1. LEASING OF TELECOMMUNICATIONS FACILITIES1.1 It is mutually agreed between both Parties that CNC China leases from Netcom Groupinternational telecommunications channel gateways (including International Backhaul landingstations, International Ground-Cable entry stations, landing or domestic extension terminals andEarth-Station in the International satellites network), international telecommunications servicegateways (including International Network Bureau for Telecommunications, InternationalTelecommunications Network Relay Stations, International Network Bureau for ATM/FR, DDN and IP),international Submarine Cable capacities, international land cable resources and internationalsatellite resources (“International Telecommunications Resources”) in addition to theinter-provincial optic fibers (“Inter-Provincial Optic-Fibers”) owned by Netcom Group and locatedin areas covered by CNC China’s business operation and other resources and facilities(collectively referred to as “Telecommunications Resources and Facilities”) that CNC China needs inits business operations.2. FUNDAMENTAL PRINCIPLES2.1 Netcom Group leases to CNC China the Telecommunications Resources and Facilities according tothis Agreement as a paid transaction between two enterprises engaging in economic activities.Netcom Group is entitled to demand reasonable charges for the lease of such resources andfacilities according to fair and reasonable principles; CNC China shall perform its duty in makingpayments.2.2 Netcom Group shall offer the leasing of communication resources and facilities to CNC Chinaat terms not less favorable to the terms offered to any third party for the leasing of the same orsimilar resources and facilities.2.3 Should CNC China demand Netcom Group to provide additional resources and/or facilities asdetailed in this Agreement, Netcom Group shall use its best endeavor to fulfill the needs of CNCChina in providing the demanded facilities. The terms offered to CNC China in providing suchadditional resources and/or facilities shall not be less favorable to terms offered to any thirdparty for the leasing of the same or similar resources and/or facilities.2.4 Not owing to the fault of Netcom Group, should Netcom Group fail to provide part or all ofthe resources and/or facilities as detailed in the Agreement, Netcom Group shall inform CNC Chinapromptly in writing. Netcom Group shall use its best endeavor to assist CNC China in obtaining thesame or similar resources and/or facilities by other means.2.5 The resources and/or facilities to be provided as detailed in this Agreement shall be made inaccordance with the agreement of both Parties with respect to the usage of resources and/orfacilities and also to the compliance of the relevant regulations of the State.2.6 With regards to related transactions Netcom Group promises to provide the accounting recordsof Netcom Group and other related Parties to the auditors of the Listed Company.2.7 Should either Party breach this Agreement and cause the other Party to incur loss, the Partyin breach shall undertake to compensate to the other Party promptly and entirely for the breach ofcontract (including but not limited to the direct or indirect loss incurred by the other Party dueto the breach of contract). If the loss to the other Party is caused by Force Majeure then thedefaulting Party shall not incur responsibility.2.8 When either Party to this Agreement performs its duty according to this Agreement, the otherParty shall give necessary and reasonable assistance to the performing Party.2.9 It is agreed that both Parties will take further actions to ensure the realization of theprinciples and provisions in this Agreement. It is further agreed that both Parties will ensurethat, CNC China, being a subsidiary of the Listing Company, shall comply with the Listing Rules ofthe Hong Kong Stock Exchange for connected transactions.
