Exhibit 4(v)

                           PCCW CAPITAL NO. 3 LIMITED

                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                 unconditionally and irrevocably guaranteed by

                                  PCCW LIMITED

                                AGENCY AGREEMENT

THIS AGREEMENT is dated 24th January, 2003 and made BETWEEN:

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

(2)  PCCW LIMITED (the "Guarantor"); and

(3)  DEUTSCHE BANK AG, HONG KONG BRANCH as Fiscal Agent and Principal Paying
     Agent.


WHEREAS:

(A)  The Issuer has agreed to issue U.S.$456,000,000 7.88 per cent. Guaranteed
     Notes due 2013 (the "Notes" which expression shall include, unless the
     context otherwise requires, any further Notes issued pursuant to Condition
     15 and forming a single series with the Notes).

(B)  The Notes will be issued in bearer form ("Notes") in the denomination of
     U.S.$250,000 each with interest coupons ("Coupons") attached.

(C)  The Notes will be represented by a Global Note (the "Global Note") in or
     substantially in the form set out in Schedule 1.

(D)  The definitive Notes and Coupons will be in or substantially in the
     respective forms set out in Part I of Schedule 2. The Conditions of the
     Notes (the "Conditions") will be in or substantially in the form set out
     in Part II of Schedule 2.

(E)  Payments in respect of the Notes will be unconditionally and irrevocably
     guaranteed by the Guarantor as provided in a Deed of Guarantee (the "Deed
     of Guarantee") entered into by the Guarantor substantially in the form set
     out in Schedule 3.


NOW IT IS HEREBY AGREED as follows:

1.   INTERPRETATION

(1)  Words and expressions defined in the Conditions and not otherwise defined
     in this Agreement shall have the same meanings when used in this
     Agreement.

(2)  References in this Agreement to principal and/or interest shall include
     any additional amounts payable pursuant to Condition 8.

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2.   DEFINITIONS

     As used in this Agreement and in the Conditions:

     "Fiscal Agent" and "Paying Agents" mean and include each Fiscal Agent and
     Paying Agent from time to time appointed to exercise the powers and
     undertake the duties conferred and imposed upon it by this Agreement and
     notified to the Noteholders under clause 21;

     "outstanding" means in relation to the Notes all the Notes issued other
     than:

     (a)  those Notes which have been redeemed and cancelled pursuant to
          Condition 7 or otherwise pursuant to the Conditions;

     (b)  those Notes in respect of which the date for redemption under the
          Conditions has occurred and the redemption moneys wherefore
          (including all interest payable thereon) have been duly paid to the
          Fiscal Agent in the manner provided in clause 5 (and, where
          appropriate, notice to that effect has been given to the Noteholders
          under Condition 12) and remain available for payment against
          presentation of the relevant Notes and/or Coupons;

     (c)  those Notes which have been purchased and cancelled under Condition
          7;

     (d)  those Notes which have become void under Condition 9;

     (e)  those mutilated or defaced Notes which have been surrendered and
          cancelled and in respect of which replacements have been issued
          pursuant to Condition 11;

     (f)  (for the purpose only of ascertaining the principal amount of the
          Notes outstanding and without prejudice to the status for any other
          purpose of the relevant Notes) those Notes which are alleged to have
          been lost, stolen or destroyed and in respect of which replacements
          have been issued pursuant to Condition 11; and

     (g)  the Global Note to the extent that it has been exchanged for the
          relative Notes in definitive form pursuant to its provisions,

     provided that for each of the following purposes, namely:

     (i)  the right to attend and vote at any meeting of the Noteholders or any
          of them; and

     (ii) the determination of how many and which Notes are for the time being
          outstanding for the purposes of paragraphs 2, 5, 6 and 9 of Schedule
          3,

     those Notes (if any) which are for the time being held by any person
     (including but not limited to, the Issuer, the Guarantor or any of its
     other Subsidiaries) for the benefit of the Issuer, the Guarantor or any of
     its other Subsidiaries shall (unless and until ceasing to be so held) be
     deemed not to remain outstanding;

     "specified office" means the offices specified in clause 23 or any other
     specified offices as may from time to time be duly notified pursuant to
     clause 23;

     "Subsidiary" shall have the meaning given to it in Condition 4; and

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      "United States" shall have the meaning given to it in Regulation S of the
      U.S. Securities Act of 1933, as amended.

3.    APPOINTMENT OF PAYING AGENTS

      The Issuer and the Guarantor appoint, on the terms and subject to the
      conditions of this Agreement Deutsche Bank AG, Hong Kong Branch as fiscal
      agent and principal paying agent (the "Fiscal Agent" and together with
      any other paying agents, the "Paying Agents") for the payment of
      principal of, and interest on, the Notes, acting at its specified office.

4.    AUTHENTICATION AND DELIVERY OF NOTES

(1)   The Issuer authorises and instructs the Fiscal Agent to authenticate the
      Global Note and any definitive Notes delivered pursuant to subclause (2).

(2)   The Issuer undertakes that it will, if so required in accordance with the
      terms of the Global Note, deliver to, or to the order of, the Fiscal
      Agent, not later than the date required by the Global Note, definitive
      Notes (with Coupons attached) in an aggregate principal amount of Notes
      represented by the Global Note to be issued in exchange for the Global
      Note. Each definitive Note and Coupon so delivered shall be duly executed
      on behalf of the Issuer.

(3)   The Issuer authorises and instructs the Fiscal Agent to cause the Global
      Note to be exchanged for definitive Notes in accordance with its terms.
      Following the exchange of the last interest in the Global Note, the
      Fiscal Agent shall cause the Global Note to be cancelled and delivered to
      the Issuer or as it may direct.

(4)   The Fiscal Agent shall cause all Notes delivered to and held by it under
      this Agreement to be maintained in safe custody and shall ensure that the
      definitive Notes are issued only in accordance with the terms of the
      Global Note and this Agreement.

(5)   So long as any of the Notes is outstanding the Fiscal Agent shall, within
      seven days of any request by the Issuer or the Guarantor, certify to the
      Issuer or, as the case may be, the Guarantor the number of definitive
      Notes held by it under this Agreement.

5.    PAYMENT TO THE FISCAL AGENT

(1)   The Issuer or, failing the Issuer, the Guarantor shall, not later than
      10.00 a.m. (New York City time) on the Business Day in New York City
      immediately preceding each date on which any payment of principal and/or
      interest in respect of any of the Notes becomes due and payable under the
      Conditions or if the due date of payment is not a Business Day in New
      York City on the immediately following such Business Day, transfer to an
      account specified by the Fiscal Agent such amount of U.S. dollars as
      shall be sufficient for the purposes of the payment of principal and/or
      interest in same day funds or in such funds and at such times (being not
      later than 10.00 a.m. (New York City time) on the Business Day in New
      York City immediately preceding the relevant due date or if the due date
      is not a Business Day in New York City, on the immediately following such
      Business Day) as may be determined by the Fiscal Agent to be customary
      for the settlement of similar transactions. For the purposes of this
      subclause (1), "Business Day" means a day on which commercial banks are
      open for business and foreign exchange markets settle payments in the
      relevant place or places.

(2)   The Issuer or, as the case may be, the Guarantor shall ensure that, not
      later than the second Hong Kong Business Day immediately preceding the
      date on which any payment is to be

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      made to the Fiscal Agent pursuant to subclause (1), the Fiscal Agent
      shall receive a copy of an irrevocable payment instruction to the bank
      through which the payment is to be made. For the purposes of this
      subclause (2), "Hong Kong Business Day" means a day (other than a
      Saturday or Sunday) on which banks are open for business in Hong Kong.

6.    NOTIFICATION OF NON-PAYMENT BY THE ISSUER OR THE GUARANTOR

      The Fiscal Agent shall notify by fax each of the other Paying Agents
      forthwith:

      (a)   if it has not by the relevant date specified in clause 5(1)
            received unconditionally the full amount in U.S. dollars required
            for the payment; and

      (b)   if it receives unconditionally the full amount of any sum due in
            respect of the Notes or Coupons after such date.

      The Fiscal Agent shall, at the expense of the Issuer or the Guarantor,
      forthwith upon receipt of any amount as described in subparagraph (b),
      cause notice of that receipt to be published under Condition 12.

7.    DUTIES OF THE PAYING AGENTS

(1)   Subject to the payments to the Fiscal Agent provided for by clause 5
      being duly made, the Paying Agents shall act as paying agents of the
      Issuer and/or the Guarantor in respect of the Notes and pay or cause to
      be paid on behalf of the Issuer and/or the Guarantor on and after each
      date on which any payment becomes due and payable, the amounts of
      principal and/or interest then payable on surrender or, in the case of
      the Global Note, endorsement, of Notes or Coupons under the Conditions
      and this Agreement. If any payment provided for by clause 5 is made late
      but otherwise under the terms of this Agreement the Paying Agents shall
      upon receipt of such payment by the Fiscal Agent nevertheless act as
      paying agents.

(2)   If default is made by the Issuer and the Guarantor in respect of any
      payment, unless and until the full amount of the payment has been made
      under the terms of this Agreement (except as to the time of making the
      same) or other arrangements satisfactory to the Fiscal Agent have been
      made, neither the Fiscal Agent nor any of the other Paying Agents shall
      be bound to act as paying agents.

(3)   If on presentation of a Note or Coupon the amount payable in respect of
      the Note or Coupon is not paid in full (otherwise than as a result of
      withholding or deduction for or on account of any Taxes as permitted by
      the Conditions) the Paying Agent to whom the Note or Coupon is presented
      shall procure that the Note or Coupon is enfaced with a memorandum of the
      amount paid and the date of payment.

8.    REIMBURSEMENT OF THE PAYING AGENTS

      The Fiscal Agent shall charge the account referred to in clause 5 for all
      payments made by it under this Agreement and will credit or transfer to
      the respective accounts of the other Paying Agents the amount of all
      payments made by them under the Conditions immediately upon notification
      from them, subject in each case to any applicable laws or regulations.

9.    NOTICE OF ANY WITHHOLDING OR DEDUCTION

      If the Issuer or the Guarantor is, in respect of any payment in respect
      of the Notes, compelled to withhold or deduct any amount for or on
      account of any Taxes as contemplated by

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      Condition 8, the Issuer or, as the case may be, the Guarantor shall give
      notice to the Fiscal Agent as soon as it becomes aware of the requirement
      to make the withholding or deduction and shall give to the Fiscal Agent
      such information as the Fiscal Agent shall require to enable it to comply
      with the requirement.

10.   NOTIFICATION TO THE FISCAL AGENT IN CONNECTION WITH OPTIONAL REDEMPTION,
      EARLY REDEMPTION AND REDEMPTION FOR TAXATION REASONS

(1)   If the Issuer decides to redeem all the Notes for the time being
      outstanding under Conditions 7(2) or 7(3), it shall give notice of the
      decision to the Fiscal Agent at least 45 days before the relevant
      redemption date.

(2)   If the Issuer is obliged to redeem all the Notes for the time being
      outstanding under Condition 7(4), it shall give notice of the decision to
      the Fiscal Agent at least 15 days before the relevant redemption date.

11.   RECEIPT AND PUBLICATION OF NOTICES

(1)   Forthwith upon the receipt by the Fiscal Agent of a demand or notice from
      any Noteholder or Couponholder under Condition 10 the Fiscal Agent shall
      forward a copy of the demand or notice to the Issuer and to the
      Guarantor.

