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1 BASIC PRINCIPLE:1.1 For the services and/or facilities provide by either Party to the other Party under thisAgreement, the Party reserves the right to collect reasonable service fees based on the principleof fairness for such service and/or facilities it provides. The other Party shall make the paymentfor the services and/or facilities provided. Sharing arrangements agreed by and between the Partiesin relation to sharing of service costs and income settlements are determined based on theprinciple of equality.1.2 The terms of services and/or facilities offered by one Party to the other under thisAgreement shall not be worse than any other third party offering the same or similar servicesand/or facilities.1.3 Should either Party hereunder demand for more services and/or facilities hereunder from theother Party, the other Party shall make its utmost effort to provide such services and/orfacilities requested under the conditions no less favorable than that under which this Party mayprovide the same or similar services and/or facilities to a third party.1.4 If either Party fails to provide or fully provide to the other Party the services and/orfacilities under this Agreement due to reasons other than its own fault, it shall promptly informthe other Party in writing, and shall use its best endeavors to assist the other Party to find thesame or similar services through other means.1.5 The agreed services and/or facilities hereunder shall fully comply with the purposes agreedupon under this Agreement and the standard set by the State.1.6 In the event of any breach of provision by either Party under this Agreement that leads toany damage suffered by the other Party, the Party in default shall be liable for all immediate andfull damages for breaching this Agreement. However, this Party shall not be held responsible forsuch losses in the event of Force Majeure.1.7 Both Parties shall provide all reasonable and essential assistance to the other Party for thepurpose of fulfilling the obligations set out in this Agreement.1.8 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.2 DEFINITION2.1 Master services sharing refers to the services agreed by both Parties to be provided to orreceived from another Party in accordance with the terms and conditions agreed in this Agreement,including but not limited to: (1) large customer management services, network administrationservices, network management services and head office human resources services provided by CNCChina to Netcom Group; (2) business support center services provided by either Party to another andhosting services provided by CNC China to Netcom Group in relation to the services stated in items(1) and (2) of this section; (3) premises provided by Netcom Group to CNC China and other servicessharing listed by the head office.3 LARGE BUSINESS CUSTOMERS SERVICES3.1 CNC China shall be responsible for provisions of one-stop domestic and international servicesfor large business customers to Netcom Group, details as follows:
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(1) establishing and optimizing service system for marketing over large business customer, beingresponsible for managing, organizing and coordinating marketing process for large businesscustomer, including collection of customer information, customer relationship management andcustomer demands investigation and analysis, etc;(2) bidding competition in Netcom Group’s key networking project, including business consultationon networking technologies, design of networking plan, bidding, negotiation of networkingcontracts, review and conclusion of contracts, etc; supporting bidding competition led by NetcomGroup subsidiaries;(3) stipulating management measures for project implementation and related service rules formarketing over large business customer for Netcom Group; providing complete tracking, managementand coordination services for inter-provincial digital and data lines; processing inter-districtbusiness for large business customer [over income and cost management], [emergency fund management]and business contract management;(4) bearing of Netcom Group’s large business customer marketing expenses, bidding marketingexpenses and partial daily expenses;(5) provision of technical support in nationwide networking projects, executive public relationsand policy support;(6) product development for large business customer and market research;(7) settlement and collection/payment;3.2 Obligation of Netcom GroupNetcom Group is obliged to assist CNC China in providing end-to-end services to large businesscustomers.3.3 Obligation of CNC ChinaCNC China shall provide customers with services of the quality in compliance with the customerservice quality standards agreed by both Parties.4 NETWORK ADMINISTRATION SERVICES4.1 The network administration services provided by CNC China to Netcom Group includes:(1) maintenance management, version management, data deployment management and operation qualitymanagement of transmission network, telephony network (including international network andintelligent network), data network (including DDN, ATM/FR and IP) and various support network;monitoring the operation of Level I trunk network, instructing daily circuit, route and flowscheduling of inter-provincial long distance network, processing Netcom Group’s reports andtroubleshooting;(2) resource management, end-to-end scheduling management and network routing management oftransmission network, telephony network, data network and various support network, and resourcesdistribution, equipment connection, networking and development of network reconstruction plans fordistance Level I trunk network;(3) providing periodical, or upon required by Netcom Group, network operation analysis andresource utility report of transmission network, telephony network, data network and varioussupport network;
