EXHIBIT 4(mm)


                               Dated May 12, 2004



                           PCCW CAPITAL NO. 3 LIMITED


                                U.S.$456,000,000


                    7.88 per cent. Guaranteed Notes due 2013










                -----------------------------------------------

                         SUPPLEMENTAL AGENCY AGREEMENT

                -----------------------------------------------














                                                           RICHARDS BUTLER
                                                           20th Floor
                                                           Alexandra House
                                                           16-20 Charter Road
                                                           Central
                                                           Hong Kong




<PAGE>



                                     INDEX


Clause                                                                  Page No.

1.  Interpretation.............................................................1
2.  Transfer of obligations and rights.........................................2
3.  Amendments to the agreement................................................2
4.  Copies available for inspection............................................2
5.  Notices....................................................................2
6.  Counterparts...............................................................3
7.  Descriptive Headings.......................................................4
8.  Governing Law and Submission to Jurisdiction...............................4
9.  Contracts (Rights of Third Parties) Act 1999...............................5

SCHEDULE - CONDITIONS OF THE NOTES.............................................6

SIGNATORIES...................................................................24



<PAGE>


                           PCCW CAPITAL NO. 3 LIMITED

                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                 unconditionally and irrevocably guaranteed by

                           PCCW-HKT TELEPHONE LIMITED

                         SUPPLEMENTAL AGENCY AGREEMENT

THIS SUPPLEMENTAL AGREEMENT is dated May 12, 2004 and made BETWEEN:

(1)  PCCW CAPITAL NO. 3 LIMITED (the "Issuer");

(2)  PCCW LIMITED ("PCCW");

(3)  PCCW-HKT TELEPHONE LIMITED (the "New Guarantor"); and

(4)  DEUTSCHE BANK AG, HONG KONG BRANCH as fiscal agent and principal paying
     agent (the "Fiscal Agent").


WHEREAS:

(A)  The Issuer, PCCW and the Fiscal Agent entered into an agency agreement
     dated 24th January, 2003 (the "Agreement").

(B)  PCCW executed a deed of guarantee dated 24th January, 2003 (the "Deed of
     Guarantee").

(C)  Holders of the Notes passed an Extraordinary Resolution on May 12, 2004
     approving the novation of all obligations under the Deed of Guarantee by
     PCCW to the New Guarantor and certain amendments to the Conditions; and
     authorising the Fiscal Agent to enter into this supplemental agency
     agreement (the "Supplemental Agreement").

(D)  PCCW and the New Guarantor have executed a deed of novation of even date
     (the "Deed of Novation") pursuant to which all obligations of PCCW under
     the Deed of Guarantee have been novated to the New Guarantor.


NOW IT IS HEREBY AGREED as follows:

1.   INTERPRETATION

     Unless the context otherwise requires:-

     (a)  all capitalised words and expressions used in this Supplemental
          Agreement shall have the same meanings as ascribed to them in the
          Agreement;

     (b)  all references in the Agreement (including any Schedule thereto) to
          the "Agreement" shall be construed to mean the Agreement as amended
          and supplemented pursuant to the terms of this Supplemental
          Agreement; and


                                      -1-
<PAGE>


     (c)  all references in the Agreement (including any Schedule thereto) to
          the "Guarantor" shall be construed as referring to PCCW-HKT Telephone
          Limited; and

     (d)  all references in the Global Note (dated 24th January, 2003 executed
          by the Issuer) to the "Guarantor" shall be construed as referring to
          PCCW-HKT Telephone Limited.

2.   TRANSFER OF OBLIGATIONS AND RIGHTS

(1)  In consideration of the assignment referred to in sub-clause (2) below,
     the New Guarantor undertakes to assume and perform all responsibilities,
     duties, liabilities and obligations which PCCW contracted to perform under
     the Agreement in every way, as if the original responsibilities, duties,
     liabilities and obligations had fallen to the New Guarantor, as original
     obligor, instead of PCCW. The Fiscal Agent hereby acknowledges, agrees to
     accept and consents to such assumption and performance by the New
     Guarantor.

(2)  PCCW hereby assigns all of its rights and benefits in respect of the
     Agreement to the New Guarantor. The Fiscal Agent hereby acknowledges,
     agrees and consents to such assignment.

(3)  With effect from the date of this Supplemental Agreement, PCCW shall be
     completely and absolutely released from all of its responsibilities,
     duties, liabilities and obligations under the Agreement and shall cease to
     have any rights and benefits under the Agreement.

3.   AMENDMENTS TO THE AGREEMENT

     From the date of this Supplemental Agreement:

     (a)  Clause 10(2) of the Agreement shall be deleted;

     (b)  Clause 23 of the Agreement (relating to notices) shall be deleted and
          replaced by Clause 5 of this Supplemental Agreement;

     (c)  Clause 27 of the Agreement (relating to governing law and
          jurisdiction) shall be deleted and replaced by Clause 8 of this
          Supplemental Agreement; and

     (d)  the Conditions, as set out in Part II of Schedule 2 of the Agreement
          shall be replaced by the Conditions set out in the Schedule to this
          Supplemental Agreement.

4.   COPIES AVAILABLE FOR INSPECTION

(1)  This Supplemental Agreement and the Deed of Novation shall be deposited
     with the Fiscal Agent and shall be held in safe custody by the Fiscal
     Agent at its specified office.

(2)  The Paying Agents shall hold copies of this Supplemental Agreement and the
     Deed of Novation available for inspection by Noteholders and Couponholders
     at this specified office during normal business hours. For this purpose,
     the Issuer and the Guarantor shall furnish the Paying Agents with
     sufficient copies of each of such documents.

5.   NOTICES

     Any notice required to be given under the Agreement (including this
     Supplemental Agreement) to any of the parties shall be delivered in
     person, sent by pre-paid post (first class if inland, first class airmail
     if overseas) or by facsimile addressed to:


                                      -2-
<PAGE>


        The Issuer:            PCCW Capital  No. 3 Limited
                               39th Floor, PCCW Tower
                               TaiKoo Place, 979 King's Road
                               Quarry Bay
                               Hong Kong

                               Facsimile No: +852 2962 5725

                               (Attention: Company Secretary)

        The New Guarantor:     PCCW-HKT Telephone Limited
                               39th Floor, PCCW Tower
                               TaiKoo Place, 979 King's Road
                               Quarry Bay
                               Hong Kong

                               Facsimile No: +852 2962 5725

                               (Attention:  Company Secretary)

        The Fiscal Agent:      Deutsche Bank AG, Hong Kong Branch
                               55th Floor, Cheung Kong Center
                               2 Queen's Road Central
                               Hong Kong

                               Facsimile No:  +852 2203 7320

                               (Attention: Trust & Securities Services)

        With a copy to:        Deutsche Bank AG London
                               Winchester House
                               1 Great Winchester Street
                               London EC2N 2DB

                               Facsimile No: +44 207 547 6149

                               (Attention: Trust & Securities Services)

     or such other address of which notice in writing has been given to the
     other parties to the Agreement under the provisions of this clause.

     Any such notice shall take effect, if delivered in person, at the time of
     delivery, if sent by post, three days in the case of inland post or seven
     days in the case of overseas post after despatch, and, in the case of
     facsimile, the start of the business day in the place of receipt
     immediately following, the time of despatch, provided that in the case of
     a notice given by facsimile transmission such notice shall forthwith be
     confirmed by post. The failure of the addressee to receive such
     confirmation shall not invalidate the relevant notice given by facsimile.

6.   COUNTERPARTS

     This Supplemental Agreement may be executed in any number of counterparts,
     all of which, taken together, shall constitute one and the same agreement
     and any party may enter into this Supplemental Agreement by executing a
     counterpart.