 

 
3. ELEMENTARY CONTENT OF THE LEASING OF TELECOMMUNICATIONS RESOURCES AND FACILITIES3.1 Please refer to Appendix 1 for the scope, type, and quantity of CNC China’s lease ofInternational Telecommunications resources owned by Netcom Group.3.2 Please refer to Appendix 2 for the scope, type, and quantity of CNC China’s lease ofInter-Provincial Optic Fibers owned by Netcom Group.3.3 Please refer to Appendix 3 for the scope, type, and quantity of CNC China’s lease of othertelecommunications resources and facilities owned by Netcom Group.3.4 Depending on the actual situation, both Parties can adjust on an annual basis the scope,type, and quantity for the leased international telecommunications resources and inter-provincialoptic fiber as detailed in the Appendices.4. OBLIGATIONS OF THE PARTIES4.1 CNC China is responsible for its own repairing and incurring the cost of repair according tothe regulations and standards for the leased International Telecommunications Resources andInter-Provincial Optics Fibers.4.2 The Parties shall decide through consultation that either CNC China or Netcom Group will beresponsible for maintenance of part or all of the resources and facilities set out in Appendix 3and CNC China will bear the maintenance expense (if not otherwise agreed by the Parties); If it isdecided that Netcom Group shall be responsible for maintenance of part or all of the resources andfacilities set out in Appendix 3, CNC China shall reimburse relevant expenses incurred during themaintenance of such telecommunications facilities by Netcom Group.4.3 CNC China shall use the leased Telecommunications Resources and Facilities in a reasonableway. Within the duration of this Agreement and within the scope of application of laws, CNC Chinahas the right to lease out Telecommunications Resources and Facilities to third party during thenormal leasing of network elements. The leasing fees concerned shall be set according to therelevant state regulations in accordance with the principles of fairness and reasonableness.4.4 Should CNC China need to interrupt the Telecommunications Resources and Facilities due toreasons connected to repair, CNC China shall inform Netcom Group in advance within a reasonabletime.5. QUALITY ASSURANCE5.1 Netcom Group shall ensure that the quality of the leased Telecommunications Resources andFacilities comply with the standards and regulations of the State.5.2 CNC China shall ensure that the equipments for connections to the TelecommunicationsResources and Facilities comply with the quality standard and technological requirements stipulatedby the State Regulatory Department.6. COSTS AND PAYMENTS6.1 The lease charges for CNC China’s leasing of Telecommunications Resources and Facilitiesshall be equivalent to the annual depreciation cost of such Telecommunications Resources andFacilities. Such cost shall not be higher than the market price.
 

 
6.2 Within 3 months after the end of each calendar year, both Parties shall examine (ifnecessary) the costs incurred for that year for Telecommunications Resources and Facilitiesprovided according to this Agreement. The discrepancies (if any) shall be adjusted in next year’sexamination.6.3 The charges to be paid in accordance with Article 4.2 of this Agreement shall follow themarket price; those having no market price shall follow the pricing method agreed upon by bothParties, however, the said pricing method shall be calculated with regard to the reasonable costand reasonable profit of the service, whereby “reasonable cost” means the cost agreed by bothParties.6.4 CNC China shall pay lease charges to Netcom Group before 10th of the last month of eachseason. CNC China shall provide Netcom Group with a detailed list of the lease charges of lastseason and other charges as stated in Article 6.3 of this Agreement. CNC China shall pay thebalance of lease charges, deducting the charges stated in Article 6.3 of this Agreement, to NetcomGroup. Netcom Group shall deliver the bill to CNC China upon receipt of the balance. Should therebe objections from either Party, adjustments shall be made in the following season afterconfirmation from both Parties.6.5 Should CNC China delays in payment it shall pay a late payment charge to Netcom Group at arate of 0.05% of the amount due for each day of delay.7. TERMThis Agreement shall come into effect once signed by the legal representatives or authorizedrepresentatives of both Parties and affixed with their official seals. This Agreement shall beeffective from January 1, 2008 to December 31, 2010. If CNC China wishes to renew this Agreementand notifies Netcom Group with 3 month’s notice, this Agreement shall be renewed automatically foranother 3 years on the same terms. There is no limit on the number of renewal.8 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS8.1 Each Party represents warrants and undertakes to the other Party that:(1) It is an independent legal person existing in accordance with the laws of PRC, and have thepower and authority (including but not limited to any approval, consents or permission granted bythe government departments to enter into and perform this Agreement);(2) No provision in this Agreement violates the constitutive documents or the laws andregulations of the PRC;(3) It will use its best endeavors to take all necessary and procure appropriate or advantageousmeasures to perform its obligations under this Agreement and to make this Agreement effective inaccordance with the law and regulations of the PRC and the terms of this Agreement.9. FORCE MAJEURE9.1 In the event of Force Majeure that causes both Parties or either Party to fail completely orpartially in performing the obligations under this Agreement, that said Party is not liable forbreach of agreement. However, in the event of such an incident, the affected Party shall inform theother Party by written notice within fifteen (15) days after the said incident and provide relevantproof and evidence to the other Party. At the same time, the affected Party shall use its bestendeavors to minimize the damage caused by the Force Majeure event. The affected Party or bothParties shall resume its obligations under this Agreement within a reasonable time once the ForceMajeure event has ended.9.2 The events constituting a Force Majeure relates to events which cannot be reasonablyforeseen, avoided, and overcame on an objective basis.
