**Exhibit 4.13**

 

**20 November2002**

 

 

**UNICOM NEW HORIZON MOBILE TELECOMMUNICATIONS COMPANY LIMITED**

 

 

**CHINA UNITED TELECOMMUNICATIONSCORPORATION LIMITED**

 

 

**CHINA UNITED TELECOMMUNICATIONSCORPORATION**

 

 

 

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**NetworkCapacity Lease Agreementfor Jilin, Heilongjiang, Jiangxi, Henan, Sichuanand Shaanxi Provinces, Chongqing Municipalityand the Guangxi and Xinjiang autonomous regions**

 

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**THIS AGREEMENT** is made on 20 November 2002

 

**BETWEEN:**

 

(1)                                  **UNICOM NEW HORIZON MOBILE TELECOMMUNICATIONS COMPANY LIMITED**, a limited liability companyincorporated under the laws of the PRC whose registered office is at 6th Floor, Tower 3, Henderson Centre, 18 Jianguomen NeiDajie, Beijing, the PRC (***Lessor***);

 

(2)                                  **CHINA UNITED TELECOMMUNICATIONS CORPORATIONLIMITED**, alimited liability company incorporated under the laws of the PRC whose officeis at 9th Floor, 133 Bei Dajie Jia, Xidan,Xi Cheng District, Beijing, the PRC (***Lessee***);and

 

(3)                                  **CHINA UNITED TELECOMMUNICATIONS CORPORATION**, acompany incorporated under the laws of the PRC whose registered office is at 12th Floor, Tower 1, Henderson Centre, 18 Jianguomen NeiDajie, Beijing, the PRC (***Unicom Group***).

 

**WHEREAS**:

 

(A)          Unicom Group has been approved by the PRC Government toundertake telecommunications infrastructure development and operate anationwide CDMA network within the PRC.

 

(B)           The Lessor, a wholly-owned subsidiary of Unicom Group, isa special purpose vehicle responsible for the procurement and construction ofthe CDMA mobile telecommunications network for Unicom Group.

 

(C)           Construction of the first phase of the Network wascompleted in December 2001.  Aftercompletion of the initial acceptance procedures of the Network, the Lessorentered into a lease with the Operating Entity (the ***Existing Lease***)pursuant to which the Operating Entity has been provided with capacity since 8January 2002 to carry on the CDMA Business.

 

(D)          China Unicom has agreed with Unicom Group to acquire fromit the entire registered capital of the Operating Entity.

 

(E)           Following completion of the acquisition and with effectfrom the Lease Effective Date, the Existing Lease will be terminated andreplaced by arrangements envisaged in this Agreement and the TransferAgreement.

 

(F)           In advance of the signing of the Transfer Agreement, theLessor and the Lessee agree to enter into this Agreement.

 

(G)           Unicom Group has agreed to guarantee the performance bythe Lessor of its obligations under this Agreement.

 

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**IT IS AGREED** as follows:

 

**INTERPRETATION**

 

**Definitions**

 

1.1           In this Agreement (including the recitals) the followingwords and expressions have the following respective meanings unless the contextotherwise requires:

 

***Acquisition Agreement***has the meaning given to it in the Waiver Application;

 

***Additional Term*** has the meaning given to it in clause 4.2;

 

***Additional Phase*** has the meaning given to it in clause 5.3;

 

***Agreement***means this agreement, including Schedule 1 to thisAgreement;

 

***Associates*** has the meaning given to that term in the Listing Rules;

 

***BusinessDay***means any day on which banks in the PRC are open for the transaction of normalbanking business;

 

***Capacity*** means capacity on the Network,measured in terms of total number of Subscribers, including all AdditionalCapacity to be delivered pursuant to clause 4.4;

 

***CDMA***means Code Division Multiple Access technology,which is a digital transmission technology that accommodates higher throughputby using various coding sequences to mix and separate voice and data signalsfor wireless communication, and including all network re-configuration,upgrades, enhancement or modifications to such technology from time to time(including CDMA 2000 1x and CDMA 2000 3x, each of which is designed to increasedata transmission speed and improve quality of service operation over existingnetwork infrastructure);

 

***CDMA Business*** means the CDMA mobile telecommunications business operated by theSub-lessee in the Listed Service Areas utilising the Network;

 

***China Unicom*** means China Unicom Limited, a company incorporated under theCompanies Ordinance, Chapter 32 of the Laws of Hong Kong, with limitedliability whose shares are listed on the Stock Exchange and whose AmericanDepositary Shares are listed on the New York Stock Exchange;

 

***Conditions*** means the conditions precedent set out in clause 3.1;

 

***Equipment*** means all necessary hardware, software and accessories used or tobe used in constructing the Network, where applicable, in accordance with thedesigns and specifications agreed between the Lessor and the Lessee;

 

***ForceMajeure Event*** means in relation to the Lessee and the Lessor, matters beyond thereasonable contemplation of that party, including, but not limited to, fire,lightning, explosion, war, flood, earthquake, typhoon, and other naturaldisasters,

 

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nationalemergency, civil disturbance, riot, terrorism, industrial disputes, weather ofexceptional severity, binding acts or omissions of any Government Entity;

 

***GovernmentEntity***means:

 

(a)           any national government, politicalsubdivision thereof, or local jurisdiction therein;

 

(b)           any instrumentality, board,commission, court, or agency of any thereof, however constituted; and

 

(c)                                  any association, organization, or institution of which any of theabove is a member or to whose jurisdiction any thereof is subject or in whoseactivities any of the above is a participant;

 

***Initial Term*** has the meaning given to it in clause 4.1;

 

***Lease***means the lease of Capacity by the Lessor to the Lessee pursuant tothis Agreement;

 

***Lease Effective Date ***has the meaning given to it inclause 2.1;

 

***Lease Fee***means the amounts payable by the Lessee to theLessor pursuant to clause 5.1;

 

***LessorLien***means any Security Interest from time to time createdby or through the Lessor in connection with the financing of the Networkconstruction;

 

***Listed Group***means China Unicom and its subsidiaries from time to time, includingthe Operating Entity being acquired;

 

***Listed Service Areas***means Jilin, Heilongjiang, Jiangxi, Henan, Sichuan and Shaanxiprovinces and Chongqing municipality and the Guangxi and Xinjiang autonomousregions;

 

***Listing Rules*** means the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited;

 

***MII*** means the Ministry of Information Industry of the PRC;

 

***Network***means the CDMA mobile telecommunications network, infrastructure orEquipment, constructed or acquired by or on behalf of the Lessor in the ListedService Areas, including all additional CDMA networks, infrastructure andEquipment (whether they be comprised in the same Phase of construction orotherwise) constructed or acquired after the date of this Agreement in theListed Service Areas;

 