(2)   On behalf of and at the request and expense of the Issuer or the
      Guarantor, the Fiscal Agent shall cause to be published all notices
      required to be given by the Issuer and/or the Guarantor under the
      Conditions provided that signed copies of such notices shall be sent to
      the Fiscal Agent no less than two Business Days prior to the date of
      publication.

12.   CANCELLATION OF NOTES AND COUPONS

(1)   All Notes which are surrendered in connection with redemption (together
      with all unmatured Coupons attached to or delivered with Notes) and all
      Coupons which are paid shall be cancelled by the Paying Agent to which
      they are surrendered. Each of the Paying Agents shall give to the Fiscal
      Agent details of all payments made by it and shall deliver all cancelled
      Notes and Coupons to the Fiscal Agent (or as the Fiscal Agent may
      specify). Where Notes are purchased by or on behalf of the Issuer, the
      Guarantor or any of the Guarantor's other Subsidiaries, the Issuer or, as
      the case may be, the Guarantor shall procure that the Notes (together
      with all unmatured Coupons appertaining to the Notes) are promptly
      cancelled and delivered to the Fiscal Agent or its authorised agent.

(2)   The Fiscal Agent or its authorised agent shall (unless otherwise
      instructed by the Issuer in writing and save as provided in clause 14(1))
      destroy all cancelled Notes and Coupons and furnish the Issuer and the
      Guarantor with a certificate of destruction containing written
      particulars of the serial numbers of the Notes and the number by maturity
      date of Coupons so destroyed.

13.   ISSUE OF REPLACEMENT NOTES AND COUPONS

(1)   The Issuer shall cause a sufficient quantity of additional forms of Notes
      and Coupons to be available, upon request, to the Fiscal Agent at its
      specified office for the purpose of issuing replacement Notes or Coupons
      as provided below.

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(2)   The Fiscal Agent shall, subject to and in accordance with Condition 11
      and the following provisions of this clause, cause to be authenticated
      (in the case only of replacement Notes) and delivered any replacement
      Notes or Coupons which the Issuer may determine to issue in place of
      Notes or Coupons which have been lost, stolen, mutilated, defaced or
      destroyed.

(3)   In the case of a mutilated or defaced Note, the Fiscal Agent shall ensure
      that (unless otherwise covered by such indemnity as the Issuer may
      require) any replacement Note only has attached to it Coupons
      corresponding to those attached to the mutilated or defaced Note which is
      presented for replacement.

(4)   The Fiscal Agent shall obtain verification, in the case of an allegedly
      lost, stolen or destroyed Note or Coupon in respect of which the serial
      number is known, that the Note or Coupon has not previously been redeemed
      or paid. The Fiscal Agent shall not issue a replacement Note or Coupon
      unless and until the applicant has:

      (a)   paid such expenses and costs as may be incurred in connection with
            the replacement;

      (b)   furnished it with such evidence and indemnity as the Issuer may
            reasonably require; and

      (c)   in the case of a mutilated or defaced Note or Coupon, surrendered
            it to the Fiscal Agent.

(5)   The Fiscal Agent shall cancel mutilated or defaced Notes or Coupons in
      respect of which replacement Notes or Coupons have been issued pursuant
      to this clause. The Fiscal Agent shall furnish the Issuer and the
      Guarantor with a certificate stating the serial numbers of the Notes or
      Coupons received by it and cancelled pursuant to this clause and shall,
      unless otherwise requested by the Issuer or the Guarantor, destroy all
      those Notes and Coupons and furnish the Issuer and the Guarantor with a
      destruction certificate containing the information specified in clause
      12(2).

(6)   The Fiscal Agent shall, on issuing any replacement Note or Coupon,
      forthwith inform the Issuer and the other Paying Agents of the serial
      number of the replacement Note or Coupon issued and (if known) of the
      serial number of the Note or Coupon in place of which the replacement
      Note or Coupon has been issued. Whenever replacement Coupons are issued
      under this clause, the Fiscal Agent shall also notify the other Paying
      Agents of the maturity dates of the lost, stolen, mutilated, defaced or
      destroyed Coupons and of the replacement Coupons issued.

(7)   Whenever a Note or Coupon for which a replacement Note or Coupon has been
      issued and the serial number of which is known is presented to a Paying
      Agent for payment, the relevant Paying Agent shall immediately send
      notice to the Issuer and the Fiscal Agent.

14.   RECORDS AND CERTIFICATES

(1)   The Fiscal Agent shall (a) keep a full and complete record of all Notes
      and Coupons (other than serial numbers of Coupons) and of their
      redemption and/or purchase by or on behalf of the Issuer, the Guarantor
      or any of the Guarantor's other Subsidiaries, cancellation or payment (as
      the case may be) and of all replacement Notes or Coupons issued in
      substitution for lost, stolen, mutilated, defaced or destroyed Notes or
      Coupons and (b) in respect of the Coupons of each maturity, retain until
      the expiry of ten years from the Relevant Date in respect of the Coupons
      either all paid Coupons of that maturity or a list of the serial numbers

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      of Coupons of that maturity still remaining unpaid. The Fiscal Agent
      shall during normal business hours make the records and Coupons (if any)
      available to the Issuer and the Guarantor.

(2)   The Fiscal Agent shall give to the Issuer and the Guarantor, as soon as
      possible and in any event within four months after the date of
      redemption, purchase, payment or replacement of a Note or Coupon (as the
      case may be), a certificate stating (a) the aggregate principal amount of
      Notes which have been redeemed and the aggregate amount in respect of
      Coupons which have been paid, (b) the serial numbers of those Notes in
      definitive form, (c) the total number by maturity date of those Coupons,
      (d) the aggregate principal amounts of Notes (if any) which have been
      purchased by or on behalf of the Issuer, the Guarantor or any of the
      Guarantor's other Subsidiaries and cancelled (subject to delivery of the
      Notes to the Fiscal Agent) and the serial numbers of such Notes in
      definitive form and the total number by maturity date of the Coupons
      attached to or surrendered with the purchased Notes, (e) the aggregate
      principal amounts of Notes and the aggregate amounts in respect of
      Coupons which have been surrendered and replaced and the serial numbers
      of those Notes in definitive form and the total number by maturity date
      of those Coupons surrendered therewith and (f) the total number by
      maturity date of unmatured Coupons missing from Notes which have been
      redeemed or surrendered and replaced and the serial numbers of the Notes
      in definitive form to which the missing unmatured Coupons appertained.

15.   COPIES OF THIS AGREEMENT AND THE DEED OF GUARANTEE AVAILABLE FOR
      INSPECTION

(1)   The Deed of Guarantee 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 Agreement, together with
      copies of the Deed of Guarantee, and any other documents expressed to be
      held by them in the Listing Circular to be issued by the Issuer in
      relation to the Notes available for inspection by Noteholders and
      Couponholders at their specified offices 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.

16.   COMMISSIONS AND EXPENSES

(1)   The Issuer, or, failing the Issuer, the Guarantor shall pay to the Fiscal
      Agent such commissions in respect of the services of the Paying Agents
      under this Agreement as shall be agreed between the Issuer, the Guarantor
      and the Fiscal Agent. Neither the Issuer nor the Guarantor shall be
      concerned with the apportionment of payment among the Paying Agents.

(2)   The Issuer or, failing the Issuer, the Guarantor shall also pay to the
      Fiscal Agent an amount equal to any value added tax of which the Issuer
      is aware which may be payable in respect of the commissions together with
      all expenses properly incurred by the Paying Agents in connection with
      their services under this Agreement.

(3)   The Fiscal Agent shall arrange for payment of the commissions due to the
      other Paying Agents and arrange for the reimbursement of their expenses
      promptly after receipt of the relevant moneys from the Issuer or the
      Guarantor.

(4)   At the request of the Fiscal Agent, the parties to this Agreement may
      from time to time during the continuance of this Agreement review the
      commissions agreed initially pursuant to

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      subclause (1) with a view to determining whether the parties can mutually
      agree upon any changes to the commissions.

17.   INDEMNITY

(1)   The Issuer or, failing the Issuer, the Guarantor undertakes to indemnify
      each of the Paying Agents and their directors, officers, employees and
      controlling persons against all losses, liabilities, costs, claims,
      actions, damages, expenses or demands which any of them may incur or
      which may be made against any of them as a result of or in connection
      with the appointment of or the exercise of the powers and duties by any
      Paying Agent under this Agreement except as may result from its wilful
      default, negligence or bad faith or that of its directors, officers,
      employees or controlling persons or any of them, or breach by it of the
      terms of this Agreement.

(2)   Each of the Paying Agents severally undertakes to indemnify the Issuer
      and its directors, officers, employees and controlling persons against
      all losses, liabilities, costs, claims, actions, damages, expenses or
      demands which any of them may incur or which may be made against any of
      them as a result of its wilful default, negligence or bad faith or that
      of its directors, officers, employees or controlling persons or any of
      them, or breach by it of the terms of this Agreement.

(3)   The indemnities set out above shall survive any termination of this
      Agreement.

18.   REPAYMENT BY FISCAL AGENT

      Sums paid by or by arrangement with the Issuer or the Guarantor to the
      Fiscal Agent pursuant to the terms of this Agreement shall not be
      required to be repaid to the Issuer unless and until any Note or Coupon
      becomes void under the provisions of Condition 9 but in that event the
      Fiscal Agent shall forthwith repay to the Issuer or, if so directed by
      the Issuer, to the Guarantor sums equivalent to the amounts which would
      otherwise have been payable in respect of the relevant Note or Coupon.

19.   CONDITIONS OF APPOINTMENT

(1)   Subject as provided in subclause (3) of this clause, the Fiscal Agent
      shall be entitled to deal with money paid to it by the Issuer or the
      Guarantor for the purposes of this Agreement in the same manner as other
      money paid to a banker by its customers and shall not be liable to
      account to the Issuer or the Guarantor for any interest or other amounts
      in respect of the money. No money held by any Paying Agent need be
      segregated except as required by law.

(2)   In acting under this Agreement and in connection with the Notes and the
      Coupons, the Paying Agents shall act solely as agents of the Issuer and
      the Guarantor and will not assume any obligations towards or relationship
      of agency or trust for or with any of the owners or holders of the Notes
      or the Coupons.

(3)   No Paying Agent shall exercise any right of set-off or lien against the
      Issuer, the Guarantor or any holders of Notes or Coupons in respect of
      any moneys payable to or by it under the terms of this Agreement.

(4)   Except as ordered by a court of competent jurisdiction or required by law
      or otherwise instructed by the Issuer or the Guarantor, each of the
      Paying Agents shall be entitled to treat the holder of any Note or Coupon
      as the absolute owner for all purposes (whether or not the

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      Note or Coupon shall be overdue and notwithstanding any notice of
      ownership or other writing on the Note or Coupon or any notice of
      previous loss or theft of the Note or Coupon).

(5)   The Paying Agents shall be obliged to perform such duties and only such
      duties as are set out in this Agreement and the Notes and no implied
      duties or obligations shall be read into this Agreement or the Notes
      against the Paying Agents.

(6)   The Paying Agents may consult with independent legal and other
      professional advisers and the opinion of the advisers shall be full and
      complete protection in respect of action taken, omitted or suffered under
      this Agreement in good faith and in accordance with the opinion of the
      advisers.