                                      -3-
<PAGE>


7.   DESCRIPTIVE HEADINGS

     The descriptive headings in this Supplemental Agreement are for
     convenience of reference only and shall not define or limit the provisions
     of this Supplemental Agreement.

8.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

(1)  The provisions of the Agreement (including this Supplemental Agreement)
     are governed by, and shall be construed in accordance with, English law.

(2)  Each of the Issuer and the New Guarantor irrevocably agrees for the
     benefit of the Paying Agents that the courts of England are to have
     jurisdiction to settle any dispute which may arise out of or in connection
     with the Agreement (including this Supplemental Agreement) and that
     accordingly any suit, action or proceedings arising out of or in
     connection with the Agreement (together referred to as "Proceedings") may
     be brought in the courts of England.

(3)  Each of the Issuer and the New Guarantor irrevocably and unconditionally
     waives and agrees not to raise any objection which it may have now or
     subsequently to the laying of the venue of any Proceedings in the courts
     of England and any claim that any Proceedings have been brought in an
     inconvenient forum and further irrevocably and unconditionally agrees that
     a judgment in any Proceedings brought in the courts of England shall be
     conclusive and binding upon the Issuer and may be enforced in the courts
     of any other jurisdiction.

(4)  Nothing in this clause shall limit any right to take Proceedings against
     the Issuer in any other court of competent jurisdiction, nor shall the
     taking of Proceedings in one or more jurisdictions preclude the taking of
     Proceedings in any other jurisdiction, whether concurrently or not.

(5)  Each of the Issuer and the New Guarantor irrevocably and unconditionally
     appoints RB Secretariat Limited at its registered office for the time
     being (currently at 10th Floor, Beaufort House, 15 St. Botolph Street,
     London EC3A 7EE, England) as its agent for service of process in England
     in respect of any Proceedings and undertakes that in the event of it
     ceasing so to act it will appoint another person with a registered office
     in London as its agent for that purpose.

(6)  Each of the Issuer and the New Guarantor:

     (a)  agrees to procure that, so long as any of the Notes remains liable to
          prescription, there shall be in force an appointment of such a person
          with an office in London with authority to accept service as
          aforesaid;

     (b)  agrees that failure by any such person to give notice of such service
          of process to the Issuer or the New Guarantor shall not impair the
          validity of such service or of any judgment based thereon;

     (c)  consents to the service of process in respect of any Proceedings by
          the airmailing of copies, postage prepaid, to the Issuer or the New
          Guarantor (as the case may be) in accordance with clause 5 of this
          Supplemental Agreement; and

     (d)  agrees that nothing in the Agreement (including this Supplemental
          Agreement) shall affect the right to serve process in any other
          manner permitted by law.


                                      -4-
<PAGE>


9.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

     A person who is not a party to this Supplemental Agreement has no right
     under the Contracts (Rights of Third Parties) Act 1999 to enforce any
     terms of this Supplemental Agreement, but this does not affect any right
     or remedy of a third party which exists or is available apart from that
     Act.


SIGNED by each of the parties (or their duly authorised representatives) on the
date which appears first on page 1.






                                      -5-
<PAGE>


                                    SCHEDULE

                            CONDITIONS OF THE NOTES


The U.S.$456,000,000 7.88 per cent. Guaranteed Notes due 2013 (the "Notes",
which expression shall in these Conditions, unless the context otherwise
requires, include any further notes issued pursuant to Condition 15 and forming
a single series with the Notes) of PCCW Capital No.3 Limited (the "Issuer") are
issued subject to and with the benefit of an Agency Agreement dated 24th
January, 2003 made between the Issuer, PCCW Limited ("PCCW") and Deutsche Bank
AG, Hong Kong Branch as fiscal agent and principal paying agent (the "Fiscal
Agent") and any other paying agents appointed from time to time pursuant
thereto (together with the Fiscal Agent, the "Paying Agents"), as amended and
supplemented pursuant to a supplemental agency agreement dated May 12, 2004
made between the Issuer, PCCW, PCCW-HKT Telephone Limited (the "Guarantor") and
the Fiscal Agent (together, the "Agency Agreement", which expression shall
include such further amendments or supplements thereto or restatements thereof
as exist from time to time).

The statements in these Conditions include summaries of, and are subject to,
the detailed provisions of and definitions in the Agency Agreement. Copies of
the Agency Agreement are available for inspection during normal business hours
by the holders of the Notes (the "Noteholders") and the holders of the interest
coupons appertaining to the Notes (the "Couponholders" and the "Coupons",
respectively) at the specified office of each of the Paying Agents. The
Noteholders and the Couponholders are entitled to the benefit of, are bound by,
and are deemed to have notice of, all the provisions of the Agency Agreement
applicable to them. References in these Conditions to the Fiscal Agent and the
Paying Agents shall include any successor appointed under the Agency Agreement.

1.   FORM, DENOMINATION AND TITLE

(1)  Form and Denomination

     The Notes are in bearer form, serially numbered, in the denomination of
     U.S.$250,000 with Coupons attached on issue.

(2)  Title

     Title to the Notes and to the Coupons will pass by delivery.

(3)  Holder Absolute Owner

     The Issuer, the Guarantor and any Paying Agent may (to the fullest extent
     permitted by applicable laws) deem and treat the holder of any Note or
     Coupon as the absolute owner for all purposes (whether or not the Note or
     Coupon shall be overdue and notwithstanding any notice of ownership or
     writing on the Note or Coupon or any notice of previous loss or theft of
     the Note or Coupon).

2.   STATUS OF THE NOTES

     The Notes and the Coupons constitute direct, unconditional and (subject to
     the provisions of Condition 4(1)) unsecured obligations of the Issuer and
     (subject as provided above) rank and will rank pari passu, without any
     preference among themselves, with all other outstanding


                                      -6-
<PAGE>


     unsecured and unsubordinated obligations of the Issuer, present and
     future, save for such obligations as may be preferred by mandatory
     provisions of applicable law.

3.   GUARANTEE

     PCCW executed a deed of guarantee (the "Deed of Guarantee") dated 24th
     January, 2003. Pursuant to the authority of an Extraordinary Resolution of
     Noteholders passed at a meeting of the Noteholders held on May 12, 2004,
     all obligations under the Deed of Guarantee have, by virtue of a deed of
     novation (the "Deed of Novation") dated May 12, 2004, been novated by PCCW
     to the Guarantor. Pursuant to the Deed of Guarantee, as novated, the
     Guarantor unconditionally and irrevocably guarantees (the "Guarantee") the
     due and punctual payment of the principal of and interest on the Notes as
     and when the same shall become due and payable, together with any
     additional amounts in respect of the Notes payable pursuant to Condition
     8. The obligations of the Guarantor under the Guarantee constitute direct,
     unconditional and (subject to the provisions of Condition 4(1)) unsecured
     obligations of the Guarantor and (subject as provided above) rank and will
     rank pari passu with all other outstanding unsecured and unsubordinated
     obligations of the Guarantor, present and future, save for such
     obligations as may be preferred by mandatory provisions of applicable law.
     The originals of the Deed of Guarantee and the Deed of Novation are held
     by the Fiscal Agent on behalf of, and copies are available for inspection
     by, the Noteholders and Couponholders at its specified office during
     normal business hours.