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(4) maintenance of the following system hardware/software and data of Netcom Group: telephonynetwork administration system, data network administration system, transmission networkadministration system, signaling network/synchronous network/DCN network administration system,network resource management system, administration website and maintenance website.4.2 Obligations of Netcom Group(1) Netcom Group should assist CNC China in network operation administration in accordance withnetwork administration regulations.(2) Netcom Group should ask services from CNC China in a planned manner, such as resourcesscheduling, optic fiber and circuit connection, etc.(3) Netcom Group should immediately provide CNC China with the network change plans and failureswithin the province Netcom Group located in.4.3 Obligations of CNC China(1) CNC China should ensure that the network service quality is better than the relevantstandards set by the Ministry of Information Industry and resource utility rate should achieve thetarget agreed by both Parties. The target will be stipulated in separate document.(2) CNC China should be available 24 hours a day and 7 days a week (24 x 7 hours) to insure realtime monitor network operation and process failure complaints.(3) CNC China should respond to Netcom Group’s general complaints and service requests within 5working days. The serious malfunctions should be resolved in the timeframe as stipulated by theMinistry of Information Industry.(4) CNC China should ensure a network utility rate of 99.9%.5 HEAD OFFICE HUMAN RESOURCES SERVICES5.1 CNC China should provide to Netcom Group such human resources services as sharing head officeadministrative staff and operation management staff and hosting services regarding business,financial affaires and personnel.6. BUSINESS SUPPORT CENTER SERVICES6.1 CNC China should provide the following business support center services to Netcom Group:(1) collecting, pricing and monthly billing of international telecommunications business data andsettlement with overseas providers;(2) collection and collection of roam data for overall network businesses, including but notlimited to intelligent network (such as 300 and 800), IP card and PHS short messages, etc andinter-provincial roam billing;(3) settlement of overall network with other domestic providers or settlement entities;(4) processing internal-network settlement;
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(5) settlement between Netcom Group’s provincial branches and other national telecom serviceproviders commissioned by Netcom Group;(6) providing relevant organizations of Netcom Group with service data statistics report;(7) responsible for the billing operations of VoIP and 167 services of former Jitong NetworkCommunications Stock Company Limited.6.2 The business support center services offered by Netcom Group to CNC China include:(1) Undertaking the production and distribution of various phone cards and IC cards (hereinafterreferred to as “telecommunication card”) over Netcom Group’s backbone intelligent networks,including identification, assessment and management of qualifications of card providers and relatedraw material providers; responsible for inviting card providers to tender, and entering intotelecommunication card procurement framework agreement; responsible for production data generation,encrypted data transmission, key production, and quality and security management oftelecommunication card, as well as supervising implementation of agreement between card providerand provincial subsidiary; responsible for planning out annual theme scheme of telecommunicationcard, and administering design and review of contributions; responsible for directing relatedprovincial subsidiaries in ordering and manufacturing telecommunication cards according to theannual theme scheme of telecommunication card; responsible for the conclusion, implementation ofcoded cards agreement, and the production thereof thereafter;(2) Responsible for management of telecommunication card services, including the development ofregulations on the production and the graphics and context design of telecommunication card;responsible for gathering business statistics of various cards and performing operational analysis;6.3 Obligations of both Parties(1) CNC China shall complete all international settlement, inter-networks settlement andinter-provincial settlement timely and exactly in accordance with rules enacted by the Ministry ofInformation Industry of State Council and inform Netcom Group as required.(2) Netcom Group shall complete the design and production of cards printed with nominal valuewithout falling short of the agreed time-limit, quantity and quality requirement.(3) Netcom Group shall timely accomplish other business demands by CNC China according to theactual status of business system and network capacity.7. OTHER SHARING SERVICES LISTED BY THE HEAD OFFICENetcom Group will provide CNC China with other sharing services listed by the head office, such asadvertising, promotion, business hospitality, maintenance and property management etc.8. USE OF PREMISES8.1 Purpose of Premises(1) Netcom Group agrees to provide its office building (including air conditioner, power supply,electronic equipments and other related facilities etc contained therein.) located at 156Fuxingmennei Avenue, Xi Cheng District, Beijing to CNC China for its use in accordance to therequirement of CNC China.(2) CNC China shall use above-mentioned premises as its primary office building.