(7)   Each of the Paying Agents shall be protected and shall incur no liability
      for or in respect of action taken, omitted or suffered in reliance upon
      any instruction, request or order from the Issuer, the Guarantor or any
      other Paying Agent, or any Note or Coupon, or any notice, resolution,
      direction, consent, certificate, affidavit, statement, facsimile, telex
      or other paper, electronic communication or document which it reasonably
      believes to be genuine and to have been delivered, signed or sent by the
      proper party or parties or upon written instructions from the Issuer or
      the Guarantor.

(8)   Any of the Paying Agents, their officers, directors, employees or
      controlling persons, may become the owner of, or acquire any interest in,
      Notes or Coupons with the same rights that it or he would have if the
      Paying Agent concerned were not appointed under this Agreement, and may
      engage or be interested in any financial or other transaction with the
      Issuer or the Guarantor, and may act on, or as depositary, trustee or
      agent for, any committee or body of holders of Notes or Coupons or other
      obligations of the Issuer or the Guarantor, as freely as if the Paying
      Agent were not appointed under this Agreement.

(9)   The Fiscal Agent shall not be under any obligation to take any action
      under this Agreement which may be illegal or contrary to applicable law,
      or that it expects will result in any expense or liability accruing to
      it, the payment of which within a reasonable time is not, in its opinion,
      assured to it.

20.   COMMUNICATION WITH PAYING AGENTS

      A copy of all communications relating to the subject matter of this
      Agreement between the Issuer or the Guarantor and any of the Paying
      Agents other than the Fiscal Agent shall be sent to the Fiscal Agent.

21.   TERMINATION OF APPOINTMENT

(1)   The Issuer and the Guarantor may terminate the appointment of any Paying
      Agent at any time and/or appoint additional or other Paying Agents by
      giving to the Paying Agent whose appointment is concerned and, where
      appropriate, the Fiscal Agent at least 90 days' prior written notice to
      that effect, provided that, so long as any of the Notes is outstanding:

      (a)   in the case of a Paying Agent, the notice shall not expire less
            than 45 days before any due date for the payment of interest; and

      (b)   notice shall be given under Condition 12 at least 30 days before
            the removal or appointment of a Paying Agent.

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(2)   Notwithstanding the provisions of subclause (1), if at any time a Paying
      Agent becomes incapable of acting, or is adjudged bankrupt or insolvent,
      or files a voluntary petition in bankruptcy or makes an assignment for
      the benefit of its creditors or consents to the appointment of an
      administrator, liquidator or administrative or other receiver of all or
      any substantial part of its property, or if an administrator, liquidator
      or administrative or other receiver of it or of all or a substantial part
      of its property is appointed, or it admits in writing its inability to
      pay or meet its debts as they may mature or suspends payment of its
      debts, or if an order of any court is entered approving any petition
      filed by or against it under the provisions of any applicable bankruptcy
      or insolvency law or if a public officer takes charge or control of the
      Paying Agent or of its property or affairs for the purpose of
      rehabilitation, administration or liquidation, the Issuer and the
      Guarantor may forthwith without notice terminate the appointment of the
      Paying Agent, in which event notice shall be given to the Noteholders
      under Condition 12 as soon as is practicable.

(3)   The termination of the appointment of a Paying Agent under this Agreement
      shall not entitle the Paying Agent to any amount by way of compensation
      but shall be without prejudice to any amount then accrued due.

(4)   All or any of the Paying Agents may resign their respective appointments
      under this Agreement at any time by giving to the Issuer, the Guarantor
      and, where appropriate, the Fiscal Agent at least 90 days' prior written
      notice to that effect provided that, so long as any of the Notes is
      outstanding, the notice shall not, in the case of a Paying Agent, expire
      less than 45 days before any due date for the payment of interest.
      Following receipt of a notice of resignation from a Paying Agent, the
      Issuer or, failing the Issuer, the Guarantor shall promptly, and in any
      event not less than 30 days before the resignation takes effect, give
      notice to the Noteholders under Condition 12. If the Fiscal Agent shall
      resign or be removed pursuant to subclauses (1) or (2) above or in
      accordance with this subclause (4), the Issuer and the Guarantor shall
      promptly and in any event within 30 days appoint a successor (being a
      leading bank acting through its office in Hong Kong). If the Issuer and
      the Guarantor fail to appoint a successor by the tenth day prior to the
      expiration of such period, the Fiscal Agent may select a leading bank
      acting through its office in Hong Kong to act as Fiscal Agent hereunder
      and the Issuer and the Guarantor shall appoint that bank as the successor
      Fiscal Agent.

(5)   Notwithstanding the provisions of subclauses (1), (2) and (4), so long as
      any of the Notes is outstanding, the termination of the appointment of a
      Paying Agent (whether by the Issuer and the Guarantor or by the
      resignation of the Paying Agent) shall not be effective unless upon the
      expiry of the relevant notice there is:

      (a)   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,
            a Paying Agent in a European Union Member State that will not be
            obliged to withhold or deduct tax pursuant to any such Directive of
            law; and

      (c)   if any Notes are listed on the Luxembourg Stock Exchange or any
            other stock exchange, 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).

<PAGE>
                                      11


(6)   Any successor Paying Agent shall execute and deliver to its predecessor,
      the Issuer, the Guarantor and, where appropriate, the Fiscal Agent an
      instrument accepting the appointment under this Agreement, and the
      successor Paying Agent, without any further act, deed or conveyance,
      shall become vested with all the authority, rights, powers, trusts,
      immunities, duties and obligations of the predecessor with like effect as
      if originally named as a Paying Agent.

(7)   If the appointment of a Paying Agent under this Agreement is terminated
      (whether by the Issuer, the Guarantor or by the resignation of the Paying
      Agent), the Paying Agent shall on the date on which the termination takes
      effect deliver to its successor Paying Agent (or, if none, the Fiscal
      Agent) all Notes and Coupons surrendered to it but not yet destroyed and
      all records concerning the Notes and Coupons maintained by it (except
      such documents and records as it is obliged by law or regulation to
      retain or not to release) and pay to its successor Paying Agent (or, if
      none, to the Fiscal Agent) the amounts (if any) held by it in respect of
      Notes or Coupons which have become due and payable but which have not
      been presented for payment, but shall have no other duties or
      responsibilities under this Agreement.

(8)   If the Fiscal Agent or any of the other Paying Agents shall change its
      specified office, it shall give to the Issuer, the Guarantor and, where
      appropriate, the Fiscal Agent not less than 45 days' prior written notice
      to that effect giving the address of the new specified office. As soon as
      practicable thereafter and in any event at least 30 days before the
      change, the Fiscal Agent shall give to the Noteholders on behalf of and
      at the expense of the Issuer or, failing the Issuer, the Guarantor notice
      of the change and the address of the new specified office under Condition
      12.

(9)   A corporation into which any Paying Agent for the time being may be
      merged or converted or a corporation with which the Paying Agent may be
      consolidated or a corporation resulting from a merger, conversion or
      consolidation to which the Paying Agent shall be a party shall, to the
      extent permitted by applicable law, be the successor Paying Agent under
      this Agreement without the execution or filing of any paper or any
      further act on the part of any of the parties to this Agreement. Notice
      of any merger, conversion or consolidation shall forthwith be given to
      the Issuer, the Guarantor and, where appropriate, the Fiscal Agent.

22.   MEETINGS OF NOTEHOLDERS

(1)   The provisions of Schedule 3 shall apply to meetings of the Noteholders
      and shall have effect in the same manner as if set out in this Agreement
      provided that, so long as any of the Notes are represented by the Global
      Note, the expression "Noteholders" shall include the persons for the time
      being shown in the records of Euroclear Bank S.A./N.V., as operator of
      the Euroclear System ("Euroclear") and/or Clearstream Banking, societe
      anonyme ("Clearstream, Luxembourg"), as the holders of a particular
      principal amount of such Notes (each an "Accountholder") (in which regard
      a certificate or other document issued by Euroclear or Clearstream,
      Luxembourg as to the principal amount of such Notes standing to the
      account of any person shall be conclusive and binding) for all purposes
      other than with respect to the payment of principal and interest on such
      Notes, the right to which shall be vested as against the Issuer solely in
      the bearer of the Global Note in accordance with and subject to its
      terms, and the expressions "holder" and "holders" shall be construed
      accordingly and the expression "Notes" shall mean units of U.S.$250,000
      in principal amount of Notes.

<PAGE>
                                      12


(2)   Without prejudice to subclause (1), each of the Paying Agents shall, on
      the request of any holder of Notes, issue Voting Certificates and Block
      Voting Instructions (as defined in paragraph 1 of Schedule 3) together,
      if so required by the Issuer, with reasonable proof satisfactory to the
      Issuer of their due execution on behalf of the Paying Agent under the
      provisions of Schedule 3 and shall forthwith give notice to the Issuer
      under Schedule 3 of any revocation or amendment of a Voting Certificate
      or Block Voting Instruction. Each Paying Agent shall keep a full and
      complete record of all Voting Certificates and Block Voting Instructions
      issued by it and shall, not less than 24 hours before the time appointed
      for holding any meeting or adjourned meeting, deposit at such place as
      the Fiscal Agent shall designate or approve, full particulars of all
      Voting Certificates and Block Voting Instructions issued by it in respect
      of any meeting or adjourned meeting.

23.   NOTICES

      Any notice required to be given under this 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 or telex
      addressed to:

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

                         Facsimile No: 2962 5725

                         (Attention: Company Secretary)

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

                         Facsimile No: 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: Corporate Trust & Agency Services)

<PAGE>
                                      13


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

                         Facsimile No: +44 207 547 6149

                         (Attention: Corporate Trust & Agency Services)

      or such other address of which notice in writing has been given to the
      other parties to this 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 earlier of 24 hours after, or the start of the second
      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.

24.   TAXES

      The Issuer or, failing the Issuer, the Guarantor agrees to pay any and
      all stamp and other documentary taxes or duties which may be payable in
      connection with the execution, delivery, performance and enforcement of
      this Agreement.

25.   COUNTERPARTS

      This 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 Agreement by executing a counterpart.

26.   DESCRIPTIVE HEADINGS

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

27.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

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

(2)   Each of the Issuer and the 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 this
      Agreement and that accordingly any suit, action or proceedings arising
      out of or in connection with this Agreement (together referred to as
      "Proceedings") may be brought in the courts of England.

(3)   Each of the Issuer and the 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

<PAGE>
                                      14


      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 Guarantor irrevocably and unconditionally
      appoints Simmlaw Services Limited at its registered office for the time
      being (currently at CityPoint, One Ropemaker Street, London EC2Y 9SS,
      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 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 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
            Guarantor (as the case may be) in accordance with clause 23; and

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

28.   AMENDMENTS

      This Agreement may be amended by all of the parties, without the consent
      of any Noteholder or Couponholder, either:

      (a)   for the purpose of curing any ambiguity or of curing, correcting or
            supplementing any manifest or proven error or any other defective
            provision contained in this Agreement; or

      (b)   in any manner which the parties may mutually deem necessary or
            desirable and which shall not be inconsistent with the Conditions
            and shall not be materially prejudicial to the interests of the
            Noteholders.

29.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      A person who is not a party to this Agreement has no right under the
      Contracts (Rights of Third Parties) Act 1999 to enforce any terms of this
      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.