***Network Construction Cost***in relation to each Phase of the Network, the total amount of allpayments, costs, expenses and amounts paid or incurred by the Lessor that aredirectly attributable to the construction of that Phase, includingconstruction, installation and Equipment procurement costs and expenses, surveyand design costs, investment in technology, software and other intangibleassets, insurance premiums

 

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andcapitalised interest on loans in respect of the construction period of thatPhase, any taxes levied or paid in respect of the procurement of Equipment andthe construction of that Phase of the Network, including import taxes andcustoms duties and all costs incurred in relation to any networkre-configuration, upgrade, enhancement or modifications to the technology inrespect of that Phase, all such payments, costs, expenses and amounts havingbeen verified and confirmed by certified public accountants in accordance withPRC accounting principles and standards as capital in nature and being able tosatisfy the accounting definition of fixed assets of the Lessor in itsaccounts;

 

***Operating Entity***means Unicom New Century TelecommunicationsCorporation Limited;

 

***Phase*** means a fixed amount of constructed Capacity on the Network, asstated in clause 4.12 (in respect of Phase 1) or agreed by the Lessor andLessee pursuant to clause 4.13 (in respect of any Additional Phase);

 

***PRC*** means the People’s Republic of China (excluding, for the purposesof this Agreement, the Hong Kong Special Administrative Region, Macau SpecialAdministrative Region and Taiwan);

 

***Prospective Connected Transactions***has the meaning given to it in the Waiver Application;

 

***Purchase Option*** has the meaning given to it in clause 13.1;

 

***Purchase Price*** has the meaning given to it in clause 13.2;

 

***Quarter***means a period of three calendar months, with the first quartercommencing on the Lease Effective Date;

 

***RMB*** means Renminbi, the lawful currency of the PRC;

 

***SecurityInterest***means any mortgage, charge, pledge, lien, encumbrance, assignment,hypothecation, right of set-off or any other agreement or arrangement havingthe effect of conferring security;

 

***Shanghai Stock Exchange***means the Shanghai Stock Exchange of the PRC;

 

***Subscriber*** means a unit of capacity on the Network, as further described inclauses 4.14 and 4.15;

 

***Subsidiary*** means any company:

 

(a)           of which another controls thecomposition of the board of directors of the company; or

 

(b)                                 of which another has direct or indirect control or owns directly orindirectly more than 50 per cent. of the voting share capital; and

 

***Term***means the Initial Term and all Additional Terms.

 

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***Transfer Agreement***means the Network Capacity Lease Agreemententered into between the Lessee and the Operating Entity on the date of thisAgreement;

 

***UNC Services Agreement***has the meaning given to it in the Waiver Application; and

 

***Waiver Application***means China UnicomLimited’s draft connected transaction waiver application to the Hong Kong StockExchange dated 19 November 2002.

 

1.2           Inthis Agreement and the Schedules unless the context requires:

 

(a)           the ***headings***are inserted for convenience only and shall notaffect the construction of this Agreement;

 

(b)           references to one ***gender*** include allgenders;

 

(c)           references to ***parties*** are to theparties to this Agreement;

 

(d)           references to ***clauses*** and ***schedules*** are toclauses of and schedules to this Agreement; and

 

(e)           words and phrases indicating thesingular shall, where the context so admits, include the plural and vice versa.

 

1.3           Schedule 1 to this Agreement formspart of this Agreement.

 

**LEASEOF NETWORK CAPACITY**

 

2.1           Subject to satisfaction of theConditions, the Lessor agrees to lease Capacity to the Lessee on the terms setout herein, with effect from such date as the Lessor and the Lessee may agreefollowing fulfilment (or waivers) of the Conditions (the ***Lease Effective Date***).

 

2.2           The Lessor agrees that, following thecompletion of the Transfer Agreement, the Operating Entity shall be permittedto use and operate the Network on an exclusive basis to provide CDMA services,including basic voice services, mobile data services and value added mobileservices, under applicable PRC laws and regulations, in the Listed ServiceAreas.

 

2.3           In consideration of the satisfactoryperformance by the Lessor of its obligations under this Agreement, the Lesseeshall pay the Lease Fee in accordance with clause 5.

 

**CONDITIONS**

 

3.1           The Lease shall not be effective andbinding on the parties unless the following conditions have been fulfilled:

 

(a)                                  the passing of resolutions by the shareholders of the Lesseeapproving this Agreement and the UNC Services Agreement at an extraordinarygeneral meeting of the Lessee convened for such purpose;

 

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(b)                                 the passing of resolutions by the shareholders (other than UnicomGroup and its Associates, who shall abstain from voting) of China UnicomLimited approving the Acquisition Agreement and the Prospective ConnectedTransactions at an extraordinary general meeting of China Unicom Limited convenedfor such purpose; and

 

(c)           all other conditions precedentcontained in the Transfer Agreement having been fulfilled or waived.

 

3.2           In the event that the Conditions havenot been satisfied by 30 June 2003 or such later date as the parties may agreein writing, all rights, obligations and liabilities of each party hereto shallbe of no further effect and no party shall have any claim against any other andthis Agreement shall be void and of no further effect.

 

**TERMAND CAPACITY**

 

**Term**

 

4.1           The Lessee shall initially leaseCapacity for a period of one year from the Lease Effective Date (the ***Initial Term***).

 

4.2           The Lease shall be renewable forfurther one year periods (each an ***Additional Term***) at the option of the Lesseeby giving not less than 180 days’ prior written notice to the Lessor.

 

**InitialCapacity Commitment**

 

4.3           During the Initial Term, the Lesseeshall lease the following total amounts of Capacity:

 
| First  Quarter  | -      | such  Capacity as is notified to the Lessor by not later than 15 December 2002                    |
|-----------------|--------|---------------------------------------------------------------------------------------------------|
|            |   |                                                                                              |
| Second  Quarter | -      | such  Capacity as is notified to the Lessor by not later than the last day of the  first Quarter  |
|            |   |                                                                                              |
| Third  Quarter  | -      | such  Capacity as is notified to the Lessor by not later than the last day of the  second Quarter |
|            |   |                                                                                              |
| Fourth  Quarter | -      | such  Capacity as is notified to the Lessor by not later than the last day of the  third Quarter  |

 

**AdditionalCapacity**

 

4.4           In addition to its Capacitycommitment in respect of the Initial Term, subject to giving not less than 180days’ prior written notice to the Lessor, the Lessee may lease such additionalCapacity as it may require during the Term (***Additional Capacity***).  Such notice shall specify the total amountof Additional Capacity required, the date by which the Additional Capacity isrequired to be delivered, and other requirements and details in relation to theAdditional Capacity.