4.   NEGATIVE PLEDGE

(1)  Negative Pledge

     For so long as any of the Notes remains outstanding, neither the Issuer
     nor the Guarantor will, and the Guarantor will procure that none of the
     Principal Subsidiaries (other than Listed Principal Subsidiaries) will,
     create, incur, assume or permit to exist any Lien (other than Permitted
     Liens) upon any of their respective property or assets, owned as at 24th
     January, 2003 (the "Issue Date") or as have been or may be acquired after
     the Issue Date, to secure any Indebtedness of the Guarantor or such
     Principal Subsidiaries (or any guarantee or indemnity in respect thereof)
     without, in any such case, making effective provision whereby the Notes
     will be secured either at least equally and rateably with such
     Indebtedness or by such other Lien as shall have been approved by an
     Extraordinary Resolution of the Noteholders for so long as such
     Indebtedness will be so secured, unless, after giving effect thereto, the
     aggregate outstanding principal amount of all such secured Indebtedness
     (excluding that of Listed Principal Subsidiaries and their respective
     Subsidiaries and Indebtedness secured by Permitted Liens) entered into
     after the Issue Date would not exceed 50 per cent. of the Guarantor's
     Adjusted Consolidated Net Worth.

(2)  Interpretation

     For the purposes of these Conditions:

     "Adjusted Consolidated Net Worth" means the sum of (a) all amounts paid up
     (or credited as paid up) on all classes of the Guarantor's issued share
     capital, revenue or capital reserves, capital contribution, or any other
     accounts that are included as shareholders' funds under generally accepted
     accounting principles and practices in Hong Kong ("HK GAAP") and (b) the
     aggregate outstanding principal amount of Subordinated Indebtedness;


                                      -7-
<PAGE>


       "Principal Subsidiary" at any time shall mean a Subsidiary of the
       Guarantor:

       (i)    as to which one or more of the following conditions is satisfied:

              (a)    its net profit or (in the case of a Subsidiary of the
                     Guarantor which has Subsidiaries) consolidated net profit
                     attributable to the Guarantor (in each case before taxation
                     and exceptional items) is at least 5 per cent. of the
                     consolidated net profit of the Guarantor and its
                     Subsidiaries (before taxation and exceptional items but
                     after deducting minority interests in Subsidiaries); or

              (b)    its net assets or (in the case of a Subsidiary of the
                     Guarantor which has Subsidiaries) consolidated net assets
                     attributable to the Guarantor (in each case after deducting
                     minority interests in Subsidiaries) are at least 5 per
                     cent. of the consolidated net assets (after deducting
                     minority interests in Subsidiaries) of the Guarantor and
                     its Subsidiaries;

              all as calculated by reference to the then latest audited
              financial statements (consolidated or, as the case may be,
              unconsolidated) of the Subsidiary of the Guarantor and the then
              latest audited consolidated financial statements of the Guarantor
              provided that: (1) in the case of a Subsidiary of the Guarantor
              acquired after the end of the financial period to which the then
              latest relevant audited accounts relate, the reference to the
              then latest audited accounts for the purposes of the calculation
              above shall, until audited accounts for the financial period in
              which the acquisition is made are published, be deemed to be a
              reference to the accounts adjusted to consolidate the latest
              audited accounts of the Subsidiary in the accounts; (2) if, in
              the case of a Subsidiary of the Guarantor which itself has one or
              more Subsidiaries, no consolidated accounts are prepared and
              audited, its consolidated net assets and consolidated net profits
              shall be determined on the basis of pro forma consolidated
              accounts of the relevant Subsidiary and its Subsidiaries prepared
              for this purpose by its auditors; (3) if the accounts of a
              Subsidiary of the Guarantor (not being a Subsidiary referred to
              in (1) above) are not consolidated with those of the Guarantor
              then the determination of whether or not the Subsidiary of the
              Guarantor is a Principal Subsidiary shall, if the Guarantor
              requires, be based on a pro forma consolidation of its accounts
              (consolidated, if appropriate) with the consolidated accounts of
              the Guarantor and its Subsidiaries; or

       (ii)   to which is transferred all or substantially all of the assets of
              a Subsidiary of the Guarantor which immediately prior to the
              transfer is a Principal Subsidiary, provided that, with effect
              from such transfer, the Subsidiary which so transfers its assets
              and undertakings shall cease to be a Principal Subsidiary (but
              without prejudice to paragraph (i) above) and the Subsidiary of
              the Guarantor to which the assets are so transferred shall
              forthwith upon such transfer become a Principal Subsidiary.

       A certificate of the auditors of the Guarantor as to whether or not a
       Subsidiary is a Principal Subsidiary shall be conclusive and binding on
       all parties in the absence of manifest error;

       "Indebtedness" of any Person means any indebtedness for or in respect of
       money borrowed that has a final maturity of one year or more from its
       date of incurrence or issuance and that is evidenced by any agreement or
       other instrument, excluding trade payables; provided, however, that for
       the purposes of determining the amount of Indebtedness of the Guarantor
       or any of its Subsidiaries outstanding at any relevant time, the amount
       included as Indebtedness


                                      -8-
<PAGE>


       of the Guarantor or such Subsidiary in respect of finance leases shall
       be the net amount from time to time properly characterised as
       "obligations under finance leases" in accordance with HK GAAP;

       "Lien" means any mortgage, charge, pledge, lien, encumbrance,
       hypothecation, title retention, security interest or security
       arrangement of any kind;

       "Listed Principal Subsidiary" means any Principal Subsidiary, the shares
       of which are at the relevant time listed on The Stock Exchange of Hong
       Kong Limited or any other recognised stock exchange;

       "Permitted Liens" means:

       (i)    Liens existing on or prior to the Issue Date;

       (ii)   Liens for taxes or assessments or other applicable governmental
              charges or levies;

       (iii)  Liens created or arising by operation of law or created in the
              ordinary course of business, including, but not limited to,
              landlords' liens and statutory liens of carriers, warehousemen,
              mechanics, materialmen, vendors and other liens securing amounts
              which are not more than 60 days overdue or which are being
              contested in good faith;

       (iv)   Liens incurred or deposits made in the ordinary course of
              business in connection with workers' compensation, unemployment
              insurance and other types of social security or to secure the
              performance of tenders, statutory obligations, surety and appeal
              bonds, bids, leases, government contracts or undertakings,
              performance and return of money bonds, interconnection, access or
              resale agreements with other telecommunications companies or
              organisations, and similar obligations;

       (v)    easements, rights-of-way, zoning and similar restrictions and
              other similar charges or encumbrances not interfering with the
              ordinary conduct of the business of the Guarantor and any
              Principal Subsidiaries;

       (vi)   Liens created on any property or assets acquired, leased or
              developed (including improved, constructed, altered or repaired)
              after the Issue Date; provided, however, that (i) any such Lien
              shall be confined to the property or assets acquired, leased or
              developed (including improved, constructed, altered or repaired);
              (ii) the principal amount of the debt encumbered by such Lien
              shall not exceed the cost of the acquisition or development of
              such property or assets or any improvements thereto (including
              any construction, repair or alteration) or thereon and (iii) any
              such Lien shall be created concurrently with or within three
              years following the acquisition, lease or development (including
              construction, improvement, repair or alteration) of such property
              or assets;

       (vii)  rights of setoff of a financial institution with respect to
              deposits or other accounts of the Guarantor or any Principal
              Subsidiary held by such financial institution in an amount not to
              exceed the aggregate amount owed to such financial institution by
              the Guarantor or such Principal Subsidiary, as the case may be;

       (viii) Liens on documents and the goods they represent in connection
              with letters of credit, trade finance and similar transactions
              entered into in the ordinary course of business;


                                      -9-
<PAGE>


       (ix)   Liens arising in connection with industrial revenue, development
              or similar bonds or other indebtedness or means of project
              financing (provided that the Liens arising in connection with
              such industrial revenue, development or similar bonds or other
              indebtedness or means of project financing do not exceed the
              value of the project financed and are limited to the project
              financed);

       (x)    Liens in favour of the Guarantor or any Principal Subsidiary;

       (xi)   leases, subleases, licenses and sublicenses granted to third
              parties in the ordinary course of business;