<PAGE>
                                      15



                                   SCHEDULE 1

                              FORM OF GLOBAL NOTE

                                                             ISIN: XS0161652127
                                                         Common Code: 016165212


                           PCCW CAPITAL NO. 3 LIMITED

                                  GLOBAL NOTE

                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                 unconditionally and irrevocably guaranteed by

                                  PCCW LIMITED


This Global Note is issued in respect of the U.S.$456,000,000 7.88 per cent.
Guaranteed Notes due 2013 (the "Notes") of PCCW Capital No. 3 Limited (the
"Issuer"). The Notes are issued subject to and with the benefit of an Agency
Agreement (the "Agency Agreement") dated 24th January, 2003 between, inter
alios, the Issuer, PCCW Limited (the "Guarantor") and Deutsche Bank AG, Hong
Kong Branch as Fiscal Agent (the "Fiscal Agent"). Payments in respect of the
Notes are unconditionally and irrevocably guaranteed by the Guarantor as
provided in a Deed of Guarantee dated 24th January, 2003 entered into by the
Guarantor. The Notes are issued subject to and with the benefit of the
Conditions of the Notes (the "Conditions") set out in Part II of Schedule 2 to
the Agency Agreement.

1.    PROMISE TO PAY

      Subject as provided in this Global Note, the Issuer, for value received,
      promises to pay the bearer upon presentation and surrender of this Global
      Note the sum of U.S.$456,000,000 (four hundred and fifty-six million
      United States dollars) or such lesser sum as is equal to the principal
      amount of the Notes represented by this Global Note on 24th January, 2013
      or on such earlier date as the principal of this Global Note may become
      due under the Conditions and to pay interest on the principal sum for the
      time being outstanding at the rate of 7.88 per cent. per annum from 24th
      January, 2003 payable semi-annually in arrear in equal instalments on
      24th January and 24th July in each year until payment of the principal
      sum has been made or duly provided for in full together with any other
      amounts as may be payable, all subject to and under the Conditions.

2.    EXCHANGE FOR DEFINITIVE NOTES AND PURCHASES

      The definitive Notes to be issued on exchange of this Global Note as
      provided below will be in bearer form in the denomination of U.S.$250,000
      each with interest coupons ("Coupons") attached.

      This Global Note may be exchanged in whole but not in part (free of
      charge) for definitive Notes and Coupons in the forms set out in Part I
      of Schedule 2 to the Agency Agreement only upon the occurrence of an
      Exchange Event.

<PAGE>
                                      16


      An "Exchange Event" means;

            (1)   an Event of Default (as defined in Condition 10) has occurred
                  and is continuing;

            (2)   the Issuer has been notified that both Euroclear Bank
                  S.A./N.V., as operator of the Euroclear System ("Euroclear")
                  and Clearstream Banking, societe anonyme ("Clearstream,
                  Luxembourg") have been closed for business for a continuous
                  period of 14 days (other than by reason of holiday, statutory
                  or otherwise) or have announced an intention permanently to
                  cease business or have in fact done so and no successor
                  clearing system is available; or

            (3)   the Issuer has or will become subject to adverse tax
                  consequences which would not be suffered were the Notes
                  represented by this Global Note in definitive form.

      The Issuer will promptly give notice to Noteholders in accordance with
      Condition 12 upon the occurrence of an Exchange Event. In the event of
      the occurrence of any Exchange Event, Euroclear and/or Clearstream,
      Luxembourg acting on the instructions of any holder of an interest in
      this Global Note may give notice to the Fiscal Agent requesting exchange
      and, in the event of the occurrence of an Exchange Event as described in
      (3) above, the Issuer may also give notice to the Fiscal Agent requesting
      exchange. Any such exchange shall occur no later than 45 days after the
      date of receipt of the first relevant notice by the Fiscal Agent.

      Any such exchange will be made upon presentation of this Global Note at
      the office of the Fiscal Agent specified above by the bearer of this
      Global Note on any day (other than a Saturday or Sunday) on which banks
      are open for general business in Hong Kong. The aggregate principal
      amount of definitive Notes issued upon an exchange of this Global Note
      will be equal to the aggregate principal amount of this Global Note.

      On an exchange of this Global Note, this Global Note shall be surrendered
      to the Fiscal Agent.

      Upon (a) any exchange of a part of this Global Note for a definitive Note
      or (b) receipt of instructions from Euroclear or Clearstream, Luxembourg
      that, following the purchase by or on behalf of the Issuer, the Guarantor
      or any of the Guarantor's other Subsidiaries of a part of this Global
      Note, part is to be cancelled, the portion of the principal amount of
      this Global Note so exchanged or to be so cancelled shall be endorsed by
      or on behalf of the Fiscal Agent on Part I of the Schedule to this Global
      Note, whereupon the principal amount of this Global Note shall be reduced
      for all purposes by the amount so exchanged or cancelled and endorsed.

3.    BENEFITS

      Until the entire principal amount of this Global Note has been
      extinguished in exchange for definitive Notes, this Global Note shall in
      all respects be entitled to the same benefits as the definitive Notes for
      which it may be exchanged.

4.    PAYMENTS

      Payments in respect of Notes for the time being represented by this
      Global Note shall be made to the bearer of this Global Note.

      Upon any payment in respect of the Notes represented by this Global Note,
      the amount so paid shall be endorsed by or on behalf of the Fiscal Agent
      on Part II of the Schedule to this

<PAGE>
                                      17


      Global Note. In the case of any payment of principal, the principal
      amount of this Global Note shall be reduced for all purposes by the
      amount so paid and the remaining principal amount of this Global Note
      shall be endorsed by or on behalf of the Fiscal Agent on Part II of the
      Schedule to this Global Note.

5.    ACCOUNTHOLDERS

      For so long as any of the Notes is represented by this Global Note, each
      person who is for the time being shown in the records of Euroclear and/or
      Clearstream, Luxembourg as the holder of a particular principal amount of
      Notes (each an "Accountholder") shall be treated by the Issuer as the
      holder of that principal amount for all purposes (including but not
      limited to for the purposes of giving notice to the Issuer pursuant to
      Condition 10) other than with respect to the payment of principal and
      interest in respect of the Notes, the right to which shall be vested, as
      against the Issuer, solely in the holder of this Global Note in
      accordance with and subject to its terms. Any certificate or other
      document issued by Euroclear or Clearstream, Luxembourg as to the
      principal amount of Notes standing to the account of any Accountholder
      shall be conclusive and binding for all purposes.

      Notes represented by this Global Note are transferable in accordance with
      the rules and procedures for the time being of Euroclear or Clearstream,
      Luxembourg as appropriate.

      The Issuer covenants in favour of each Accountholder that it will make
      all payments in respect of the principal amount of Notes for the time
      being shown in the records of Euroclear and/or Clearstream, Luxembourg as
      being held by the Accountholder and represented by this Global Note to
      the bearer of this Global Note in accordance with clause 1 above and
      acknowledges that each Accountholder may take proceedings to enforce this
      covenant and any of the other rights which it has under the first
      paragraph of this clause directly against the Issuer.

      The Issuer undertakes in favour of each Accountholder that, in relation
      to any payment to be made by it under this Global Note, it will comply
      with the provisions of Condition 8 to the extent that they apply to any
      payments in respect of the Notes as if those provisions had been set out
      in full in this Global Note.

      The Issuer acknowledges the right of every Accountholder to the
      production of, and the right of every Accountholder to obtain (upon
      payment of a reasonable charge) a copy of, this Global Note, and further
      acknowledges and covenants that the obligations binding upon it contained
      in this Global Note are owed to, and shall be for the account of, each
      and every Accountholder, and that each Accountholder shall be entitled
      severally to enforce those obligations against the Issuer.

6.    NOTICES

      So long as this Global Note is held on behalf of Euroclear or
      Clearstream, Luxembourg, notices required to be given to Noteholders may
      be given by their being delivered to Euroclear or Clearstream, Luxembourg
      for communication to entitled Accountholders, rather than by publication
      as required by the Conditions.

7.    AUTHENTICATION

      This Global Note shall not become valid or enforceable for any purpose
      unless and until it has been authenticated by or on behalf of the Fiscal
      Agent.

<PAGE>
                                      18


8.    CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      No rights are conferred on any person under the Contracts (Rights of
      Third Parties) Act 1999 to enforce any term of this Global Note, but this
      does not affect any right or remedy of any person which exists or is
      available apart from that Act.

9.    GOVERNING LAW

      This Global Note is governed by, and shall be construed in accordance
      with, English law.



IN WITNESS whereof this Global Note has been executed as a deed poll on behalf
of the Issuer.


THE COMMON SEAL of                        )
PCCW CAPITAL NO. 3 LIMITED                )
was affixed in the presence of:           )


                                                   Director


Dated 24th January, 2003


CERTIFICATE OF AUTHENTICATION

This is the Global Note described
in the Agency Agreement
By or on behalf of
Deutsche Bank AG, Hong Kong Branch
as Fiscal Agent
(without recourse, warranty or liability)

..................................

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

<PAGE>
                                      19



                                  THE SCHEDULE

                                     Part I

                EXCHANGES FOR DEFINITIVE NOTES AND CANCELLATIONS



The following exchanges of a part of this Global Note for definitive Notes and
cancellations of a part of the aggregate principal amount of this Global Note
have been made:

<TABLE>
Date of exchange or    Part of the aggregate   Part of the           Remaining               Notation made
cancellation           principal amount of     aggregate principal   principal               by or on behalf
                       this Global Note        amount of this        amount of this Global   of the Fiscal
                       exchanged for           Global Note           Note following          Agent
                       definitive Notes        cancelled             exchange or
                                                                     cancellation

                       U.S.$                   U.S.$                 U.S.$
<S>                    <C>                     <C>                   <C>                     <C>
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
</TABLE>

<PAGE>
                                      20



                                    Part II

                                    PAYMENTS


The following payments in respect of the Notes represented by this Global Note
have been made:

<TABLE>
Date of payment        Amount of interest      Amount of             Remaining principal     Notation made
                       paid                    principal paid        amount of this Global   by or on behalf
                                                                     Note following payment  of the Fiscal
                                                                                             Agent

                       U.S.$                   U.S.$                 U.S.$

<S>                    <C>                     <C>                   <C>                     <C>
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
-------------------    ---------------------   -------------------   ---------------------   ---------------------
</TABLE>

<PAGE>
                                      21



                                   SCHEDULE 2

                                     PART I

                      FORMS OF DEFINITIVE NOTE AND COUPON

                            FORM OF DEFINITIVE NOTE

(Face of Note)

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

000000                             XS0161652127                        00 00000

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

                           PCCW CAPITAL NO. 3 LIMITED
              (incorporated with limited liability under the laws
                         of the British Virgin Islands)


                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                   unconditionally and irrevocably guaranteed
                   as to payment of principal and interest by

                                  PCCW LIMITED
       (incorporated with limited liability under the laws of Hong Kong)



The issue of the Notes was authorised by a resolution of the Board of Directors
of PCCW Capital No. 3 Limited (the "Issuer") passed on 22nd January, 2003 and
the giving of the guarantee in respect of the Notes was authorised by a
resolution of the Board of Directors of PCCW Limited (the "Guarantor") passed
on 22nd January, 2003.

This Note forms one of a series of Notes issued as bearer Notes in the
denomination of U.S.$250,000 each, in an aggregate principal amount of
U.S.$456,000,000.