 

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4.5           Subject to clause 4.6, the Lessorshall ensure that all Capacity which the Lessee has committed to lease orrequested pursuant to clause 4.3 or clause 4.4 is supplied by the due date ofdelivery of the Capacity (the ***Capacity Delivery Date***) and otherwise in accordance withthe notification provided by the Lessee under clause 4.4. In addition, theLessor shall also use best endeavours to provide all such further Capacity asthe Lessee may from time to time request on less than 180 days’ notice, eitherby supplying existing surplus Capacity, or through additional or acceleratedexpansion of the Network in the Listed Service Areas or by other appropriatemeans.

 

4.6           Unless otherwise agreed between theLessor and the Lessee, the Lessor shall not be obliged to deliver anyAdditional Capacity if to do so would require the Lessor to expand the Networkbeyond Phase 1 (as described in clause 4.12). However, if the Lessor agrees to provide any such Additional Capacity,the provisions of this Agreement (including the determination of NetworkConstruction Cost and the Lease Fee) shall apply equally in relation to allsuch Additional Capacity which the Lessor has agreed to provide.

 

4.7           Subject to clause 4.6, if at any timeany event occurs or circumstances arise which may delay the delivery of anyCapacity on the scheduled Capacity Delivery Date, then the Lessor shall, assoon as practicable (and in any event within five Business Days of the Lessorbecoming aware of the event or circumstances in question), notify the Lessee ofthat fact in writing. Such notification shall set out:

 

(a)                                  the nature of the event or circumstances and whether they havearisen as a result of any of the causes set out in clause 4.9;

 

(b)                                 a description of the steps, if any, which the Lessor has identifiedare necessary to rectify the matter and bring the Capacity into operationalservice on the relevant Capacity Delivery Date or as soon as practicablethereafter; and

 

(c)                                  the likely effect of the event or circumstances on the achievabilityof the Capacity Delivery Date.

 

4.8           Following receipt by the Lessee ofany notification pursuant to clause 4.7, the Lessee and the Lessor shalldiscuss in good faith:

 

(a)           actions which can be taken to rectifythe matter; and

 

(b)           any proposed change to the relevantCapacity Delivery Date.

 

4.9           Notwithstanding the foregoing, if anyevent or circumstance notified by the Lessor to the Lessee under clause 4.7 is,or arises as a result of, one or more of the following:

 

(a)           a Force Majeure Event;

 

(b)                                 any material breach by the Lessee of any of its material obligationsunder this Agreement which prevents the Lessor from performing the relevantobligation under this Agreement; or

 

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(c)                                  compliance with any applicable law, the mandatory requirements ofany Government Entity or any other applicable statutory regulations;

 

then, save tothe extent that the event arose (in the case of an event under clause 4.9(c)only) as a result of any breach of this Agreement by the Lessor, the Lessorshall have no liability to the extent the delay arises from such events,whether under clause 4.10 or otherwise, to provide any Delay Discount (asdefined below), or pay any damages or other compensation to the Lessee as aresult of the Capacity not being ready for service by the Capacity DeliveryDate as a result of such events and that Capacity Delivery Date shall beextended to the earliest practicable date on which the Lessee requires, and theLessor is able, to make available the Capacity in light of the relevant event.

 

**Consequencesof failure to achieve Capacity Delivery Dates**

 

4.10         Subject to clauses 4.6 and 4.9, if anyCapacity is not ready for operational service by the relevant Capacity DeliveryDate, then the Lessor shall provide the Lessee with a discount (a ***Delay Discount***),calculated as follows:

 
| Delay  Discount | = | Daily Lease  Fee of relevant delayed Capacity ***x*** period of delay (number of days) |
|-----------------|---|----------------------------------------------------------------------------------------|

 

The DelayDiscount shall be credited against next Lease Fee payment to be made by theLessee (or caused to be made by the Lessee) to the Lessor.

 

**Reductionof Capacity**

 

4.11         The Lessee may not reduce the amount ofCapacity leased by it hereunder during the Initial Term. However, subject toproviding not less than 180 days’ prior written notice to the Lessor, or withthe prior written consent of the Lessor, the Lessee may reduce the amount ofCapacity leased with effect from the commencement of any Additional Term,provided that the Lessee must lease all Capacity which it has requested orotherwise committed to lease for at least one year following the date ofdelivery or renewal of the lease of such Capacity (as the case may be). Anyreduction in the total amount of leased Capacity shall be effected in reverseof the order in which Capacity was originally delivered and leased hereunder,such that Capacity last delivered prior to the request for reduction shall bereduced first.

 

**NetworkCapacity**

 

4.12         The Lessor represents to the Lesseethat Phase 1 of the Network has a total Capacity of approximately 4.04 millionSubscribers.

 

4.13         Subject to clause 4.6, the Lessor andLessee shall, based on the Lessee’s requests for Additional Capacity from timeto time, agree the total amount of Capacity to be constructed for eachAdditional Phase.

 

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**SubscriberCapacity**

 

4.14         All Phase 1 Capacity leased hereundershall be calculated based on a nominal value of 0.015 Erlang per Subscriberduring peak periods.

 

4.15         The parties may, in light of actualusage patterns and other relevant factors, agree to vary the nominal value perSubscriber in respect of Capacity constructed during any Additional Phase.

 

**Spectrum**

 

4.16         The Lessor shall, based on the amountof all committed Capacity and any Additional Capacity requested under clause4.4, provide or procure that the Lessee is provided with all necessary spectrumfor the operation and expansion of the CDMA Business.

 

**NetworkUpgrade**

 

4.17         Unless otherwise agreed between theLessor and the Lessee, the Lessor shall not be obliged to re-configure,upgrade, enhance or otherwise modify the Network.  However, if the Lessor agrees to do so, clauses 4.4 to 4.10 andclause 7 shall apply *mutatis mutandis*in relation to all such re-configurations, upgrades, enhancement andmodifications which the Lessor has agreed to provide.

 

**LEASEFEE**

 

5.1           The Lease Fee shall be determined soas to enable the Lessor to recover the Network Construction Cost within sevenyears, together with an internal rate of return on its investment of 8%.  The Lease Fee shall be calculated byapplying the formula set out in Schedule 1, subject to adjustment in accordancewith clause 5.3. For the purposes of this clause 5 and Schedule 1, the LeaseFee shall include the lease fees paid or payable by the Operating Entity to theLessor under the Existing Lease.

 

5.2           The parties agree that, by applyingthe formula set out in Schedule 1, the current estimate of the Lease Fee perSubscriber for all Phase 1 Capacity, subject to clause 5.3, is RMB61.4 perQuarter.

 

5.3           The Lessor and the Lessee shallprocure that, as soon as reasonably practicable following final acceptance ofeach Phase of the Network constructed after Phase 1 (each an ***Additional Phase***), afirm of auditors jointly selected by the Lessor and Lessee is appointed toperform procedures agreed upon with the Lessor and Lessee to verify the finalNetwork Construction Cost in respect of such Additional Phase. The Lessor shallprovide the Lessee and the firm of auditors so appointed with certified copiesor originals of all such supporting invoices and receipts and other documentaryevidence and information as the Lessee or such auditors may require in order toverify the Network Construction Cost in respect of any Additional Phase of theNetwork. The auditors’ fees for carrying out the aforesaid procedures shall beborne by the Lessor and the Lessee in equal shares.