 

 
10. CONFIDENTIALITY10.1 Unless with written approval by the other Party, neither Party can announce nor supply orreveal to any third party information regarding this Agreement or the business information of theother Party, with the exception of requests by the legal or governmental departments or any otherrelevant securities regulatory authorities or for the purpose of the Listing Company seekinglisting or retaining listing.11. TRANSFER OF RIGHTS AND DUTIESWithout the written approval of the other Party, neither Party may transfer any single right andobligation as agreed upon under this Agreement.12. NON-WAIVERUnless otherwise specified by law, the failure or delay of exercising the right, power or privilegeas endowed by this Agreement on the part of any Party cannot be deemed as the waiver of suchrights, power or privileges. Besides, the partial exercise of such rights, power or privilegesshall not hinder the exercise of such rights, power or privileges of this Party in the future.13. NOTICES13.1 All notices required to be delivered pursuant to this Agreement shall be in writing, anddelivered to the address as stated at the beginning part of this Agreement, or to addresses orfacsimile numbers designated by one Party to the other Parties in writing from time to time.13.2 Any notice shall be delivered either by hand, registered mail, or facsimile. Any notice shallbe deemed to have been delivered at the time of actual receipt if delivered by hand; three daysafter the date of return receipt if delivered by registered mail; and at the time of transmissionif delivered by facsimile.14. GOVERNING LAWS14.1 This Agreement shall be governed, interpreted and implemented in accordance with laws of thePRC.15 DISPUTE RESOLUTIONIn case of disputes as to the power, interpretation or implementation of this Agreement, bothParties shall seek to settle the matters of dispute by friendly negotiation. If the matters ofdispute cannot be settled by negotiation within thirty (30) days from the day the matters ofdispute arise, either Party has the right to resort to litigation at the people’s court which hasjurisdiction over such Party.16 MISCELLANEOUS16.1 Without written confirmation from both Parties, no Party can change or amend this Agreement.Upon the agreement of both Parties, both Parties can amend this Agreement or enter intosupplementary agreement to this Agreement. The amendments or supplementary agreements of thisAgreement shall come into effect once signed by the legal representatives or authorizedrepresentatives of both Parties and affixed with their official seals.16.2 This Agreement is severable, that is, if any provision of this Agreement is held to be void,illegal, void or unenforceable at any time, the effectiveness and performance of other provisionsof this Agreement shall not be affected.16.3 The appendix to this Agreement forms a part to this Agreement; both the Agreement and theappendix to this Agreement have equal legal status.
 

 
16.4 This Agreement shall be governed and interpreted in accordance with the laws of PRC.16.5 This Agreement is made into two (2) duplicate originals. Each Party holds one (1) copy, andeach copy shall have the same legal binding effect.IN WITNESS WHEREOF, the legal representatives or authorized representatives of the both Partieshereto have executed this Agreement as of the date and venue first written above.Signature page:**CHINA NETWORK COMMUNICATIONS GROUP CORPORATION**     By:  /s/ Zuo Xunsheng    Legal Representative or Authorized Representative  **CHINA NETCOM (GROUP) COMPANY LIMITED**     By:  /s/ Zuo Xunsheng    Legal Representative or Authorized Representative  **APPENDIX I:**List of international telecommunications resources to be lease**APPENDIX II:**List of inter-provincial optic fiber to be leased**APPENDIX III:**List of other telecommunications resources and facilities to be leased