The Issuer for value received and subject to and in accordance with the
Conditions endorsed hereon hereby promises to pay to the bearer on 24th
January, 2013 (or on such earlier date as the principal sum (as determined
under the Conditions) may become repayable under the said Conditions) the
principal sum of:

  U.S.$456,000,000 (Four Hundred and Fifty-Six Million United States Dollars)

together with interest on the principal sum at the rate of 7.88 per cent. per
annum payable semi-annually in arrear in equal instalments on 24th January and
24th July in each year and together with such other amounts as may be payable,
all subject to and under the Conditions.

The Notes are issued pursuant to an Agency Agreement (the "Agency Agreement")
dated 24th January, 2003 between, inter alios, the Issuer and Deutsche Bank AG,
Hong Kong Branch as Fiscal Agent. Payments of principal and interest in respect
of the Notes are unconditionally and irrevocably guaranteed by the Guarantor as
provided in a Deed of Guarantee (the "Deed of Guarantee") dated

<PAGE>
                                      22


24th January, 2003 entered into by the Guarantor. The Notes have the benefit
of, and are subject to, the provisions contained in the Agency Agreement, the
Deed of Guarantee and the Conditions.

Neither this Note nor any of the Coupons relating to this Note shall become
valid or enforceable for any purpose unless and until this Note has been
authenticated by or on behalf of the Fiscal Agent.


IN WITNESS WHEREOF this Note has been executed on behalf of the Issuer.

Dated as of [                  ]


Issued in Hong Kong.

                                              PCCW CAPITAL NO. 3 LIMITED
                                              By:



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

CERTIFICATE OF AUTHENTICATION

This is one of the Notes described
in the Agency Agreement.

By or on behalf of
Deutsche Bank AG, Hong Kong Branch as
Fiscal Agent
(without recourse, warranty or liability)

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


ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

<PAGE>
                                      23


(Reverse of Note)

                                    PART II

                            CONDITIONS OF THE NOTES

                   (as set out in Part II of this Schedule 2)

                       FISCAL AND PRINCIPAL PAYING AGENT

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

and/or such other or further Fiscal Agent or Paying Agents and/or specified
offices as may from time to time be appointed by the Issuer and notice of which
has been given to the Noteholders.


<PAGE>
                                      24



                                 FORM OF COUPON

(Face of Coupon)

PCCW Capital No. 3 Limited
U.S.$456,000,000 7.88 per cent. Guaranteed Notes due 2013


This Coupon relating to a Note             [Coupon for U.S.$9,850 due on 24th
in the denomination                        July, 2003/24th January/July [2004-
of U.S.$250,000                            2012/24th January, 2013]]
is payable to bearer, separately
negotiable and subject to the
Conditions of the Notes.


            PCCW CAPITAL NO. 3 LIMITED

            By: ................


ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.


00 000000                        XS0161652127                            000000

(Reverse of Coupon)

FISCAL AND PRINCIPAL PAYING AGENT:
DEUTSCHE BANK AG, HONG KONG BRANCH

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                                      25



                                   SCHEDULE 2

                            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 (such agreement as amended and/or supplemented and/or restated
from time to time, the "Agency Agreement") made between the Issuer, PCCW
Limited (the "Guarantor") as guarantor, 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 to the Agency Agreement
(together with the Fiscal Agent, the "Paying Agents").

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

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                                      26


3.    GUARANTEE

      The Guarantor has executed a deed of guarantee (the "Deed of Guarantee")
      dated 24th January, 2003 under which 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 original of the
      Deed of Guarantee is 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, the Issuer and the
      Guarantor will procure that neither PCCW-HKT Telephone Limited ("HKTC")
      nor any HKTC Principal Subsidiary (other than Listed HKTC Principal
      Subsidiaries) will create, incur, assume or permit to exist any Lien
      (other than Permitted Liens) upon any of their respective property or
      assets, now owned or acquired after 24th January, 2003 (the "Issue
      Date"), to secure any Indebtedness of HKTC or such HKTC Principal
      Subsidiary (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 HKTC 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 HKTC'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 HKTC'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;

      "HKTC Principal Subsidiary" at any time shall mean a Subsidiary of HKTC:

      (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 HKTC which
                  has Subsidiaries) consolidated net profit attributable to
                  HKTC (in each case before taxation and exceptional items) is
                  at least 5 per cent. of the consolidated net profit of

<PAGE>
                                      27


                  HKTC 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 HKTC which
                  has Subsidiaries) consolidated net assets attributable to
                  HKTC (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 HKTC 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 HKTC and the then latest audited consolidated
            financial statements of HKTC provided that: (1) in the case of a
            Subsidiary of HKTC 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 HKTC 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
            HKTC (not being a Subsidiary referred to in (1) above) are not
            consolidated with those of HKTC then the determination of whether
            or not the Subsidiary of HKTC is an HKTC Principal Subsidiary
            shall, if HKTC requires, be based on a pro forma consolidation of
            its accounts (consolidated, if appropriate) with the consolidated
            accounts of HKTC and its Subsidiaries; or

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

      A certificate of the auditors of HKTC as to whether or not a Subsidiary
      is an HKTC 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 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 HKTC Principal Subsidiary" means any HKTC Principal Subsidiary,
      the shares of

<PAGE>
                                      28


      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 HKTC and any HKTC 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 HKTC or any HKTC Principal Subsidiary
            held by such financial institution in an amount not to exceed the
            aggregate amount owed to such financial institution by HKTC or such
            HKTC 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;

      (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 HKTC or any HKTC Principal Subsidiary;

<PAGE>
                                      29


      (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 an HKTC 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 HKTC or any HKTC Principal
            Subsidiary in favour of any government or any subdivision thereof,
            securing the obligations of HKTC or such HKTC 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 HKTC or
            any HKTC 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 HKTC 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
      HKTC (including perpetual debt, which HKTC 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 HKTC, the holders of
      the Notes shall be entitled to receive 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

<PAGE>
                                      30


      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.

(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

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                                      31


(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 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.

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                                      32


(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.

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.

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                                      33


(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

      Subject to (4) below, if a Trigger Event has at any time occurred, 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 notice 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 falling on or after 24th January, 2005 at their
      principal amount. Upon the expiry of such notice, the Issuer shall be
      obliged to redeem the Notes. For the avoidance of doubt, any downgrading
      in the Guarantor's senior unsecured debt rating or the placing of such
      rating under review (in the case of Moody's Investors Services Limited
      ("Moody's")) or on Creditwatch (in the case of Standard & Poor's, a
      division of the McGraw-Hill Companies, Inc. ("S&P")) which occurs at

<PAGE>
                                      34


      any time after the occurrence of a Trigger Event shall not prohibit the
      Issuer giving the notice referred to in (a) above or redeeming the Notes
      in accordance with this Condition 7(3).

      In this Condition, "Trigger Event" means the Guarantor's senior unsecured
      debt being rated "Baa2" or higher by Moody's and "BBB" or higher by S&P.

(4)   Early Redemption

      If a Trigger Event has occurred at any time on or prior to the date which
      is 15 days prior to the Interest Payment Date falling on 24th January,
      2010 and the Notes have not been previously redeemed, the Issuer will be
      obliged to redeem all (but not some only) of the Notes at their principal
      amount on that Interest Payment Date, notwithstanding any subsequent
      downgrading in the Guarantor's senior unsecured debt rating or the
      placing of such rating under review (in the case of Moody's) or on
      Creditwatch (in the case of S&P) prior to such Interest Payment Date. In
      such case, the Issuer will give notice to the Noteholders in accordance
      with Condition 12 specifying the date and details of the Trigger Event.

(5)   Redemption at the Option of the Holders

(a)   Disposal of HKTC

      If the Guarantor ceases to own directly or indirectly at least 70 per
      cent. of the issued voting capital of HKTC (other than as a result of a
      consolidation, amalgamation or merger in which substantially all the
      assets of HKTC continue to be owned or controlled directly or indirectly
      by the Guarantor or by a company or companies at least 70 per cent. of
      the issued share capital of which is/are owned or controlled by the
      Guarantor, in which circumstances the Guarantor shall deliver to the
      Fiscal Agent a certificate signed by two Directors of the Guarantor
      certifying the foregoing to be true and correct), upon any Noteholder
      giving to the Issuer not less than 15 nor more than 30 days' notice, the
      Issuer will, upon the expiry of such notice, redeem in whole (but not in
      part) the Notes the subject of the notice on the date which is 15 days
      following the expiry of such notice at their principal amount together
      with interest accrued to the date of redemption.

(b)   Failure to List

      In the event that the Notes are not listed on the Luxembourg Stock
      Exchange by 24th September, 2003, upon any Noteholder giving to the
      Issuer not less than 30 nor more than 60 days' notice, the Issuer will,
      upon the expiry of such notice, redeem in whole (but not in part) the
      Notes the subject of the notice on the next Interest Payment Date at
      their principal amount.

(c)   Notice

      Promptly upon the Issuer or the Guarantor becoming aware that either of
      the events described in (a) or (b) above has occurred, the Issuer or the
      Guarantor, as the case may be, shall, give notice to the Noteholders in
      accordance with Condition 12 specifying the date and nature of the event.

(d)   Exercise

<PAGE>
                                      35


      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.

(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 the Guarantor 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 the Guarantor 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, the Guarantor or
      such Subsidiary of the Guarantor, 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

<PAGE>
                                      36


      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, 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

<PAGE>
                                      37


      (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, the Guarantor or such Subsidiary
            of the Guarantor, 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.

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

(1)   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

<PAGE>
                                      38


      (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 Material
            Subsidiary, (ii) acceleration of the maturity of any Indebtedness
            of the Issuer, the Guarantor or any Material Subsidiary following a
            default by the Issuer, the Guarantor or such Material 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 Material 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 Material 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 Material Subsidiary or of the Issuer or the Guarantor and their
            respective Subsidiaries taken as a whole; or

      (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 Material 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 Material 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 Material
            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 Material Subsidiary (except for
            the purpose of and followed by a reconstruction or amalgamation on
            terms approved by the holders of a majority in

<PAGE>
                                      39


            principal amount of the Notes before that step is taken or in the
            case of a Material Subsidiary whereby the undertaking and assets of
            the Material Subsidiary are transferred or otherwise vested in the
            Guarantor or another of its Subsidiaries pursuant to a merger of
            the Material 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 Material 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 the Guarantor; 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.


(2)   Interpretation

      In these Conditions:

      "EBITDA" means, in respect of any entity, the total operating profit
      (loss) for continuing operations before interest, tax, depreciation of
      tangible assets and amortisation of goodwill and other intangible assets
      of that entity as determined in accordance with HK GAAP and excluding any
      share of results of associates, jointly controlled and unconsolidated
      companies, exceptional profits or losses on the sale or termination of an
      operation, exceptional costs of a reorganisation or restructuring and any
      extraordinary losses or expenses such as goodwill write-off, asset and
      investment impairment losses and provisions for investments and
      properties and any exceptional profits or losses on the disposal of
      assets and extraordinary items and minority interests; and

      "Material Subsidiary" means, at any time, any Subsidiary of the
      Guarantor:-

      (i)   whose EBITDA exceeds 12 per cent. of the consolidated EBITDA of the
            Guarantor and its Subsidiaries; or

      (ii)  whose gross assets exceed 12 per cent. of the consolidated gross
            assets of the Guarantor and its Subsidiaries; or

<PAGE>
                                      40


      (iii) to which is transferred the whole, or substantially the whole, of
            the assets and undertaking of a subsidiary which immediately prior
            to such transfer is a Material Subsidiary.