 

5.4           In the event that the final NetworkConstruction Cost calculated under clause 5.3 in respect of an Additional Phasediffers from the Network Construction Cost calculated at the time of initialacceptance of such Additional Phase by more than

 

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1.0%, thefinal Network Construction Cost shall be substituted for the initial NetworkConstruction Cost used in calculating the Lease Fee by applying the formulacontained in Schedule 1, and any adjustment in such Lease Fee shall apply fromthe commencement of the applicable Term. Subject to the foregoing, subsequent quarterly payments of the Lease Feeshall be increased or decreased as appropriate to reflect the adjustment to theLease Fee pursuant to this clause 5.4.

 

5.5           The Lease Fee in respect of eachAdditional Phase of the Network shall, subject to clauses 5.3 and 5.4, becalculated by applying the formula set out in Schedule 1 and agreed by theLessor and the Lessee as soon as reasonably practicable following initial acceptanceand delivery of each such Additional Phase and shall apply to all Capacityleased from that Phase.

 

**PAYMENT**

 

6.1           Subject to clauses 6.2 and 7.3, theLease Fee shall, based on the actual amount of Capacity (in terms of volume andnumber of days) leased by the Lessee during each Quarter, be paid (or caused tobe paid) quarterly in arrears by the Lessee to the Lessor within 30 daysfollowing the end of each Quarter during the Term.  The total Lease Fee payable by the Lessee in respect of a Quartershall be calculated by applying the formula set out in Schedule 1. If newCapacity is delivered into service after the Lease Effective Date, all LeaseFees in respect thereof will be payable commencing from the date such Capacityis delivered and ready for use, and the first payment, covering the period fromthe date the Capacity is delivered and ready for use to the beginning of thenext Quarter, shall be payable in arrears within 30 days following the end ofthe Quarter in which it is delivered.

 

6.2           The Lessor shall send an invoice tothe Lessee within two days following the end of each Quarter during the Term inrespect of all Capacity leased during such Quarter.  Such invoice shall contain details of all Capacity leased duringthe relevant Quarter, as well as the Lessor’s calculation, by applying theformula set out in Schedule 1, of the total Lease Fee payable by the Lessee forsuch Quarter.

 

6.3           Unless otherwise agreed in writingbetween the Lessor and the Lessee, all Lease Fee payments shall be made in Renminbi.

 

6.4           All sums payable to the Lessor underthis Agreement shall be made in immediately available funds by electronic fundstransfer to such account as the Lessor shall by not less than seven days’ priorwritten notice notify to the Lessee.

 

6.5           The Lessor may charge interest on anyoutstanding sum payable to the Lessor hereunder from the due date to the dateof receipt of payment in full by the Lessor, at the daily compound rate of0.01%.

 

**PROCUREMENTAND CONSTRUCTION OF THE NETWORK**

 

7.1           The Lessor shall procure the Networkand shall finance the procurement of all Equipment. Except for Phase 1 andPhase 2 of the Network, the Lessor shall invite the Lessee to participate inall negotiations with Equipment suppliers, and the Lessee

 

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shall beentitled to approve all Equipment purchases and sign all Equipment purchasecontracts.

 

7.2           The Lessor shall ensure that theNetwork is constructed in accordance with the detailed design standards,specifications and timetable agreed in writing between the Lessor andLessee.  Subject to clause 4.6, theLessor and Lessee shall, within 60 days following the issue by the Lessee of arequest for Additional Capacity under clause 4.4, agree in writing the detaileddesign standards, specifications and construction timetable for any requiredexpansion of the Network to meet such Additional Capacity requirements.

 

7.3           Subject to complying with itsobligations under clause 7.2, the Lessor shall use its best endeavours to ensurethat the Equipment is procured and the Network constructed for the lowestachievable cost, and shall comply with any requirement of the Lessee that thepurchase of the Equipment be undertaken in a manner which is tax efficient forthe Lessee.

 

**ACCEPTANCEAND TESTING OF THE NETWORK**

 

8.1           In relation to each Additional Phaseof the Network, authorised representatives of the Lessor and the Lessee shallattend the initial acceptance and the final acceptance arranged by theEquipment suppliers in accordance with the Equipment supply and installationservices contracts, which shall incorporate the acceptance regulations of theLessor. Representatives of the Lessor and the Lessee shall effect initial andfinal acceptance of each Additional Phase by execution and delivery to theEquipment suppliers of an initial acceptance document and a final acceptancedocument, respectively.  The Lessee mayelect to be represented or accompanied by authorised representatives of theOperating Entity.

 

**OPERATION,MANAGEMENT AND REVENUE**

 

9.1           On the day of signing by theauthorised representatives of the Lessor and the Lessee of an initialacceptance document relating to a particular Additional Phase of the Network,that Phase shall be formally delivered to the Operating Entity for operation,management and maintenance.

 

9.2           All operating revenue, includingairtime charges, monthly subscription fees, interconnection charges, incomefrom sales of UIM cards and handsets and other income generated from or inconnection with the operation of the Network shall be collected by and belongto the Operating Entity.

 

9.3           All costs of operating and managingthe Network shall be borne by the Operating Entity.

 

**RISKAND TITLE**

 

10.1          The parties agree that title to allparts of the Network procured, acquired or otherwise funded by the Lessor willremain vested in the Lessor until the Network is transferred to the Lesseepursuant to clause 13.

 

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10.2         As between the Lessor and the Lessee,during the period of construction of each Additional Phase of the Network, theLessor shall bear all risks of loss, theft, damage and destruction of or to theNetwork. Thereafter and until the expiry of the Term, the Lessor shall bear allrisks of physical loss, damage and destruction of or to the Network caused by aForce Majeure Event, and the Lessee shall be responsible for all losses anddamage resulting from the Operating Entity’s operation of the Network.