       (xii)  attachment, judgment and other similar Liens arising in
              connection with court proceedings which are effectively stayed
              while the underlying claims are being contested in good faith by
              appropriate proceedings;

       (xiii) any Lien against any property or assets of a Person existing at
              the time such Person becomes a Principal Subsidiary or arising
              after such acquisition pursuant to contractual commitments
              entered into prior to and not in contemplation of such
              acquisition;

       (xiv)  any Lien existing on any property or assets prior to the
              acquisition thereof, which Lien was not created in connection
              with the acquisition thereof, except for Liens permitted pursuant
              to clause (vi) above;

       (xv)   Liens on any property or assets of the Guarantor or any Principal
              Subsidiary in favour of any government or any subdivision
              thereof, securing the obligations of the Guarantor or such
              Principal Subsidiary under any contract or payment owed to such
              governmental entity pursuant to applicable laws, rules,
              regulations or statutes;

       (xvi)  Liens created in connection with any sale/leaseback transaction;

       (xvii) any renewal or extension of any of the Liens described in the
              foregoing clauses which is limited to the original property or
              assets covered thereby; or

      (xviii) Liens in respect of Indebtedness with respect to which the
              Guarantor or any Principal Subsidiary has paid money or deposited
              money or securities with a fiscal agent, trustee or depository to
              pay or discharge in full the obligations of the Guarantor and its
              Subsidiaries in respect thereof (other than the obligations that
              such money or securities so paid or deposited, and the proceeds
              therefrom, be sufficient to pay or discharge such obligations in
              full);

       "Person" means any individual, corporation, partnership, joint venture,
       association, joint stock company, trust, unincorporated organisation,
       government or any agency or political subdivision thereof or any other
       entity;

       "Subordinated Indebtedness" means the principal amount of Indebtedness
       of the Guarantor (including perpetual debt, which the Guarantor is not
       required to repay) which (i) has a final maturity and a weighted average
       life to maturity longer than the maturity of the Notes and (ii) is
       issued or assumed pursuant to, or evidenced by, an indenture, other
       instrument or agreement containing provisions for the subordination of
       such Indebtedness to the Notes including (x) a provision that, in the
       event of any bankruptcy, insolvency or other similar proceeding in
       respect of the Guarantor, the holders of the Notes shall be entitled to
       receive


                                      -10-
<PAGE>


       payment in full in cash of all principal, Additional Amounts (as defined
       below) and interest on the Notes (including all interest arising after
       the commencement of such proceeding whether or not an allowed claim in
       such proceeding) before the holder or holders of any such Subordinated
       Indebtedness shall be entitled to receive any payment of principal,
       interest or premium thereon, (y) a provision that, if an Event of
       Default has occurred and is continuing under the Notes, the holder or
       holders of any such Subordinated Indebtedness shall not be entitled to
       payment of any principal, interest or premium in respect thereof unless
       or until such Event of Default shall have been cured or waived or shall
       have ceased to exist, and (z) a provision that the holder or holders of
       such Subordinated Indebtedness may not accelerate the maturity thereof
       as a result of any default relating thereto so long as any Note is
       outstanding; and

       "Subsidiary" means, in relation to any company, any company or other
       business entity of which the first-named company owns or controls
       (either directly or through one or more other Subsidiaries) more than 50
       per cent. of the issued share capital, or other ownership interest,
       giving ordinary voting power to elect directors, managers or trustees of
       such company or other business entity, or any company or other business
       entity which at any time has its accounts consolidated with those of the
       first-named company or which, under Hong Kong law or regulations and
       under HK GAAP from time to time, should have its accounts consolidated
       with those of the first-named company.

5.     INTEREST

(1)    Interest Rate and Interest Payment Dates

       The Notes bear interest from (and including) the Issue Date at the rate
       of 7.88 per cent. per annum, payable semi-annually in arrear in equal
       instalments on 24th January and 24th July of each year (each an "Interest
       Payment Date"). The first payment, for the period from and including 24th
       January, 2003 to but excluding 24th July, 2003 and amounting to
       U.S.$9,850 per U.S.$250,000 principal amount of Notes, shall be made on
       24th July, 2003.

       The period from (and including) the Issue Date to (but excluding) the
       first Interest Payment Date and each successive period from (and
       including) an Interest Payment Date to (but excluding) the next
       succeeding Interest Payment Date is herein referred to as an "Interest
       Period".

(2)    Interest Accrual

       Each Note will cease to bear interest from (and including) its due date
       for redemption unless, upon due presentation, payment of the principal in
       respect of the Note is improperly withheld or refused or unless default
       is otherwise made in respect of payment. In such event, interest will
       continue to accrue until whichever is the earlier of:

       (a)    the date on which all amounts due in respect of such Note have
              been paid; and

       (b)    five days after the date on which the full amount of the moneys
              payable in respect of such Notes has been received by the Fiscal
              Agent and notice to that effect has been given to the Noteholders
              in accordance with Condition 12.


                                      -11-
<PAGE>


(3)    Calculation of Broken Interest

       When interest is required to be calculated in respect of a period ending
       other than on an Interest Payment Date, it shall be calculated on the
       basis of a 360-day year consisting of 12 months of 30 days each and, in
       the case of an incomplete month, the number of days elapsed on the basis
       of a month of 30 days.

6.     PAYMENTS

(1)    Payments in respect of Notes

       Payments of principal and interest in respect of each Note will be made
       against presentation and surrender (or, in the case of part payment only,
       endorsement) of such Note, except that payments of interest due on an
       Interest Payment Date will be made against presentation and surrender
       (or, in the case of part payment only, endorsement) of the relevant
       Coupon, in each case only at the specified office outside the United
       States of any of the Paying Agents.

(2)    Method of Payment

       Payments will be made by credit or transfer to an account in U.S. dollars
       maintained by the payee, or, at the option of the payee, by a cheque in
       U.S. dollars drawn on a bank in New York City.

(3)    U.S. Paying Agents

       Notwithstanding the foregoing, payments will be made at the specified
       office in the United States of any Paying Agent and (if no such
       appointment is then in effect) the Issuer shall appoint and maintain a
       Paying Agent with a specified office in New York City at which payments
       will be made:

       (a)    if (i) the Issuer has appointed Paying Agents with specified
              offices outside the United States with the reasonable expectation
              that the Paying Agents would be able to make payment at the
              specified offices outside the United States of the full amount
              payable with respect to the Notes in the manner provided above
              when due, (ii) payment of the full amount due in U.S. dollars at
              all specified offices of the Paying Agents outside the United
              States is illegal or effectively precluded by exchange controls or
              other similar restrictions and (iii) the payment is then permitted
              under United States law; or

       (b)    at the option of the relevant holder, if the payment is then
              permitted under United States law without involving, in the
              opinion of the Issuer, adverse tax consequences for the Issuer or
              the Guarantor.

(4)    Missing Unmatured Coupons

       Each Note should be presented for payment together with all relative
       unmatured Coupons, failing which the full amount of any relative missing
       unmatured Coupon (or, in the case of payment not being made in full, that
       proportion of the full amount of the missing unmatured Coupon which the
       amount so paid bears to the total amount due) will be deducted from the
       amount due for payment. Each amount so deducted will be paid in the
       manner mentioned above against presentation and surrender (or, in the
       case of part payment only, endorsement) of the relative missing Coupon at
       any time before the expiry of 10 years after the Relevant Date (as
       defined in Condition 8) in respect of the relevant Note (whether or not
       the Coupon


                                      -12-
<PAGE>


       would otherwise have become void pursuant to condition 9) or, if later,
       five years after the date on which the Coupon would have become due, but
       not thereafter.