      In each case as based on the then most recent audited consolidated
      accounts of the Guarantor and its Subsidiaries provided that, if a
      Subsidiary itself has Subsidiaries and produces in respect of any year
      audited consolidated accounts of such Subsidiary and its Subsidiaries,
      the references above to EBITDA or gross assets of such Subsidiary shall
      be construed as references to the EBITDA or gross assets of such
      Subsidiary and its consolidated Subsidiaries and the reference to the
      then most recent audited consolidated accounts of such Subsidiary (which
      are all as determined in accordance with the general accounting
      principles in the relevant country) shall be construed as a reference to
      the then most recent audited consolidated accounts of such Subsidiary and
      its consolidated Subsidiaries.

      In the case of a company or other business entity becoming a Subsidiary,
      after the end of the financial period of the Guarantor to which the
      latest audited consolidated accounts of the Guarantor relate, the
      reference to the then most recent audited consolidated accounts of the
      Guarantor for the purpose of the calculations above shall, until audited
      consolidated accounts of the Guarantor for the financial period in which
      the acquisition is made or, as the case may be, in which the relevant
      company or other business entity becomes a Subsidiary are published, be
      deemed to be a reference to the then latest audited consolidated accounts
      of the Guarantor, adjusted to consolidate the latest audited accounts of
      such Subsidiary (consolidated where applicable) in such accounts.

      If, at any relevant time, in relation to the Guarantor or any Subsidiary
      which itself has Subsidiaries no audited consolidated accounts are
      prepared and audited, total assets and EBITDA of the Guarantor and/or any
      such Subsidiary shall be determined on the basis of pro forma
      consolidated accounts prepared for this purpose by the Guarantor and
      reviewed by the auditors of the Guarantor. In the event that a Subsidiary
      does not prepare audited accounts, then for the purpose of this
      definition reference shall be made to the unaudited accounts of such
      Subsidiary.

      In any event, a report by the auditors of the Guarantor that, in their
      opinion, a Subsidiary is or is not, or was or was not, a Material
      Subsidiary, shall, in the absence of manifest error, be conclusive and
      binding on all parties.

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.

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

<PAGE>
                                      41


      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.

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

<PAGE>
                                      42


      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:

      (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

<PAGE>
                                      43


            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.

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.

<PAGE>
                                      44


(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 Simmlaw
      Services Limited of CityPoint, One Ropemaker Street, London EC2Y 9SS,
      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



<PAGE>
                                      45



                                   SCHEDULE 3

                           FORM OF DEED OF GUARANTEE

                           GUARANTEE OF PCCW LIMITED


THIS GUARANTEE is given on 24th January, 2003 by PCCW Limited (the "Guarantor")
in favour of (1) the Relevant Account Holders (as defined below) in respect of
the Notes (as defined below) and (2) the holders for the time being of the
Notes and the interest coupons (if any) appertaining to the Notes ("Coupons").
Each Relevant Account Holder, each holder of a Note and each holder of a Coupon
is a "Holder". "Relevant Account Holder" means any account holder with either
or both of Euroclear Bank S.A./N.V., as operator of the Euroclear System, and
Clearstream Banking, societe anonyme.

WHEREAS

(A)   The Guarantor has agreed to guarantee the obligations of PCCW Capital No.
      3 Limited (the "Issuer") under the U.S.$456,000,000 7.88 per cent.
      Guaranteed Notes due 2013 (the "Notes") to be issued by the Issuer
      pursuant to an Agency Agreement (the "Agency Agreement") dated 24th
      January, 2003 between, inter alios, the Issuer, the Guarantor and
      Deutsche Bank AG, Hong Kong Branch as Fiscal Agent (the "Fiscal Agent").

(B)   Terms defined in the Conditions of the Notes (the "Conditions") and/or in
      the Agency Agreement and not otherwise defined in this Deed shall have
      the same meaning when used in this Deed.

NOW THIS DEED WITNESSETH as follows:

1.    GUARANTEE AND INDEMNITY

      The Guarantor as primary obligor unconditionally and irrevocably:

      (a)   guarantees to each Holder by way of continuing guarantee the due
            and punctual payment of all amounts payable by the Issuer on or in
            respect of the Note or Coupon (including any additional amounts
            which may become payable in respect of the Note or Coupon under
            Condition 8) as and when the same shall become due in accordance
            with the Conditions; and

      (b)   agrees that, if and each time that the Issuer shall fail to make
            any payments as and when the same become due, the Guarantor will on
            demand (without requiring the relevant Holder first to take steps
            against the Issuer or any other person) pay to the relevant Holder
            the amounts (as to which the certificate of the relevant Holder
            shall in the absence of manifest error be conclusive) in the manner
            and the currency in which the amounts are payable by the Issuer.


<PAGE>
                                      46



2.    TAX AND WITHHOLDING

      All payments by the Guarantor under this Deed will 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 Guarantor will pay such additional amounts
      ("Additional Amounts") as may be necessary in order that the net amounts
      received by the Holders after such withholding or deduction shall equal
      the respective amounts which would have been receivable in respect of the
      Notes or, as the case may be, Coupons, in the absence of the withholding
      or deduction; except that no Additional Amounts shall be payable with
      respect 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
            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 the 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 Holder 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 member state of the European Union; 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, 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

<PAGE>
                                      47


      (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 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
            government charge; or

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

      As used herein:

      "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

      "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 or the
      Guarantor, as the case may be, is resident for tax purposes from or
      through which payments in respect of the Notes are made or any political
      subdivision or any authority thereof or therein having power to tax.

3.    PRESERVATION OF RIGHTS

(1)   The obligations of the Guarantor hereunder shall be deemed to be
      undertaken as principal obligor and not merely as surety.

(2)   The obligations of the Guarantor hereunder shall be continuing
      obligations notwithstanding any settlement of account or other matter or
      thing whatsoever and, in particular but without limitation, shall not be
      considered satisfied by any intermediate payment or satisfaction of all
      or any of the Issuer's obligations under or in respect of any Note or
      Coupon or the Agency Agreement and shall continue in full force and
      effect until all sums due from the Issuer in respect of each Note and
      Coupon and under the Agency Agreement have been paid, and all other
      obligations of the Issuer thereunder or in respect thereof have been
      satisfied in full.

(3)   Neither the obligations expressed to be assumed by the Guarantor herein
      nor the rights, powers and remedies conferred upon the Holders by this
      Deed or by law shall be discharged, impaired or otherwise affected by:

      (a)   the winding up, liquidation or dissolution of the Issuer or
            analogous proceeding in any jurisdiction or any change in its
            status, function, control or ownership;

<PAGE>
                                      48


      (b)   any of the obligations of the Issuer under or in respect of any of
            the Notes or the Coupons or the Agency Agreement being or becoming
            illegal, invalid or unenforceable;

      (c)   time or other indulgence being granted or agreed to be granted to
            the Issuer in respect of its obligations under or in respect of any
            of the Notes or Coupons or the Agency Agreement;

      (d)   any amendment to, or any variation, waiver or release of, any
            obligation of the Issuer under or in respect of any of the Notes or
            Coupons or the Agency Agreement or any security or other guarantee
            or indemnity in respect thereof; or

      (e)   any other act, event or omission which, but for this clause 3(3),
            might operate to discharge, impair or otherwise affect the
            obligations expressed to be assumed by the Guarantor herein or any
            of the rights, powers or remedies conferred upon the Holders or any
            of them by this Deed or by law.

(4)   Any settlement or discharge between the Guarantor and the Holders or any
      of them shall be conditional upon no payment to the Holders or any of
      them by the Issuer or any other person on the Issuer's behalf being
      avoided or reduced by virtue of any provision or enactment relating to
      bankruptcy, insolvency or liquidation for the time being in force and, in
      the event of any such payment being so avoided or reduced, the Holders
      shall be entitled to recover the amount by which such payment is so
      avoided or reduced from the Guarantor subsequently as if such settlement
      or discharge had not occurred. Any Holder, acting bona fide and in good
      faith, shall be entitled to concede or compromise any claim that any
      payment is liable to avoidance or reduction.

(5)   No Holder shall be obliged before exercising any of the rights, powers or
      remedies conferred upon it by this Deed or by law:

      (a)   to make any demand of the Issuer, other than, in the case of a Note
            or Coupon, the presentation of such Note or Coupon;

      (b)   to take any action or obtain judgment in any court against the
            Issuer; or

      (c)   to make or file any claim or proof in a winding-up or dissolution
            of the Issuer,

      and, save as aforesaid, the Guarantor hereby expressly waives, in respect
      of each Note or Coupon, presentment, demand, protest and notice of
      dishonour.

(6)   The Guarantor agrees that, so long as any sums are or may be owed by the
      Issuer in respect of the Notes or Coupons or under the Agency Agreement
      or the Issuer is under any actual or contingent obligation thereunder or
      in respect thereof, the Guarantor will not exercise any right which the
      Guarantor may at any time have by reason of the performance by the
      Guarantor of its obligations hereunder including, but not limited to, any
      right:

      (a)   to be indemnified by the Issuer;

      (b)   to claim any contribution from any other guarantor of the Issuer's
            obligations under or in respect of the Notes or Coupons or the
            Agency Agreement;

<PAGE>
                                      49


      (c)   to take the benefit (in whole or in part) of any security enjoyed
            in connection with any of the Notes or Coupons or the Agency
            Agreement by any Holder; or

      (d)   to be subrogated to the rights of any Holder against the Issuer in
            respect of amounts paid by the Guarantor under this Deed or claim
            in competition with any Holder against the Issuer.

4.    CONDITIONS OF THE NOTES

      The Guarantor hereby undertakes to comply with and be bound by those
      provisions of the Conditions which are expressed to relate to it
      (including, but not limited to, the relevant provisions of Condition 4).

5.    STATUS OF THIS DEED OF GUARANTEE

      The Guarantor represents and warrants that:

      (a)   the obligations of the Guarantor under this Guarantee constitute
            the direct, unconditional and (subject to the provisions of
            Condition 4) 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;

      (b)   all necessary governmental consents and authorisations for the
            giving and implementation of this Guarantee have been obtained; and

      (c)   upon due execution and delivery by the Guarantor, this Guarantee
            will constitute a legal, valid and binding obligation of the
            Guarantee enforceable in accordance with its terms, subject to
            applicable bankruptcy, insolvency and similar laws affecting
            creditors' rights generally and general principles of equity.

6.    DEPOSIT OF DEED OF GUARANTEE

      A duly executed original of this Deed shall be deposited with and held by
      Deutsche Bank AG, Hong Kong Branch (or such other entity that for the
      time being acts as Fiscal Agent under the Agency Agreement) until the
      date on which complete performance by the Guarantor of the obligations
      contained in this Deed and in all Notes and Coupons then outstanding from
      time to time occurs. The Guarantor hereby acknowledges the right of every
      Holder to the production of this Deed.

7.    STAMP DUTIES

      The Guarantor shall pay all stamp, registration and other taxes and
      duties (including any interest and penalties thereon or in connection
      therewith) which are payable upon or in connection with the execution and
      delivery of this Deed, and shall indemnify each Holder against any claim,
      demand, action, liability, damages, cost, loss or expense (including,
      without limitation, legal fees and any applicable value added tax) which
      it may incur as a result or arising out of or in relation to any failure
      to pay or delay in paying any of the same.