 

**RESPONSIBILITIESOF THE PARTIES**

 

**Lessor’sResponsibilities**

 

11.1         Without limiting the Lessor’s otherobligations hereunder, the Lessor’s responsibilities are:

 

(a)                                  to obtain and maintain all necessary government and other approvals,authorisations, licences and other documents necessary or desirable for theconstruction, operation, maintenance and upgrading of the Network;

 

(b)                                 to obtain all PRC approvals and permits for the import of allequipment and technology, other supplies and installation services required forthe construction and operation of the Network, and to use best endeavours toobtain and maintain favourable customs duties;

 

(c)                                  to obtain all necessary funding for the construction and expansionof the Network in accordance with the Lessee’s requirements;

 

(d)                                 to ensure that each Additional Phase of the Network is constructedin accordance with construction timetable agreed by the Lessor and Lessee;

 

(e)           to handle all arrangements inrelation to the importation of the Equipment;

 

(f)                                    to ensure that the Capacity leased is delivered to the Lessee beforethe relevant Capacity Delivery Date;

 

(g)                                 to use best endeavours to ensure that the Network is constructed forthe lowest cost achievable based on the technical specifications and subject toprevailing economic circumstances, provided that the Network quality standardsshall meet the standards agreed by the Lessor and Lessee;

 

(h)                                 upon request by the Lessee to upgrade the software or hardware ofthe Network, to use best endeavours to satisfy the request as soon as possible;

 

(i)                                     to make available to the Lessee during the Term the benefit of allmanufacturer’s warranties in relation to the Equipment and other productsupport;

 

(j)                                     unless agreed in writing with the Lessee and Unicom Group and saveas contemplated by the Transfer Agreement, not to lease or sell any part of theNetwork to any third party, or permit any third party to use or operate theNetwork in any manner to provide telecommunications services;

 

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(k)                                  without the prior written consent of the Lessee, not to use oroperate the Network in any manner to provide telecommunications services, or tocompete in any other manner with the Listed Group; and

 

(l)                                     in the event of a breakdown of any part of the Network, to providethe Lessee all necessary cooperation, including liasing with Equipmentsuppliers and coordinating relevant parties.

 

**Lessee’sResponsibilities**

 

11.2         Without limiting the Lessee’s otherobligations hereunder, the Lessee’s responsibilities are:

 

(a)                                  to promptly notify the Lessor of any event of loss or any eventwhich is likely to result in an insurance notification claim;

 

(b)                                 to provide the Lessor with such information concerning thecondition, use and operation of the Network as the Lessor may from time to timereasonably request;

 

(c)                                  to permit the Lessor’s representatives to inspect the Network duringnormal working hours, upon reasonable notice;

 

(d)                                 to be responsible for the maintenance and safety of the Network andmaintenance of all databases in relation to the Network;

 

(e)                                  to permit the Lessor to use such of its premises as are reasonablyrequired by the Lessor for the purpose of complying with its obligations underthis Agreement;

 

(f)                                    to refrain from subleasing any part of the Network or assign itsrights under the lease to any party other than the Operating Entity or anothermember of the Listed Group; and

 

(g)                                 in accordance with market requirements and subscriber demand, to useall reasonable efforts to promote and advertise the CDMA Business in the ListedService Areas.

 

**UnicomGroup’s Responsibilities**

 

11.3         Without limiting Unicom Group’s otherobligations hereunder, Unicom Group’s responsibilities are:

 

(a)                                  to obtain and maintain all necessary government and other approvals,authorisations, licences and other documents necessary or desirable for theconstruction, operation, maintenance and upgrading of the Network; and

 

(b)                                 to establish and maintain roaming and interconnection arrangementswith other telecommunications operators.

 

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**REPRESENTATIONSAND WARRANTIES**

 

**Representationsand Warranties of the Lessee**

 

12.1         The Lessee represents and warrants to the Lessor that:

 

(a)                                  **Status**:  It isa limited liability company duly incorporated and validly existing under thelaws of the PRC and has the corporate power to own its assets and carry on itsbusiness as it is being conducted;

 

(b)                                 **Power and authority**: Ithas the corporate power to enter into and perform, and has taken all necessarycorporate action to authorise the entry into, performance and delivery of, thisAgreement and the transactions contemplated by this Agreement;

 

(c)                                  **Legal validity**: This Agreement hasbeen duly authorised, executed and delivered by the Lessee, and this Agreementconstitutes legal, valid and binding obligations of the Lessee, enforceable inaccordance with its terms;

 

(d)                                 **Non-conflict**: The entry into andperformance by the Lessee of, and the transactions contemplated by, thisAgreement do not and will not (i) conflict with the constitutional documents ofthe Lessee; or (ii) conflict with or result in default under any document whichis binding upon the Lessee or any of its assets nor result in the creation ofany Security Interest over any of its assets;

 

(e)                                  **Authorisation**: Allauthorisations, consents, registrations and notifications required by theLessee in connection with the entry into, performance, validity andenforceability of, this Agreement and the transactions contemplated by thisAgreement, have been obtained or effected (as appropriate) and are in fullforce and effect;

 

(f)                                    **No Immunity**: The Lessee issubject to civil commercial law with respect to its obligations under thisAgreement; and neither Lessee nor any of its assets is entitled to any right ofimmunity, and the entry into and performance of this Agreement by the Lesseeconstitute private and commercial acts; and

 

(g)                                 **Litigation**: No litigation,arbitration or administrative proceedings are pending or threatened againstLessee which, if adversely determined, would have a material adverse effectupon the Lessee’s financial condition or business or its ability to perform itsobligations under this Agreement.

 

**Representationsand Warranties of the Lessor and Unicom Group**

 

12.2         Each of the Lessor and Unicom Group jointly and severallyrepresents and warrants to the Lessee that:

 

(a)                                  **Status**: The Lessor is a company duly incorporated andvalidly existing under the laws of the PRC and has the corporate power to ownits assets and carry on its business as it is now being conducted;

 

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(b)                                 **Power and authority**: The Lessor has thecorporate power to enter into and perform, and has taken all necessarycorporate action to authorise the entry into, performance and delivery of, thisAgreement and the transactions contemplated by this Agreement;

 

(c)                                  **Legal validity**: This Agreementconstitutes the Lessor’s legal, valid and binding obligation;

 

(d)                                 **Non-conflict**: The entry into andperformance by the Lessor of, and the transactions contemplated by, this Agreementdo not and will not conflict with: (i) any laws binding on the Lessor; or (ii)the constitutional documents of the Lessor; or (iii) any document which isbinding upon the Lessor or any of its assets;

 

(e)                                  **Authorisation**: So far as concernsthe obligations of the Lessor, all authorisations, consents, registrations andnotifications required under the laws of the PRC in connection with the entryinto, performance, validity and enforceability of, and the transactionscontemplated by, this Agreement by the Lessor have been obtained or effected(as appropriate) and are in full force and effect;

 

(f)                                    **No breach**: The use of theNetwork by the Operating Entity in accordance with this Agreement will notcause the Operating Entity to breach any law, regulation, direction,permission, waiver, consent, registration, approval or other authorisation; and

 

(g)                                 **No Immunity**: The Lessoris subject to civil commercial law with respect to its obligations under thisAgreement; and neither the Lessor nor any of its assets is entitled to anyright of immunity, and the entry into and performance of this Agreement by theLessor constitute private and commercial acts.