(5)    Payments subject to Applicable Laws

       Payments in respect of principal and interest on the Notes are subject in
       all cases to any fiscal or other laws and regulations applicable in the
       place of payment, but without prejudice to the provisions of Condition 8.

(6)    Payment only on a Presentation Date

       A holder shall be entitled to present a Note or Coupon for payment only
       on a Presentation Date and shall not, except as provided in Condition 5,
       be entitled to any further interest or other payment if a Presentation
       Date is after the due date.

       "Presentation Date" means a day which (subject to Condition 9):

       (a)    is or falls after the relevant due date;

       (b)    is a Business Day in the place of the specified office of the
              Paying Agent at which the Note or Coupon is presented for payment;
              and

       (c)    in the case of payment by credit or transfer to a U.S. dollar
              account in New York City as referred to above), is a Business Day
              in New York City.

       In this Condition, "Business Day" means, in relation to any place, a day
       (other than a Saturday or Sunday) on which commercial banks and foreign
       exchange markets settle payments and are open for general business
       (including dealing in foreign exchange and foreign currency deposits) in
       that place.

(7)    Initial Paying Agents

       The names of the initial Paying Agents and their initial specified
       offices are set out at the end of these Conditions. The Issuer reserves
       the right at any time to vary or terminate the appointment of any Paying
       Agent and to appoint additional or other Paying Agents provided that (a)
       it will at all times maintain a Fiscal Agent having its specified office
       in Hong Kong, (b) if any European Union Directive on the taxation of
       savings implementing the conclusions of the ECOFIN Council Meeting of
       26th-27th November, 2000 or any law implementing or complying with, or
       introduced in order to conform to, such Directive is introduced, the
       Issuer will ensure it maintains a Paying Agent in a European Union Member
       State that will not be obliged to withhold or deduct tax pursuant to any
       such Directive, (c) if any Notes are listed on the Luxembourg Stock
       Exchange or any other stock exchange, it will at all times maintain a
       Paying Agent having its specified office in Luxembourg, or, as the case
       may be, in such place as may be required by the rules and regulations of
       any other relevant stock exchange (or any other relevant authority) and
       (d) the specified office of a Paying Agent shall not be located within
       the United States. Notice of any termination or appointment and of any
       changes in specified offices shall be given to the Noteholders promptly
       by the Issuer in accordance with Condition 12.

       The Agents shall act solely as Agent of the Issuer and will not thereby
       assume any obligations towards or relationship of agency or trust for or
       with any of the owners or holders of Notes or Coupons.


                                      -13-
<PAGE>


7.     REDEMPTION AND PURCHASE

(1)    Redemption at Maturity

       Unless previously redeemed or purchased and cancelled as provided below,
       the Issuer will redeem the Notes at their principal amount on 24th
       January, 2013.

(2)    Redemption for Taxation Reasons

       If (a) as a result of any change in, or amendment to, the laws or
       regulations of a Relevant Jurisdiction (as defined in Condition 8), or
       any change in the official interpretation of the laws or regulations of a
       Relevant Jurisdiction, which change or amendment becomes effective after
       24th January, 2003 on the next Interest Payment Date (i) the Issuer is or
       would be required to pay Additional Amounts (as defined in Condition 8)
       as provided or referred to in Condition 8; or (ii) the Guarantor would be
       unable for reasons outside its control to procure payment by the Issuer
       and in making payment itself would be required to pay such Additional
       Amounts; or (iii) the Guarantor or any of its Subsidiaries has or will
       become obliged to pay any Additional Amounts in respect of the
       Intercompany Loan (as defined in Condition 8) and (b) the requirement
       cannot be avoided by the Issuer, the Guarantor or any of such
       Subsidiaries, as the case may be, taking reasonable measures available to
       it provided that such measures do not involve the Issuer, the Guarantor
       or such Subsidiary incurring material expenses, the Issuer may at its
       option, having given not less than 30 nor more than 60 days' notice to
       the Noteholders in accordance with Condition 12 (which notice shall be
       irrevocable), redeem all the Notes, but not some only, at any time at
       their principal amount together with interest accrued to (but excluding)
       the date of redemption, provided that no notice of redemption shall be
       given earlier than 90 days before the earliest date on which the Issuer,
       the Guarantor or such Subsidiary of the Guarantor, as the case may be,
       would be required to pay such Additional Amounts were a payment in
       respect of the Notes then due. Prior to the publication of any notice of
       redemption pursuant to this paragraph, the Issuer shall deliver to the
       Fiscal Agent a certificate signed by two Directors of the Issuer, the
       Guarantor or such Subsidiary of the Guarantor, as the case may be,
       stating that the requirement referred to in (a) above will apply on the
       next Interest Payment Date and cannot be avoided by the Issuer, the
       Guarantor or such Subsidiary of the Guarantor, as the case may be, taking
       reasonable measures available to it provided that such measures do not
       involve the Issuer, the Guarantor or such Subsidiary incurring material
       expenses and an opinion of independent legal advisers of recognised
       standing to the effect that the Issuer, the Guarantor or such Subsidiary
       of the Guarantor, as the case may be, has or will become obliged to pay
       such Additional Amounts as a result of the change or amendment.

(3)    Redemption at the Option of the Issuer

       The Issuer may give:

       (a)    not less than 30 nor more than 60 days' notice to the Noteholders
              in accordance with Condition 12; and

       (b)    not less than 15 days before the giving of the notice referred to
              in (a), notice to the Fiscal Agent

       (which notices shall be irrevocable and shall specify the date fixed for
       redemption), to redeem all (but not some only) of the Notes on any
       Interest Payment Date during the period


                                      -14-
<PAGE>


       commencing on 24th January, 2007 and ending on 24th January, 2010 (both
       dates inclusive) at their principal amount. Upon the expiry of such
       notice, the Issuer shall be obliged to redeem the Notes.

(4)    [intentionally blank]

(5)    Redemption at the Option of the Holders

(a)    Early Redemption

       In the event that the Notes have not been previously redeemed, upon any
       Noteholder giving to the Issuer not less than 30 nor more than 60 days'
       notice expiring on 24th January, 2010 (or expiring on any Interest
       Payment Date thereafter), the Issuer will redeem in whole (but not in
       part) the Notes the subject of the notice on such Interest Payment Date,
       at their principal amount.

(b)    Exercise

       To exercise the right to require redemption of any Notes under this
       Condition 7(5), the holder of the Notes must deliver at the specified
       office of any Paying Agent on any Business Day (as defined in Condition
       6(6)) in the place of such specified office, a duly signed and completed
       notice of exercise in the form (for the time being current and which may,
       if this Note is held in a clearing system, be any form acceptable to the
       clearing system delivered in any manner acceptable to the clearing
       system) obtainable from any specified office of any Paying Agent (a "Put
       Notice") and in which the holder must specify a bank account (or, if
       payment is required to be made by cheque, and address) to which payment
       is to be made under this Condition accompanied by such Notes or evidence
       satisfactory to the Paying Agent concerned that such Notes will,
       following the delivery of the Put Notice, be held to its order or under
       its control. A Put Notice given by a holder of any Note shall be
       irrevocable except where, prior to the due date of redemption, an Event
       of Default has occurred and be continuing, in which event such holder, at
       its option, may elect by notice to the Issuer to withdraw the Put Notice
       and instead to give notice that the Note is immediately due and repayable
       under Condition 10.

(6)    Purchases

       The Issuer, the Guarantor or any of the Guarantor's Subsidiaries (as
       defined above) may at any time purchase Notes (provided that all
       unmatured Coupons appertaining to the Notes are purchased with the Notes)
       in any manner and at any price. If purchases are made by tender, tenders
       must be available to all Noteholders alike.