<PAGE>
                                      50


8.    BENEFIT OF DEED OF GUARANTEE

(1)   This Deed shall take effect as a deed poll for the benefit of the Holders
      from time to time.

(2)   This Deed shall enure to the benefit of each Holder and its (and any
      subsequent) successors and assigns, each of which shall be entitled
      severally to enforce this Deed against the Guarantor.

(3)   The Guarantor shall not be entitled to assign or transfer all or any of
      its rights, benefits and obligations hereunder.

9.    PARTIAL INVALIDITY

      If at any time any provision hereof is or becomes illegal, invalid or
      unenforceable in any respect under the laws of any jurisdiction, neither
      the legality, validity or enforceability of the remaining provisions
      hereof nor the legality, validity or enforceability of such provision
      under the laws of any other jurisdiction shall in any way be affected or
      impaired thereby.

10.   MODIFICATION

      The Agency Agreement contains provisions for amending the terms of this
      Deed and for convening meetings of Holders of Notes to consider matters
      relating to Notes, including the modification of any provision of this
      Deed. Subject to clause 28 of the Agency Agreement, any modification may
      be made by supplemental deed poll if sanctioned by an Extraordinary
      Resolution and shall be binding on all Holders of Notes.

11.   NOTICES AND COMMUNICATIONS

(1)   All notices and communications to the Guarantor in relation to this Deed
      shall be made in the English language (or shall be accompanied by a
      certified English translation thereof), shall be made in writing (by
      letter or fax) and shall be sent to the Guarantor at:

      PCCW Limited
      39th Floor, PCCW Tower
      TaiKoo Place
      979 King's Road
      Quarry Bay
      Hong Kong

      Fax Number:    2962 5725
      Attention of:  Company Secretary

      or to such other address or fax number and for the attention of such
      other person or department as the Guarantor has notified to the Holders
      in the manner prescribed for the giving of notices in connection with the
      Notes.

(2)   A communication shall be deemed received (if by fax) when a transmission
      report confirming that the fax has been received is printed (provided
      that any communication by fax shall also be sent by letter to arrive
      within two business days in the place of receipt of the day on which the
      fax is deemed to have been received) or (if by letter) when delivered, in
      each case in the manner required by this clause. However, if a
      communication is received after business

<PAGE>
                                      51


      hours on any business day or on a day which is not a business day in the
      place of receipt it shall be deemed to be received and become effective
      on the next business day in the place of receipt. Every communication
      shall be irrevocable save in respect of any manifest error therein.

12.   LAW AND JURISDICTION

(1)   This Deed is governed by, and shall be construed in accordance with,
      English law.

(2)   The Guarantor irrevocably agrees for the exclusive benefit of the Holders
      that the courts of England are to have jurisdiction to settle any
      disputes which may arise out of or in connection with this Deed and that
      accordingly any suit, action or proceedings (together referred to as
      "Proceedings") arising out of or in connection with this Deed may be
      brought in the courts of England.

      The Guarantor irrevocably waives any objection which it may have now or
      hereafter 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 agrees that a judgment in any
      Proceedings brought in the courts of England shall be conclusive and
      binding upon the Guarantor and may be enforced in the courts of any other
      jurisdiction.

      Nothing contained in this clause shall limit any right to take
      Proceedings against the Guarantor 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.

      The Guarantor appoints Simmlaw Services Limited of CityPoint, One
      Ropemaker Street, London EC2Y, 9SS, England to accept service of process
      on its behalf. If such person shall cease to have an office in London,
      the Guarantor shall appoint another person with an office in London to
      accept service. The Guarantor will procure that, so long as any of the
      Notes remains outstanding, a person with an office in London shall be
      appointed to accept service.

      Nothing in this Deed shall affect the right to serve process in any other
      manner permitted by law.

13.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      No rights are conferred on any person under the Contracts (Rights of
      Third Parties) Act 1999 to enforce any term of this Deed, but this does
      not affect any right or remedy of any person which exists or is available
      apart from that Act.

IN WITNESS whereof this Guarantee has been entered into as a deed poll by the
Guarantor on the date which appears first on page 1.


THE COMMON SEAL of                    )
PCCW LIMITED                          )
was affixed in the presence of:       )

<PAGE>
                                      52



                                   SCHEDULE 4

                     PROVISIONS FOR MEETINGS OF NOTEHOLDERS



1.    As used in this schedule the following expressions shall have the
      following meanings unless the context otherwise requires:

      (a)   "Voting Certificate" shall mean an English language certificate
            issued by a Paying Agent and dated in which it is stated:

            (i)   that on the date of the Voting Certificate Notes (not being
                  Notes in respect of which a Block Voting Instruction has been
                  issued and is outstanding in respect of the meeting specified
                  in the Voting Certificate and any adjourned meeting) were
                  deposited with the Paying Agent or (to the satisfaction of
                  the Paying Agent) were held to its order or under its control
                  and that the Notes will not cease to be so deposited or held
                  until the first to occur of:

                  (A)   the conclusion of the meeting specified in the Voting
                        Certificate or, if applicable, any adjourned meeting;
                        and

                  (B)   the surrender of the Voting Certificate to the Paying
                        Agent who issued the same; and

            (ii)  that the bearer of the Voting Certificate is entitled to
                  attend and vote at the meeting and any adjourned meeting in
                  respect of the Notes represented by the Voting Certificate;

      (b)   "Block Voting Instruction" shall mean an English language document
            issued by a Paying Agent and dated in which:

            (i)   it is certified that Notes (not being Notes in respect of
                  which a Voting Certificate has been issued and is outstanding
                  in respect of the meeting specified in the Block Voting
                  Instruction and any adjourned meeting) have been deposited
                  with the Paying Agent or (to the satisfaction of the Paying
                  Agent) were held to its order or under its control and that
                  the Notes will not cease to be so deposited or held until the
                  first to occur of:

                  (A)   the conclusion of the meeting specified in the document
                        or, if applicable, any adjourned meeting; and

                  (B)   the surrender to the Paying Agent not less than 48
                        hours before the time for which the meeting or any
                        adjourned meeting is convened of the receipt issued by
                        the Paying Agent in respect of each deposited Note
                        which is to be released or (as the case may require)
                        the Note ceasing with the agreement of the Paying Agent
                        to be held to its order or under its control and the
                        giving of notice by the Paying Agent to the Issuer
                        under paragraph 17 of the necessary amendment to the
                        Block Voting Instruction;

            (ii)  it is certified that each holder of the Notes has instructed
                  the Paying Agent that the vote(s) attributable to the Notes
                  so deposited or held should be cast in a particular way in
                  relation to the resolution to be put to the meeting or any
                  adjourned meeting and that all the instructions are, during
                  the period

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                                      53


                  commencing 48 hours before the time for which the meeting or
                  any adjourned meeting is convened and ending at the
                  conclusion or adjournment, neither revocable nor capable of
                  amendment;

            (iii) the total number, total principal amount and the serial
                  numbers (if available) of the Notes so deposited or held are
                  listed distinguishing, with regard to each resolution,
                  between those in respect of which instructions have been
                  correctly given that the attributable votes should be cast in
                  favour of the resolution and those in respect of which
                  instructions have been so given that the attributable votes
                  should be cast against the resolution; and

            (iv)  one or more persons named in the Block Voting Instruction (a
                  "proxy") is or are authorised and instructed by the Paying
                  Agent to cast the votes attributable to the Notes so listed
                  in accordance with the instructions referred to in
                  subparagraph (iii) as set out in the Block Voting
                  Instruction.

      The holder of any Voting Certificate or the proxies named in any Block
      Voting Instruction shall for all purposes in connection with the relevant
      meeting or adjourned meeting of Noteholders be deemed to be the holder of
      the Notes to which the Voting Certificate or Block Voting Instruction
      relates and the Paying Agent with which the Notes have been deposited or
      the person holding the same to the order or under the control of the
      Paying Agent shall be deemed for such purpose not to be the holder of
      those Notes.

2.    The Issuer or the Guarantor may at any time and the Issuer shall upon a
      requisition in writing signed by the holders of not less than one-tenth
      in principal amount of the Notes for the time being outstanding convene a
      meeting of the Noteholders and if the Issuer makes default for a period
      of seven days in convening a meeting the same may be convened by the
      requisitionists. Every meeting shall be held at such place as the Fiscal
      Agent may approve.

3.    At least 21 days' notice (exclusive of the day on which the notice is
      given and the day on which the meeting is held) specifying the place, day
      and hour of meeting shall be given to the Noteholders before any meeting
      of the Noteholders in the manner provided by Condition 12. The notice
      shall state generally the nature of the business to be transacted at the
      meeting but (except for an Extraordinary Resolution) it shall not be
      necessary to specify in the notice the terms of any resolution to be
      proposed. Such notice shall include a statement to the effect that Notes
      may be deposited with Paying Agents for the purpose of obtaining Voting
      Certificates or appointing proxies. A copy of the notice shall be sent by
      post to the Issuer (unless the meeting is convened by the Issuer) and to
      the Guarantor (unless the meeting is convened by the Guarantor).

4.    Some person (who may but need not be a Noteholder) nominated in writing
      by the Issuer shall be entitled to take the chair at every meeting but if
      no nomination is made or if at any meeting the person nominated shall not
      be present within fifteen minutes after the time appointed for holding
      the meeting the Noteholders present shall choose one of their number to
      be Chairman.

5.    At any meeting one or more persons present holding Notes or Voting
      Certificates or being proxies and holding or representing in the
      aggregate not less than one-twentieth of the principal amount of the
      Notes for the time being outstanding shall (except for the purpose of
      passing an Extraordinary Resolution) form a quorum for the transaction of
      business and no business (other than the choosing of a Chairman) shall be
      transacted at any meeting unless the requisite quorum be present at the
      commencement of business. The quorum at any meeting for passing an
      Extraordinary Resolution shall (subject as provided below) be one or more
      persons present holding Notes or Voting Certificates or being proxies and
      holding or representing in the aggregate a clear majority in principal
      amount of the Notes for the time

<PAGE>
                                      54


      being outstanding, provided that at any meeting the business of which
      includes any of the following matters (each of which shall only be
      capable of being effected after having been approved by Extraordinary
      Resolution) namely:

      (a)   modification of the date fixed for final maturity of the Notes or
            reduction of the amount of principal payable;

      (b)   reduction or cancellation of the principal payable on the Notes;

      (c)   reduction of the amount payable or, where applicable, modification
            of the method of calculating the amount payable or modification of
            the date of payment in respect of any interest;

      (d)   alteration of the currency in which payments under the Notes and
            Coupons are to be made;

      (e)   alteration of the majority required to pass an Extraordinary
            Resolution;

      (f)   the sanctioning of any scheme or proposal as is described in
            paragraph 18(f);

      (g)   alteration of this proviso or the proviso to paragraph 6;

      the quorum shall be one or more persons present holding Notes or Voting
      Certificates or being proxies and holding or representing in the
      aggregate not less than two-thirds of the principal amount of the Notes
      for the time being outstanding.