 

**Representationsand Warranties of Unicom Group**

 

12.3         Unicom Group also represents and warrants to the Lesseethat:

 

(a)                                  **Status**: Unicom Group is a company duly incorporatedand validly existing under the laws of the PRC and has the corporate power toown its assets and carry on its business as it is now being conducted;

 

(b)                                 **Power and authority**: Unicom Group hasthe corporate power to enter into and perform, and has taken all necessarycorporate action to authorise the entry into, performance and delivery of, thisAgreement and the transactions contemplated by this Agreement;

 

(c)                                  **Legal validity**: This Agreementconstitutes Unicom Group’s legal, valid and binding obligation;

 

(d)                                 **Non-conflict**: The entry into andperformance by Unicom Group of, and the transactions contemplated by, thisAgreement do not and will not conflict with: (i) any laws binding on UnicomGroup; or (ii) the constitutional

 

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documentsof Unicom Group; or (iii) any document which is binding upon Unicom Group orany of its assets;

 

(e)                                  **Authorisation**: So far as concernsthe obligations of Unicom Group, all authorisations, consents, registrationsand notifications required under the laws of the PRC in connection with theentry into, performance, validity and enforceability of, and the transactionscontemplated by, this Agreement by Unicom Group have been obtained or effected(as appropriate) and are in full force and effect;

 

(f)                                    **CDMA Licence**: UnicomGroup’s CDMA licence (Licence No. [2001] Yi Zi No. 01) issued by the MII dated1 August 2001 is in full force and effect and there are no circumstances whichindicate that such licence will or is likely to be revoked, in whole or inpart. In accordance with applicable PRC laws and regulations, Unicom Group ispermitted to authorise the Lessee to provide CDMA mobile telecommunicationsservices by using the Network;

 

(g)                                 **No Immunity**: Unicom Group issubject to civil commercial law with respect to its obligations under thisAgreement; and neither Unicom Group nor any of its assets is entitled to anyright of immunity, and the entry into and performance of this Agreement byUnicom Group constitute private and commercial acts.

 

**PURCHASEOPTION**

 

13.1         The Lessor hereby grants the Lessee anoption to purchase the Network (the ***Purchase Option***).

 

13.2         The Purchase Option may be exercised atany time during the Term and within one year thereafter by the Lessee givingnotice in writing (a ***PurchaseOption Notice***) to the Lessor. The acquisition price of theNetwork shall be negotiated between the Lessor and the Lessee based on theappraised value of the Network determined in accordance with applicable PRClaws and regulations, and taking into account prevailing market conditions andother relevant factors, provided that the acquisition price will not be greaterthan such price as would, after taking into account all Lease Fee payments madeby the Lessee to the Lessor and deducting all Delay Discounts due to the Lesseeunder clause 4.10, enable the Lessor to recover the Network Construction Cost,together with an internal rate of return on its investment of 8% (the ***Purchase Price***).

 

13.3         The purchase of the Network by theLessee under this clause 13 shall be carried out in accordance with therelevant provisions of the Shanghai Stock Exchange listing rules and allapplicable PRC laws and regulations (or the Listing Rules and all applicableHong Kong laws after completion of the Transfer Agreement).

 

13.4         As soon as practicable following theissue of a Purchase Option Notice, the Lessor and Lessee shall negotiate ingood faith and execute an agreement in relation to the sale and purchase of theNetwork.  The agreement shall reflectthe terms referred to in this clause 13, as well as such other terms as theLessor and the Lessee

 

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shall agree.In the agreement, the Lessor shall provide such representations and warrantiesas are reasonably requested by the Lessee in relation to the Network and otherrelated matters.

 

13.5         The Network shall be sold free from allSecurity Interests and with all rights attached to it at the date of completionof the sale and purchase of the Network.

 

**INSURANCE**

 

14.1         During the construction period of eachAdditional Phase of the Network, the Lessor shall fully and continuouslymaintain insurance over the Network. The relevant insurance premiums shall bepaid by the Lessor and form part of the Network Construction Cost.  Such insurance policies shall name theLessor as the beneficiary.  Followingreceipt by the Lessor of any proceeds of such insurance, the Lessor shall applyall the proceeds to repair the Network.

 

14.2         After each Phase of the Network hasbeen constructed and made available to the Lessee, insurance of that Phase ofthe Network shall be effected and maintained fully and continuously valid by oron behalf of the Lessee on such terms and with such qualified insurance companyas agreed by the Lessor and the Lessee. The relevant insurance premiums, which form part of the cost ofoperating the Network, shall be paid by or on behalf of the Lessee.  The Lessor and the Lessee shall be named asjoint beneficiaries under all such insurance policies.

 

14.3         The proceeds of any insurance taken outover the Network shall be applied in repairing or replacing the part of theNetwork that has been damaged or lost. If the costs of such repair or replacement exceed the amount of relevantproceeds of insurance, the excess shall be paid by the Lessor and shall formpart of the Network Construction Cost in case the damage or loss occurs duringthe construction period, and shall be paid by or on behalf of the Lessee and formpart of the operating cost of the Network in case the damage or loss occursduring the operating period.

 

14.4         In the event of loss of, or damage to,the Network, the Lessor and Lessee shall agree upon the detailed steps whichcan be taken to repair or replace the Network so as to overcome, rectify andminimise such loss or damage.

 

**NETWORKMAINTENANCE**

 

15.1         The Lessee shall at all times during the Term:

 

(a)                                  take all necessary or desirable steps to safeguard all parts of theNetwork and keep the Network in good repair and condition, subject to fair wearand tear; and

 

(b)                                 maintain the Network in accordance with the generally accepted bestpractice of other mobile telecommunications operators in the PRC.

 

15.2         The Lessee shall bear all costs, feesand expenses in complying with its obligations under clause 15.1.

 

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15.3         The Lessee shall permit the Lessor’srepresentatives to inspect the Network during normal business hours, uponreasonable notice, for the purpose of ascertaining whether the Lessee is incompliance with its obligations under clause 15.1.

 

**GUARANTEEAND INDEMNITY**

 

16.1         In consideration of the Lessee enteringinto this Agreement, Unicom Group unconditionally and irrevocably guaranteesthe due and punctual performance by the Lessor of its obligations under thisAgreement. If and each time the Lessor fails for any reason to perform orobserve its obligations under this Agreement, Unicom Group shall forthwith upondemand unconditionally perform (or procure the performance of) the obligationin relation to which such failure has occurred in the manner prescribed in thisAgreement and so that the same benefits shall be received by the Lessee aswould have been so received if such obligation had been duly performed and/orobserved by the Lessor.

 

16.2         Unicom Group agrees to indemnify theLessee on demand for any loss or damage suffered by any member of the ListedGroup as a result of any defect in any of the Equipment or any loss or damagecaused by any negligence, default, act or omission of the Lessor or UnicomGroup under this Agreement or in connection with the Network. The aggregateliability of Unicom Group for any claim shall not exceed the total amount ofLease Fee payments made by the Lessee to the Lessor and the total PurchasePrice paid by the Lessee for the Network.