(7)    Cancellations

       All Notes which are (a) redeemed or (b) purchased by or on behalf of the
       Issuer, the Guarantor or any of the Guarantor's Subsidiaries will
       forthwith be cancelled, together with all relative unmatured Coupons
       attached to the Notes or surrendered with the Notes, and accordingly may
       not be reissued or resold.


                                      -15-
<PAGE>


(8)    Notices Final

       Upon the expiry of any notice as is referred to in paragraph (2), (3) or
       (5) above the Issuer shall be bound to redeem the Notes to which the
       notice refers in accordance with the terms of such paragraph.

8.     TAXATION

(1)    Payment without Withholding

       All payments in respect of the Notes by or on behalf of the Issuer or the
       Guarantor and all payments made by PCCW or any of its Subsidiaries in
       respect of the inter-company loans of the proceeds of the offering of the
       Notes from the Issuer to PCCW or any of its Subsidiaries (collectively,
       the "Intercompany Loan") shall be made without withholding or deduction
       for, or on account of, any present or future taxes, duties, assessments
       or governmental charges of whatever nature imposed or levied by or on
       behalf of any of the Relevant Jurisdictions ("Taxes"), unless such
       withholding or deduction of the Taxes is required by law. In that event,
       the Issuer, PCCW or such Subsidiary of PCCW (whether, the Guarantor, or
       another subsidiary of PCCW), as the case may be, will pay such additional
       amounts ("Additional Amounts") as may be necessary in order that the net
       amounts received by the Noteholders and Couponholders or in connection
       with the Intercompany Loan after such withholding or deduction shall
       equal the respective amounts which would have been receivable in respect
       of the Notes, the Coupons or in connection with the Intercompany Loan, as
       the case may be, in the absence of such withholding or deduction; except
       that no Additional Amounts shall be payable in relation to any payment in
       respect of any Note or Coupon:

       (a)    to, or to a third party on behalf of, a holder who is liable to
              the Taxes in respect of the Note or Coupon by reason of his having
              some connection with a Relevant Jurisdiction other than the mere
              holding of the Note or Coupon or receiving principal or interest
              in respect thereof; or

       (b)    presented for payment more than 30 days after the Relevant Date
              (as defined below) except to the extent that a holder would have
              been entitled to Additional Amounts on presenting the same for
              payment on the last day of such period of 30 days assuming that
              day to have been a Presentation Date; or

       (c)    where such withholding or deduction is imposed on a payment to an
              individual and is required to be made pursuant to any European
              Union Directive on the taxation of savings implementing the
              conclusions of the ECOFIN Council meeting of 26th to 27th
              November, 2000 or any law implementing or complying with, or
              introduced in order to conform, to such Directive; or

       (d)    presented for payment by or on behalf of a Noteholder or
              Couponholder who would have been able to avoid such withholding or
              deduction by presenting the relevant Note or Coupon, as the case
              may be, to another Paying Agent in a European Union Member State;
              or

       (e)    in respect of any such Taxes that would not have been so imposed,
              deducted or withheld if the holder or beneficial owner of a Note
              or the beneficial owner of any payment on such Note had (i) made a
              declaration of non-residence or any other claim or filing for
              exemption to which it is entitled or (ii) complied with any
              certification,


                                      -16-
<PAGE>


              identification, information, documentation or other reporting
              requirement concerning the nationality, residence, identity or
              connection with a Relevant Jurisdiction of such holder or
              beneficial owner of such Note or any payment on such Note
              (provided that (x) such declaration of non-residence or other
              claim or filing for exemption or such compliance is required by
              the applicable law of a Relevant Jurisdiction as a precondition to
              exemption from, or reduction in the rate of the imposition,
              deduction or withholding of, such Taxes and (y) at least 30 days
              prior to the first payment date with respect to which such
              declaration of non-residence or other claim or filing for
              exemption or such compliance is required under the applicable law
              of a Relevant Jurisdiction, the holder or the beneficial owner, as
              the case may be, of such Note at that time has been notified by
              the Issuer or any other person through whom payment may be made
              that a declaration of non-residence or other claim or filing for
              exemption or such compliance is required to be made); or

       (f)    in respect of any payment under or with respect to a Note to any
              holder that is a fiduciary or partnership or any person other than
              the sole beneficial owner of such payment or Note, to the extent
              that a beneficiary or settlor with respect to such fiduciary, a
              member of such a partnership or the beneficial owner of such
              payment or Note would not have been entitled to such Additional
              Amounts had such beneficiary, settlor, member or beneficial owner
              been the actual holder of such Note; or

       (g)    in respect of any estate, inheritance, gift, sales, excise,
              transfer or personal property tax or similar tax, assessment or
              governmental charge; or

       (h)    any combination of items (a) through (g) above.

(2)    Interpretation

       In these Conditions:

       (a)    "Relevant Date" means the date on which the payment first becomes
              due but, if the full amount of the money payable has not been
              received by the Fiscal Agent on or before the due date, it means
              the date on which, the full amount of the money having been so
              received, notice to that effect shall have been duly given to the
              Noteholders by the Issuer in accordance with Condition 12; and

       (b)    "Relevant Jurisdiction" means the British Virgin Islands or any
              political subdivision or any authority thereof or therein having
              power to tax, the Hong Kong Special Administrative Region of the
              People's Republic of China or any political subdivision or any
              authority thereof or therein having power to tax or any other
              jurisdiction in which the Issuer, PCCW or such Subsidiary of PCCW
              (whether the Guarantor, or another subsidiary of PCCW), as the
              case may be, is resident for tax purposes from or through which
              payments in respect of the Notes or the Intercompany Loan, as the
              case may be, are made or any political subdivision or any
              authority thereof or therein having power to tax.

(3)    Additional Amounts

       Any reference in these Conditions to any amounts in respect of the Notes
       or the Intercompany Loan shall be deemed also to refer to any Additional
       Amounts which may be payable under this Condition.


                                      -17-
<PAGE>


9.     PRESCRIPTION

       Notes and Coupons will become void unless presented for payment within
       periods of 10 years (in the case of principal) and five years (in the
       case of interest) from the Relevant Date in respect of the Notes or, as
       the case may be, the Coupons, subject to the provisions of Condition 6.

10.    EVENTS OF DEFAULT

       The holder of any Note may give notice to the Issuer that the Note is,
       and it shall accordingly forthwith become, immediately due and repayable
       at its principal amount, together with interest accrued to the date of
       repayment, if any of the following events ("Events of Default") shall
       have occurred and be continuing:

       (a)    failure to pay principal of any Note within five Business Days in
              Hong Kong and New York after the due date for such payment; or

       (b)    failure to pay interest on any Note within 30 Business Days in
              Hong Kong and New York after the due date for such payment; or

       (c)    failure to perform any other covenant or agreement of the Issuer
              or the Guarantor in the Agency Agreement, the Guarantee or the
              Notes and (except where the failure is incapable of remedy when no
              continuation or notice as is hereinafter mentioned will be
              required) such failure continues for 60 days after there has been
              given by registered or certified mail, to the Issuer or the
              Guarantor by the Fiscal Agent (as instructed by the relevant
              Noteholder) or by the relevant Noteholder, a written notice
              specifying such failure and requiring it to be remedied; or

       (d)    (i) failure to pay upon final maturity (after giving effect to the
              expiration of any applicable grace period therefor) the principal
              of any Indebtedness of the Issuer, the Guarantor or any Principal
              Subsidiary, (ii) acceleration of the maturity of any Indebtedness
              of the Issuer, the Guarantor or any Principal Subsidiary following
              a default by the Issuer, the Guarantor or such Principal
              Subsidiary unless such Indebtedness is discharged or such
              acceleration is annulled within 10 days of the due date or date of
              acceleration, or (iii) failure to pay any amount payable by the
              Issuer, the Guarantor or any Principal Subsidiary under any
              guarantee or indemnity in respect of any Indebtedness of any other
              Person unless such obligation is discharged or otherwise satisfied
              within 10 days of the due date; provided, however, that no such
              event set forth in (i), (ii) or (iii) above shall constitute an
              Event of Default unless the aggregate Indebtedness to which all
              such events relate exceeds US$30,000,000 (or its equivalent in any
              other currency) (the "Specified Limit"); or