6.    If within fifteen minutes after the time appointed for any meeting a
      quorum is not present the meeting shall if convened upon the requisition
      of Noteholders be dissolved. In any other case it shall stand adjourned
      to the same day in the next week (or if the day is a public holiday the
      next succeeding business day) at the same time and place (except in the
      case of a meeting at which an Extraordinary Resolution is to be proposed
      in which case it shall stand adjourned for the period being not less than
      14 days nor more than 42 days, and at such place as may be appointed by
      the Chairman and approved by the Fiscal Agent) and at the adjourned
      meeting one or more persons present holding Notes or Voting Certificates
      or being proxies (whatever the principal amount of the Notes so held or
      represented by them) shall (subject as provided below) form a quorum and
      shall (subject as provided below) have power to pass any Extraordinary or
      other resolution and to decide upon all matters which could properly have
      been dealt with at the meeting from which the adjournment took place had
      the requisite quorum been present, provided that at any adjourned meeting
      the business of which includes any of the matters specified in the
      proviso to paragraph 5, the quorum shall be one or more persons present
      holding Notes or Voting Certificates or being proxies and holding or
      representing in the aggregate not less than one-third of the principal
      amount of the Notes for the time being outstanding.

7.    Notice of any adjourned meeting at which an Extraordinary Resolution is
      to be submitted shall be given in the same manner as notice of an
      original meeting but as if 10 were substituted for 21 in paragraph and
      the notice shall (except in cases where the proviso to paragraph 6 shall
      apply when it shall state the relevant quorum) state that the persons
      present holding Notes or Voting Certificates or being proxies at the
      adjourned meeting whatever the principal amount of the Notes held or
      represented by them will form a quorum. Subject as provided above it
      shall not be necessary to give any notice of an adjourned meeting.

8.    Every question submitted to a meeting shall be decided in the first
      instance by a show of hands and in case of equality of votes the Chairman
      shall both on a

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                                      55


      show of hands and on a poll have a casting vote in addition to any votes
      to which he may be entitled as a Noteholder or as a holder of a Voting
      Certificate or as a proxy.

9.    At any meeting unless a poll is (before or on the declaration of the
      result of the show of hands) demanded by the Chairman or the Issuer or
      the Guarantor or by one or more persons present holding Notes or Voting
      Certificates or being proxies and holding or representing in the
      aggregate not less than one-fiftieth part of the principal amount of the
      Notes then outstanding a declaration by the Chairman that a resolution
      has been carried or carried by a particular majority or lost or not
      carried by a particular majority shall be conclusive evidence of the fact
      without proof of the number or proportion of the votes recorded in favour
      of or against the resolution.

10.   Subject to paragraph 12, if at any meeting a poll is demanded it shall be
      taken in such manner and, subject as provided below, either at once or
      after an adjournment, as the Chairman may direct and the result of the
      poll shall be deemed to be the resolution of the meeting at which the
      poll was demanded as at the date of the taking of the poll. The demand
      for a poll shall not prevent the continuance of the meeting for the
      transaction of any business other than the motion on which the poll has
      been demanded.

11.   The Chairman may with the consent of (and shall if directed by) any
      meeting adjourn the same from time to time and from place to place but no
      business shall be transacted at any adjourned meeting except business
      which might lawfully (but for lack of required quorum) have been
      transacted at the meeting from which the adjournment took place.

12.   Any poll demanded at any meeting on the election of a Chairman or on any
      question of adjournment shall be taken at the meeting without
      adjournment.

13.   Any director or officer of the Issuer or the Guarantor and the lawyers
      and financial advisers of either of them may attend and speak at any
      meeting. Save as provided above but without prejudice to the proviso to
      the definition of "outstanding" in clause 2 no person shall be entitled
      to attend and speak nor shall any person be entitled to vote at any
      meeting of the Noteholders or join with others in requesting the
      convening of a meeting unless he either produces the Note of which he is
      the holder or a Voting Certificate or is a proxy. Neither the Issuer, nor
      the Guarantor nor any of its other Subsidiaries shall be entitled to vote
      at any meeting in respect of Notes held by it for the benefit of any such
      company. Nothing contained in this Agreement shall prevent any of the
      proxies named in any Block Voting Instruction from being a director,
      officer of or otherwise connected with the Issuer or the Guarantor.

14.   Subject as provided in paragraph 13 at any meeting:

      (a)   on a show of hands every person who is present in person and
            produces a Note or Voting Certificate or is a proxy shall have one
            vote; and

      (b)   on a poll every person who is so present shall have one vote in
            respect of each U.S.$250,000 in principal amount of the Notes so
            produced or represented by the Voting Certificate so produced or in
            respect of which he is a proxy or in respect of which he is the
            Noteholder.

      Without prejudice to the obligations of the proxies named in any Block
      Voting Instruction any person entitled to more than one vote need not use
      all his votes or cast all the votes to which he is entitled in the same
      way.

15.   The proxies named in any Block Voting Instruction need not be
      Noteholders.

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                                      56


16.   Each Block Voting Instruction together (if so requested by the Issuer)
      with reasonable proof satisfactory to the Issuer of its due execution on
      behalf of the relevant Paying Agent shall be deposited at such place as
      the Fiscal Agent shall approve not less than 24 hours before the time
      appointed for holding the meeting or adjourned meeting at which the
      proxies named in the Block Voting Instruction propose to vote and in
      default the Block Voting Instruction shall not be treated as valid unless
      the Chairman of the meeting decides otherwise before the meeting or
      adjourned meeting proceeds to business. A notarially certified copy of
      each Block Voting Instruction shall (if so requested by the Issuer) be
      deposited with the Fiscal Agent before the commencement of the meeting or
      adjourned meeting but the Fiscal Agent shall not be obliged to
      investigate or be concerned with the validity of or the authority of the
      proxies named in any Block Voting Instruction.

17.   Any vote given in accordance with the terms of a Block Voting Instruction
      shall be valid notwithstanding the previous revocation or amendment of
      the Block Voting Instruction or of any of the Noteholders' instructions
      pursuant to which it was executed, provided that no intimation in writing
      of the revocation or amendment shall have been received from the relevant
      Paying Agent by the Issuer at its registered office (or such other place
      as may have been approved by the Fiscal Agent for the purpose) by the
      time being 24 hours before the time appointed for holding the meeting or
      adjourned meeting at which the Block Voting Instruction is to be used.

18.   A meeting of the Noteholders shall in addition to the powers provided
      above have the following powers exercisable by Extraordinary Resolution
      (subject to the provisions relating to quorum contained in paragraphs 5
      and 6) only namely:

      (a)   power to sanction any compromise or arrangement proposed to be made
            between the Issuer, the Guarantor and the Noteholders and
            Couponholders or any of them;

      (b)   power to sanction any abrogation, modification, compromise or
            arrangement in respect of the rights of the Noteholders and
            Couponholders against the Issuer or the Guarantor or against any of
            its property whether the rights shall arise hereunder or otherwise;

      (c)   power to assent to any modification of the provisions contained in
            the Conditions, the Notes or the Coupons which shall be proposed by
            the Issuer, the Guarantor or any Noteholder;

      (d)   power to give any authority or sanction which under the Notes or
            hereunder is required to be given by Extraordinary Resolution;

      (e)   power to appoint any persons (whether Noteholders or not) as a
            committee to represent the interests of the Noteholders and to
            confer upon the committee any powers or discretions which the
            Noteholders could themselves exercise by Extraordinary Resolution;
            and

      (f)   power to sanction any scheme or proposal for the exchange or sale
            of the Notes for or the conversion of the Notes into or the
            cancellation of the Notes in consideration of shares, stock, notes,
            bonds, debentures, debenture stock and/or other obligations and/or
            securities of the Issuer or the Guarantor or any other company
            formed or to be formed, or for or into or in consideration of cash,
            or partly for or into or in consideration of the shares, stock,
            notes, bonds, debentures, debenture stock and/or other obligations
            and/or securities as provided above and partly for or into or in
            consideration of cash.

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                                      57


19.   Any resolution passed at a meeting of the Noteholders duly convened and
      held hereunder shall be binding upon all the Noteholders whether present
      or not present at the meeting and whether or not voting and upon all
      Couponholders and each of them shall be bound to give effect to the
      resolution accordingly and the passing of any resolution shall be
      conclusive evidence that the circumstances justify the passing of the
      resolution. Notice of any resolution duly passed by the Noteholders shall
      be published under Condition 12 by the Issuer within 14 days of the
      passing of the resolution, provided that the non-publication of the
      notice shall not invalidate the resolution.

20.   The expression "Extraordinary Resolution" when used in this Schedule and
      in the Conditions means (a) a resolution passed at a meeting of the
      Noteholders duly convened and held in accordance with the provisions
      contained in this Agreement by a majority consisting of not less than
      three-fourths of the persons voting thereat upon a show of hands or if a
      poll shall be duly demanded then by a majority consisting of not less
      than three-fourths of the votes given on the poll or (b) a resolution in
      writing signed by or on behalf of all the Noteholders.

21.   Minutes of all resolutions and proceedings at every meeting shall be made
      and duly entered in books to be from time to time provided for that
      purpose by the Issuer and any Minutes purporting to be signed by the
      Chairman of the meeting at which the resolutions were passed or
      proceedings had shall be conclusive evidence of the matters contained in
      the Minutes and until the contrary is proved every meeting in respect of
      the proceedings of which Minutes have been made shall be deemed to have
      been duly held and convened and all resolutions passed or proceedings had
      to have been duly passed or had.


<PAGE>
                                      58



                                  SIGNATORIES


PCCW CAPITAL NO. 3 LIMITED

By:


PCCW LIMITED

By:


DEUTSCHE BANK AG, HONG KONG BRANCH

By:



<PAGE>



                            Dated 24th January, 2003




                           PCCW CAPITAL NO. 3 LIMITED


                                U.S.$456,000,000


                    7.88 per cent. Guaranteed Notes due 2013





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

                                AGENCY AGREEMENT

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






                                 ALLEN & OVERY
                                   Hong Kong


<PAGE>


                                     INDEX


Clause                                                                  Page No.

1.   Interpretation........................................................1
2.   Definitions...........................................................2
3.   Appointment of Paying Agents..........................................3
4.   Authentication and Delivery of Notes..................................3
5.   Payment to the Fiscal Agent...........................................3
6.   Notification of Non-Payment by the Issuer or the Guarantor............4
7.   Duties of the Paying Agents...........................................4
8.   Reimbursement of the Paying Agents....................................4
9.   Notice of any Withholding or Deduction................................4
10.  Duties of the Fiscal Agent in Connection with Optional Redemption
     and Redemption for Taxation Reasons...................................5
11.  Receipt and Publication of Notices....................................5
12.  Cancellation of Notes and Coupons.....................................5
13.  Issue of Replacement Notes and Coupons................................5
14.  Records and Certificates..............................................6
15.  Copies of this Agreement and the Deed of Guarantee Available
     for Inspection........................................................7
16.  Commissions and Expenses..............................................7
17.  Indemnity.............................................................8
18.  Repayment by Fiscal Agent.............................................8
19.  Conditions of Appointment.............................................8
20.  Communication with Paying Agents......................................9
21.  Termination of Appointment............................................9
22.  Meetings of Noteholders..............................................11
23.  Notices..............................................................12
24.  Taxes................................................................13
25.  Counterparts.........................................................13
26.  Descriptive Headings.................................................13
27.  Governing Law and Submission to Jurisdiction.........................13
28.  Amendments...........................................................14
29.  Contracts (Rights of Third Parties) Act 1999.........................14

Schedules

1.   Form of the Global Note..............................................15
2.   Part I - Form of Definitive Note and Coupon..........................21
     Part II - Conditions of the Notes....................................25
3.   Form of Deed of Guarantee............................................45
4    Provisions for Meetings of Noteholders...............................52