 

**CONFIDENTIALITY**

 

17.1         At all times during the Term, eachparty shall, and shall procure that their respective directors, officers,employees and agents shall, keep confidential and shall not, without the priorwritten consent of the other parties, disclose to any third party thisAgreement or any of the terms of this Agreement or any documents or materialssupplied by or on behalf of either party in connection with this Agreement,save that any such party shall be entitled upon giving notice to the otherparties to make such disclosure:

 

(a)                                  in connection with any proceedings arising out of or in connectionwith this Agreement to the extent that any party may consider necessary toprotect its interests; or

 

(b)                                 if required to do so by an order of a court of competentjurisdiction whether in pursuance of any procedure for discovering documents orotherwise or pursuant to any law or any regulation of any stock exchange orsecurities regulatory authority; or

 

(c)           to its auditors or legal advisors orother professional advisers; or

 

(d)           by the Lessor or the Lessee to anybank or any other financier or prospective financier; or

 

(e)           if required to do so by anyapplicable law or in order for such party to comply with its obligations underthis Agreement.

 

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17.2         Nothing in clause 17.1 shall preventthe Lessee from disclosing information, documents or other materials inconnection with the Lease to the Operating Entity.

 

**FORCEMAJEURE**

 

18.1         If the Lessee or Lessor (the ***Affected Party***) is prevented, hinderedor delayed from or in performing any of its obligations under this Agreement bya Force Majeure Event:

 

(a)                                  the Affected Party’s obligations under this Agreement are suspendedfrom notification of the event in accordance with clause 18.1(b) while theForce Majeure Event continues but only to the extent that it is so prevented,hindered or delayed;

 

(b)                                 immediately after the occurrence of the Force Majeure Event theAffected Party shall promptly notify the other parties in writing of the ForceMajeure Event, the time and date on which the Force Majeure Event started andthe effects of the Force Majeure Event on its ability to perform its obligationsunder this Agreement;

 

(c)                                  the Affected Party shall take all reasonable endeavours to mitigatethe effects of the Force Majeure Event on the performance of its obligationsunder this Agreement; and

 

(d)                                 immediately after the end of the Force Majeure Event, the AffectedParty shall notify the other parties in writing that the Force Majeure Eventhas ended, the duration of the Force Majeure Event, and shall resumeperformance of its obligations under this Agreement.

 

**TERMINATION**

 

19.1         The Lessee may terminate this Agreementby not less than 180 days’ prior written notice, such termination to takeeffect from the end of any Additional Term. The Lessor may not terminate thisAgreement except in accordance with this clause 19.1 or clause 19.2.

 

19.2         Without prejudice to any other rightsor remedies they may have (either under this Agreement or at law), the Lessoror the Lessee may terminate this Agreement if the other (or, in the case of theLessee, Unicom Group) commits any continuing or material breach of any of theprovisions of this Agreement (save for any breach which is caused by the partyseeking to rely on it) and, in the case of such a breach which is capable ofremedy, fails to remedy the same within 90 days after receipt of a writtennotice giving full particulars of the breach and requiring it to be remedied.

 

19.3         For the purpose of clause 19.2, abreach shall be considered capable of remedy if the party in breach can complywith the provision in question in all respects other than as to the time ofperformance (provided that time of performance is not of the essence).

 

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19.4         The rights to terminate this Agreementgiven by this clause 19 shall not prejudice any other right or remedy ofany party in respect of the breach concerned (if any) or any other breach.

 

19.5         Upon the termination of this Agreementfor any reason, subject as otherwise provided in this Agreement and to anyrights or obligations which have accrued prior to termination, no party shallhave any further obligation to the others under this Agreement.

 

19.6         Notwithstanding clause 19.1, thisAgreement may terminate at any time with the written agreement of the parties.

 

**Redelivery**

 

19.7         Subject to clause 13, the Lessee shallredeliver the Network to the Lessor within 90 days following the termination ofthe Lease.  At the time of suchredelivery:

 

(a)           the Network shall be free and clearof all Security Interests (other than Lessor Liens);

 

(b)                                 all maintenance to the Network due for performance during the Termshall have been completed in accordance with clause 15, with all deferredmaintenance items completed; and

 

(c)                                  all damage to the Network shall have been permanently repaired andcertified in accordance with the requirements of the relevant Equipmentmanufacturer.

 

**NOTICES**

 

20.1         Any notice to be given pursuant to thisAgreement shall be in writing and signed by (or on behalf of) the person givingit.  It shall be served by sending it byfax, or delivering it by hand, or sending it by prepaid recorded delivery,special delivery or registered post, to the address or fax number set out inclause 20.2 and in each case marked for the attention of the relevant party (orto such other address or fax number as shall have been duly notified inaccordance with this clause).  Anynotice so served by hand, fax or post shall be deemed to have been duly given:

 

(a)           in the case of delivery by hand, whendelivered;

 

(b)           in the case of delivery by fax, atthe time of transmission; and

 

(c)                                  in the case of prepaid recorded delivery, special delivery orregistered post, at 9 a.m. on the second Business Day following the date ofposting

 

provided thatin each case where delivery by hand or by fax occurs after 6 p.m. on a BusinessDay or on a day which is not a Business Day, service shall be deemed to occurat 9 a.m. on the next following Business Day.

 

References totime in this clause are to local time in the country of the addressee.

 

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20.2         The addresses and fax numbers of theparties for the purpose of clause 20.1 are as follows:

 
| **Lessor**             |                                                                                   |
|------------------------|----------------------------------------------------------------------------------------|
|                   |                                                                                   |
| Address:               | 6th  Floor, Tower 3, Henderson Centre, 18 Jianguomen Nei Dajie, Beijing, 100005,  PRC  |
|                   |                                                                                   |
| Fax:                   | +86 10 6522  7281                                                                      |
|                   |                                                                                   |
| For the  attention of: | Wang Ying  Pei                                                                         |
|                   |                                                                                   |
| **Lessee**             |                                                                                   |
|                   |                                                                                   |
| Address:               | 9th  Floor, 133 Bei Dajie Jia, Xidan, Xi Cheng District, Beijing, the PRC              |
|                   |                                                                                   |
| Fax:                   | +86 10 6650  4066                                                                      |
|                   |                                                                                   |
| For the  attention of: | The  Directors                                                                         |
|                   |                                                                                   |
| **Unicom Group**       |                                                                                   |
|                   |                                                                                   |
| Address:               | 12th  Floor, Tower 1, Henderson Centre, 18 Jianguomen Nei Dajie, Beijing, 100005,  PRC |
|                   |                                                                                   |
| Fax:                   | +86 10 6611  4366                                                                      |
|                   |                                                                                   |
| For the  attention of: | Li Zhang  Ting                                                                         |

 

20.3         A party may notify the other parties ofa change to its name, relevant addressee, address or fax number for thepurposes of this clause 20, provided that such notice shall only beeffective on:

 

(a)           the date specified in the notice asthe date on which the change is to take place; or

 

(b)                                 if no date is specified or the date specified is less than fiveBusiness Days after the date on which notice is given, the date following fiveBusiness Days after notice of any change has been given.