       (e)    the Issuer, the Guarantor or any Principal Subsidiary becomes
              insolvent and is unable to pay its debts as they fall due, stops,
              suspends or threatens to stop or suspend payment of all or a
              material part of its debts, begins negotiations or takes any
              proceeding or other step with a view to readjustment, rescheduling
              or deferral of all of its Indebtedness (or any part of its
              Indebtedness which it will or might otherwise be unable to pay
              when due) or proposes or makes a general assignment or any
              arrangement or composition with or for the benefit of its
              creditors or a moratorium is agreed or declared in respect of or
              affecting all or a material part of the Indebtedness of the
              Issuer, the Guarantor or any Principal Subsidiary or of the Issuer
              or the Guarantor and their respective Subsidiaries taken as a
              whole; or


                                      -18-
<PAGE>


       (f)    distress, attachment, execution or other legal process is levied,
              enforced or sued out on or against all or any material part of the
              assets of the Issuer, the Guarantor or any Principal Subsidiary in
              respect of which the cost or loss to the relevant company or the
              amount claimed against the relevant company exceeds the Specified
              Limit and is not discharged or stayed within 30 days (or such
              longer period as the holders of a majority in principal amount of
              the Notes may permit) unless and for so long as it is being
              contested in good faith and diligently by the Issuer, the
              Guarantor or Principal Subsidiary, as the case may be; or

       (g)    any present or future encumbrance on or over all or any material
              part of the assets of the Issuer, the Guarantor or any Principal
              Subsidiary becomes enforceable and any step (including the taking
              of possession or the appointment of a receiver, manager or similar
              officer) is taken to enforce that encumbrance; or

       (h)    any bona fide step is taken by any person for the dissolution of
              the Issuer, the Guarantor or any Principal Subsidiary (except for
              the purpose of and followed by a reconstruction or amalgamation on
              terms approved by the holders of a majority in principal amount of
              the Notes before that step is taken or in the case of a Principal
              Subsidiary whereby the undertaking and assets of the Principal
              Subsidiary are transferred or otherwise vested in the Guarantor or
              another of its Subsidiaries pursuant to a merger of the Principal
              Subsidiary with the Guarantor or such other Subsidiary or by way
              of a voluntary winding-up or dissolution where there are surplus
              assets in any such Principal Subsidiary and such surplus assets
              attributable to the Guarantor and/or any other Subsidiary are
              distributed to the Guarantor and/or such other Subsidiary); or

       (i)    the Issuer ceases to be a direct or indirect wholly-owned
              Subsidiary of PCCW; or

       (j)    the Issuer carries on any business activity whatsoever other than
              in connection with the Notes or incurs any Indebtedness (other
              than to the Guarantor or the Guarantor's Subsidiaries and carries
              on any activities in connection therewith, including without
              limitation entering into any hedging or derivative transaction in
              connection with the Intercompany Loan or otherwise) or makes any
              issue of bonds, notes, debenture stock, loan stock, or other debt
              securities of any kind other than the Notes; or

       (k)    any event occurs which under the laws of any relevant jurisdiction
              has an analogous or equivalent effect to any of the events
              referred to in paragraphs (e) through (h) above; or

       (l)    if the Guarantee ceases to be, or is claimed by the Guarantor not
              to be, in full force and effect.

11.    REPLACEMENT OF NOTES AND COUPONS

       Should any Note or Coupon be lost, stolen, mutilated, defaced or
       destroyed it may be replaced at the specified office outside the United
       States of the Fiscal Agent, upon payment by the claimant of the expenses
       incurred in connection with the replacement and on such terms as to
       evidence and indemnity as the Issuer may reasonably require. Mutilated or
       defaced Notes or Coupons must be surrendered before replacements will be
       issued.


                                      -19-
<PAGE>


12.    NOTICES

(1)    Notices to the Noteholders

       All notices to the Noteholders will be valid if published in a leading
       English language daily newspaper with general circulation in Asia as the
       Issuer may decide and, if the Notes are listed on the Luxembourg Stock
       Exchange and the rules of that exchange so require, in one daily
       newspaper published in Luxembourg. It is expected that publication will
       normally be made in the Asian Wall Street Journal and, if appropriate,
       the Luxemburger Wort. The Issuer shall also ensure that notices are duly
       published in a manner which complies with the rules and regulations of
       any stock exchange or other relevant authority on which the Notes are for
       the time being listed. Any such notice will be deemed to have been given
       on the date of the first publication or, where required to be published
       in more than one newspaper, on the date of the first publication in all
       required newspaper.

(2)    Notices from the Noteholders

       Notices to be given by any Noteholder shall be in writing and given by
       lodging the same, together with the relative Note or Notes, with the
       Fiscal Agent or, if the Notes are held in a clearing system, may be given
       through the clearing system in accordance with the standard rules and
       procedures.

13.    MEETINGS OF NOTEHOLDERS AND MODIFICATION

(1)    Provisions for Meetings

       The Agency Agreement contains provisions for convening meetings of the
       Noteholders to consider any matter affecting their interests, including
       the modification by Extraordinary Resolution of these Conditions or the
       Guarantee or the provisions of the Agency Agreement. The quorum at any
       meeting for passing an Extraordinary Resolution will be one or more
       Persons present holding or representing more than 50 per cent. in
       principal amount of the Notes for the time being outstanding, or at any
       adjourned meeting one or more Persons present whatever the principal
       amount of the Notes held or represented by him or them, except that at
       any meeting the business of which includes the modification of certain of
       these Conditions and provisions of the Agency Agreement the necessary
       quorum for passing an Extraordinary Resolution will be one or more
       Persons present holding or representing not less than two-thirds, or at
       any adjourned meeting not less than one-third, of the principal amount of
       the Notes for the time being outstanding. An Extraordinary Resolution
       passed at any meeting of the Noteholders will be binding on all
       Noteholders, whether or not they are present at the meeting, and on all
       Couponholders.

(2)    Modification

       The Fiscal Agent may agree, without the consent of the Noteholders or
       Couponholders, to any modification of any of these Conditions or any of
       the provisions of the Agency Agreement either (i) for the purpose of
       curing any ambiguity or manifest or proven error or of curing, correcting
       or supplementing any defective provision contained herein or therein or
       (ii) in any manner which is not materially prejudicial to the interests
       of the Noteholders. Any modification shall be binding on the Noteholders
       and the Couponholders and, unless the Fiscal Agent agrees otherwise, any
       modification shall be notified by the Issuer to the Noteholders as soon
       as practicable thereafter in accordance with Condition 12.