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8.2 Warranties and UndertakingsNetcom Group undertakes that it has the right to provide the premises mentioned above (includingair conditioner, power supply, electronic equipments and other related facilities etc containedtherein) to CNC China for its use. Netcom Group agrees to assume and compensate all losses of CNCChina due to any failure or damage to its right under this Agreement as a result of any disputeagainst the ownership and/or use right of Party to such properties from any third party in any caseand for any reason. Netcom Group undertakes to provide CNC China’s auditors with accounting reportsof connected transactions of Netcom Group and connected persons.9 COST ALLOCATION FOR SHARED SERVICE9.1 Both Parties agree that: the costs incurred by the large customer management services,network management services, head office human resource services provided by CNC China to NetcomGroup; the business support center service provided by both Parties to each other and the siteprovided by Netcom Group to CNC China as well as other shared services listed by the head officeshould be allocated in proportion to the income of each Party (the income of Netcom Group shouldnot include the income of its overseas subsidiaries and the Listed Company. The specific allocationproportion will be determined by the income listed in the financial statements submitted by oneParty to the other Party through consultation and shall be adjusted annually considering the totalassets of both Party). CNC China and Netcom Group shall be responsible for the specific costallocation.10 SHARING OF INCOME SETTLEMENT BETWEEN INTERNET EXCHANGE CENTER NETWORKS10.1 Both Parties agree that: income settlement paid to Netcom Group by each relevant networkoperator for its connection to Netcom Group’s internet backbone network in accordance with therelevant regulations provided by telecommunication authorities and access fees paid monthly byNetcom Group to the National Internet Exchange Center should be allocated in proportion to theincome of each Party (the income of Netcom Group should not include the income of its overseassubsidiaries and the Listed Company. The specific allocation proportion will be determined by theincome listed in the financial statements submitted by one Party to the other Party throughconsultation and shall be adjusted annually considering the total assets of both Party). CNC Chinaand Netcom Group shall be responsible for the specific income sharing.11 REPRESENTATION, WARRANTIES AND UNDERTAKINGS11.1 Both Parties hereto have made the following statements, commitments and undertakes to eachother:(1) it has the full right and authority to sign this Agreement and its appendixes (including butnot limited to obtaining approvals, consents and permissions from relevant governmentalauthorities);(2) any terms of this Agreement and its appendixes are not in violation of the regulatorydocuments of each Party and the laws and regulations 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 laws and regulations of the PRC and the terms of this Agreement.12 FORCE MAJEURE12.1 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.
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However, in the event of such an incident, the affected Party shall inform the other Party bywritten notice within fifteen (15) days after the said incident and provide relevant proof andevidence to the other Party. At the same time, the affected Party shall use its best endeavors tominimize the damage caused by the Force Majeure event. The affected Party or both Parties shallresume its obligations under this Agreement within a reasonable time once the Force Majeure eventhas ended.12.2 Force Majeure in this Agreement means all objective situations that are unforeseeable,unavoidable and that cannot be overcome.13 CONFIDENTIALITY13.1 Unless with written approval by the other Party, neither Party can announce nor supply orreveal to any third party any information regarding this Agreement or the business information ofthe other Party, with the exception of requests by the legal or governmental departments or anyother relevant securities regulatory authorities or for the purpose of the Listing Company seekinglisting or retaining listing.14 TRANSFER14.1 Without prior written consent from another Party, neither Party shall transfer any rights orobligations under this Agreement15 NON-WAIVER15.1 Unless otherwise specified by law, the failure or delay of exercising the right, power orprivilege as endowed by this Agreement on the part of any Party cannot be deemed as the waiver ofsuch rights, power or privileges. Besides, the partial exercise of such rights, power or privilegesshould not hinder the exercise of such rights, power or privileges of this Party in the future.16 NOTICE16.1 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 Party in writing from time to time.16.2 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; on the date ofreturn receipt if delivered by registered mail; and at the time of transmission if delivered byfacsimile.17 GOVERNING LAW17.1 This Agreement is governed by and shall be construed and executed in accordance with laws ofthe PRC.18 DISPUTE RESOLUTION18.1 In 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.19 EFFECTIVE DATE AND MISCELLANEOUS
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19.1 This 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.13.2 Subject to compliance with regulatory requirements in respect of the Listed Company or relatedtransactions and upon the agreement of both Parties, both Parties can amend this Agreement or enterinto supplementary 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.13.3 This Agreement is severable, that is, if any provision of this Agreement is held to be illegalor unenforceable at any time, the effectiveness and performance of other provisions of thisAgreement shall not be affected.13.4 This Agreement is made into two (2) duplicate originals. Each Party holds one (1) copy, andeach copy shall have the same legal binding effect.**Signature Page:****CHINA NETWORK COMMUNICATIONS GROUP CORPORATION (Company Seal)**     By:  /s/ Zuo Xunsheng    Legal representative or Authorized representative  **CHINA NETCOM (GROUP) COMPANY LIMITED (Company Seal)**     By:  /s/ Zuo Xunsheng    Legal representative or Authorized representative       
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