 

**ASSIGNMENTAND SUB-CONTRACTING**

 

21.1         The rights or benefits under thisAgreement may not be assigned (nor may any cause of action arising inconnection with any of them be assigned) by the Lessor or Unicom Group or theirrespective successor in title without the prior written consent theLessee.  Each of the Lessor and UnicomGroup irrevocably agrees that the Lessee may transfer or sub-contract any ofits rights and obligations under this Agreement to the Operating Entity oranother member of the Listed Group.

 

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21.2         The Lessor may, with the Lessee’s priorwritten consent, sub-contract any of its obligations under this Agreement providedthat the Lessor procures that the sub-contractor complies with the Lessor’sobligations under this Agreement as if it were a party to this Agreement inplace of the Lessor. Nothing in this clause 21 will relieve the Lessor of anyof its liabilities or obligations under this Agreement.

 

**SEVERABILITY**

 

22.1         If any provision of this Agreement isheld to be invalid or unenforceable, then such provision shall (so far as it isinvalid or unenforceable) be given no effect and shall be deemed not to beincluded in this Agreement but without invalidating any of the remainingprovisions of this Agreement.

 

**FURTHERASSURANCE**

 

23.1         Each party agrees to perform (orprocure the performance of) all further acts and things, and execute anddeliver (or procure the execution and delivery of) such further documents, asmay be required by law or as the other parties may reasonably require toimplement and/or give effect to this Agreement and the transactionscontemplated by it.

 

**COSTS**

 

24.1         Subject to clause 24.2, each of theparties shall pay its own costs and expenses (including legal costs) incurredin connection with the negotiation, preparation and implementation of thisAgreement.

 

24.2         Any stamp duty or other duties payablein connection with this Agreement, and matters contemplated hereunder shall beborne by the Lessor and the Lessee in equal shares.

 

**WAIVERSAND VARIATIONS**

 

25.1         No failure or delay on the part of anyparty in exercising any right, power or remedy hereunder shall operate as awaiver thereof nor shall any single or partial exercise of any right, power orremedy preclude any further exercise thereof or the exercise of any otherright, power or remedy. No waiver shall be effective unless expressed inwriting signed for or on behalf of the party granting it.

 

25.2         No variation of this Agreement (or ofany of the documents referred to in this Agreement) shall be valid unless it isin writing and signed by or on behalf of each of the parties to it.  The expression “variation” shall include anyvariation, supplement, deletion or replacement however effected.

 

25.3         Unless expressly agreed, no variationshall constitute a general waiver of any provisions of this Agreement, norshall it affect any rights, obligations or liabilities under or pursuant tothis Agreement which have already accrued up to the date of variation, and therights and obligations of the parties under or pursuant to this Agreement shallremain in full force and effect, except and only to the extent that they are sovaried.

 

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**ENTIREAGREEMENT**

 

26.1         This Agreement constitutes the entireagreement between the parties in respect of the subject matter of thisAgreement.

 

**GOVERNINGLAW; SETTLEMENT OF DISPUTES**

 

27.1         This Agreement and the relationshipbetween the parties shall be governed by, and interpreted in accordance with,PRC law.

 

27.2         The parties agree to use their bestefforts to settle all disputes, controversies or conflicts arising from or inconnection with this Agreement through friendly negotiation and consultation.

 

27.3         Each of the parties agree that thecourts of the PRC are to have exclusive jurisdiction to settle any disputeswhich may arise in connection with this Agreement.

 

27.4         Each party agrees to waive and not toclaim any immunity from any proceedings and legal actions and from all forms ofexecution to which it or its property is now or hereafter becomes entitledunder the laws of any jurisdiction.

 

27.5         During the arbitration or courtproceedings, the parties shall continue to perform their respective obligationsunder this Agreement except for the part in dispute which is being referred toarbitration or court proceedings.

 

**LANGUAGE**

 

28.1         This Agreement shall be written in aChinese version and an English version in two originals each. If there existsany dispute between the parties as to the interpretation of the two versions,then the two versions shall be read in conjunction to determine the parties’intention at the time of signing. If the parties’ real intention still cannotbe ascertained by such reading, the Chinese version shall prevail.

 

**IN WITNESS**whereof the parties hereto have executed thisAgreement on the date shown at the beginning of this Agreement.

 

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SIGNED on behalf of **Unicom New HorizonMobile Telecommunications Company Limited**

 

 

| By:    | /s/ Wang Ying Wei |   |
|--------|-------------------|--------|
|   |
| Name:  | Wang Ying Wei     |   |
|   |
| Title: |              |   |

 

 

SIGNED on behalf of **China UnitedTelecommunications Corporation Limited**

 

 

| By:    | /s/ Wang Jian Zhou |   |
|--------|--------------------|--------|
|   |
| Name:  | Wang Jian Zhou     |   |
|   |
| Title: |               |   |

 

 

SIGNED on behalf of **China UnitedTelecommunications Corporation**

 

 

| By:    | /s/ Yang Xian Zu |   |
|--------|------------------|--------|
|   |
| Name:  | Yang Xian Zu     |   |
|   |
| Title: |             |   |

 

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**SCHEDULE 1**

 

 

**QuarterlyLease Fee Payment Calculation Formula**

 

The totalquarterly Lease Fee payable in respect of any Phase of the Network shall becalculated as follows:

 

 

Where:

 

Q = QuarterlyLease Fee payment

 

Pi = Lease Feeper Subscriber per Quarter in Phase i of the Network

 

Mij = TotalCapacity leased during the Quarter in a particular Term j and constructed aspart of Phase i

 

dj = Number ofdays in a particular Term j in a Quarter for which Capacity is leased

 

D = Totalnumber of days during the Quarter

 

i = Naturalnumbers denoting the Phase number of the Network

 

j = Naturalnumbers denoting the Term in which the Capacity is leased

 

The quarterlyLease Fee per Subscriber for a particular Phase shall be calculated as follows:

 
|  | *=Ci*x*4.6441%* |
|--|-----------------|

 

Where:

 

Ci = NetworkConstruction Cost per Subscriber for Phase i

 

n = Number ofQuarters during seven years, being n = 4 x 7 = 28

 

R = Quarterlyreturn on investment: based on an annual return of 8%, R = (1+8%)(1/4)= 1.9427%

 

In respect ofPhase 1, the recoupment period of seven years specified in clause 5.1shall be deemed to commence from 8 January 2002.

 

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