                                      -20-
<PAGE>


14.    CURRENCY INDEMNITY

       The Issuer's and the Guarantor's obligations under the Notes to make
       all payments in U.S. dollars will not be satisfied by any payment,
       recovery or any other realisation of proceeds in any currency other
       than U.S. dollars. If, for the purpose of obtaining a judgment in any
       court with respect to any obligation of the Issuer or, as the case may
       be, the Guarantor under any Notes it shall become necessary to convert
       into any other currency or currency unit any amount in the currency or
       currency unit due under any Notes then such conversion shall be made
       by the Fiscal Agent at the market exchange rate (as determined by the
       Fiscal Agent) as in effect on the date of entry of the judgment (the
       "Judgment Date"); it being understood that the Fiscal Agent shall
       effect such conversion only after receipt of the relevant funds from
       the Issuer or, as the case may be, the Guarantor and that such
       conversion may require up to three Business Days in Hong Kong, New
       York City and the financial centre of the currency into which any
       amount is converted to effect after the receipt of such funds. If
       pursuant to any such judgment, conversion shall be made on a date (the
       "Substitute Date") other than the Judgment Date and there shall occur
       a change between the market exchange rate for U.S. dollars as in
       effect on the Substitute Date and the market exchange rate as in
       effect on the Judgment Date, the Issuer agrees to pay such additional
       amounts (if any) in U.S. dollars as may be necessary to ensure that
       the amount paid is equal to the amount in such other currency or
       currency unit which, when converted at the market exchange rate as in
       effect on the Judgment Date, is the amount due under any Notes. Any
       amount due from the Issuer or, as the case may be, the Guarantor under
       this Condition shall be due as a separate debt and is not to be
       affected by or merged into any judgment being obtained for any other
       sums due in respect of any Notes. In no event, however, shall the
       Issuer or, as the case may be, the Guarantor be required to pay more
       in U.S. dollars due under the Notes at the market exchange rate as in
       effect on the Judgment Date than the amount of U.S. dollars stated to
       be due under the Notes so that in any event the Issuer's and the
       Guarantor's obligations under the Notes will be effectively maintained
       as obligations in U.S. dollars and the Issuer or, as the case may be,
       the Guarantor shall be entitled to withhold (or be reimbursed for, as
       the case may be) any excess of the amount actually realised upon any
       such conversion on the Substitute Date over the amount due and payable
       on the Judgment Date.

15.    FURTHER ISSUES

       The Issuer may from time to time without the consent of the
       Noteholders or Couponholders create and issue further notes, having
       terms and conditions the same as those of the Notes, or the same
       except for the amount of the first payment of interest, which may be
       consolidated and form a single series with the outstanding Notes.

16.    SUBSTITUTION

       The Issuer may at any time substitute, without the consent of the
       Noteholders or the Couponholders, the Guarantor or a Subsidiary of the
       Guarantor (such substituted company being hereinafter called the "New
       Company") to assume liability for the due and punctual payment of all
       payments and the performance of all the Issuer's obligations under the
       Notes and the Coupons then outstanding. Upon any such substitution,
       the New Company shall succeed to the rights and obligations of the
       Issuer (or any previous substitute) under the Notes and the Issuer (or
       any previous substitute) shall be released from its liability on the
       Notes. Such substitution shall be permitted only if, in addition to
       assuming the obligations of the Issuer (or of any previous substitute)
       under the Notes:


                                      -21-
<PAGE>


       (i)    the New Company shall, by means of a deed poll (the "Substitution
              Deed Poll"), agree to indemnify each Noteholder and Couponholder
              against (A) any taxes, duties, fees, assessments or governmental
              charges of whatever nature which are imposed on such holder with
              respect to such Note, and which would not have been so imposed had
              such substitution not been made, (B) any taxes, duties, fees,
              assessments or governmental charges of whatever nature imposed on
              or relating to such substitution and (C) any costs or expenses of
              the act of such substitution;

       (ii)   unless such New Company is the Guarantor, the Guarantor shall in
              the Substitution Deed Poll irrevocably guarantee all payments in
              respect of the Notes;

       (iii)  the New Company shall warrant, by means of the Substitution Deed
              Poll, that all necessary governmental approvals and consents for
              the assumption by the New Company of its obligations and the
              giving and implementation of the Guarantor's guarantee (if
              applicable) have been obtained and are in full force and effect
              and the obligations of the New Company under the Notes and of the
              Guarantor under its guarantee to guarantee payments in respect of
              the Notes (if applicable) are legal, valid, binding and
              enforceable in accordance with their terms, subject to applicable
              bankruptcy, insolvency and similar laws affecting creditors'
              rights generally and general principles of equity; and

       (iv)   the New Company shall have obtained legal opinions from
              independent legal advisers of recognised standing in the country
              of incorporation of the New Company, Hong Kong and England that
              the obligations of the New Company and, unless the New Company is
              the Guarantor, the Guarantor in respect of the Notes and the
              Substitution Deed Poll, as the case may be, are legal, valid and
              binding and that all consents and approvals as aforesaid have been
              obtained.

       Not more than 30 nor less than 15 days prior to the effective date of
       the substitution by the New Company, the Issuer shall give notice to
       the Noteholders and the Couponholders, in accordance with Condition
       12, of the substitution, stating that copies, or pending execution
       thereof final drafts, of the Substitution Deed Poll and other relevant
       documents and of the legal opinions are available for inspection by
       Noteholders and Couponholders at the specified offices of the Paying
       Agents during normal business hours. The originals of the Substitution
       Deed Poll and other documents will be delivered to the Fiscal Agent to
       hold until there are no claims outstanding in respect of the Notes or
       the Coupons.

       Upon the substitution becoming effective (x) references (if any) in
       these Conditions to the British Virgin Islands shall be replaced by
       references to the country of incorporation and, if different, the
       country of tax residence of the New Company and (y) if the New Company
       is not the Guarantor, all references in the Conditions to the
       Guarantor shall apply to the Guarantor in its capacity as such
       pursuant to Condition 16(ii) above.

17.    CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

       The Notes confer no right under the Contracts (Rights of Third
       Parties) Act 1999 to enforce any term of these Notes, but this does
       not affect any right or remedy of a third party which exists or is
       available apart from that Act.


                                      -22-
<PAGE>


18.    GOVERNING LAW AND SUBMISSION TO JURISDICTION

(1)    Governing Law

       The Agency Agreement, the Guarantee, the Notes and the Coupons are
       governed by, and will be construed in accordance with, English law.

(2)    Jurisdiction of English Courts

       The Issuer irrevocably agrees for the benefit of the Noteholders and
       the Couponholders that the courts of England are to have jurisdiction
       to settle any disputes which may arise out of or in connection with
       the Notes or the Coupons and that accordingly any suit, action or
       proceedings arising out of or in connection therewith (together
       referred to as "Proceedings") may be brought in the courts of England.
       The Issuer irrevocably and unconditionally waives and agrees not to
       raise any objection which it may have now or subsequently to the
       laying of the venue of any Proceedings in the courts of England and
       any claim that any Proceedings have been brought in an inconvenient
       forum and further irrevocably and unconditionally agrees that a
       judgment in any Proceedings brought in the courts of England shall be
       conclusive and binding upon it and may be enforced in the courts of
       any other jurisdiction. Nothing in this Condition shall limit any
       right to take Proceedings against the Issuer in any other court of
       competent jurisdiction, nor shall the taking of Proceedings in one or
       more jurisdictions preclude the taking of Proceedings in any other
       jurisdiction, whether concurrently or not.

(3)    Appointment of Process Agent

       The Issuer hereby irrevocably and unconditionally appoints RB
       Secretariat Limited at its registered office for the time being
       (currently at 10th Floor, Beaufort House, 15 St. Botolph Street,
       London EC3A 7EE, England at its registered office for the time being
       as its agent for service of process in England in respect of any
       Proceedings and undertakes that in the event of such agent ceasing so
       to act it will appoint another person as its agent for that purpose.


                                  FISCAL AGENT

                       Deutsche Bank AG, Hong Kong Branch
                         55th Floor, Cheung Kong Center
                             2 Queen's Road Central
                                    Hong Kong






                                      -23-
<PAGE>


                                  SIGNATORIES



PCCW CAPITAL NO. 3 LIMITED

By:



PCCW LIMITED

By:



PCCW-HKT TELEPHONE LIMITED

By:



DEUTSCHE BANK AG, HONG KONG BRANCH

By:


                                      24