**Exhibit 4.20**

 

**20 November 2003**

 

 

**UNICOMNEW HORIZONTELECOMMUNICATIONS CORPORATION LIMITED**

 

 

**CHINAUNITED TELECOMMUNICATIONS CORPORATION LIMITED**

 

 

**CHINAUNITED TELECOMMUNICATIONS CORPORATION**

 

 

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**Network Capacity Lease Agreementfor****Shanxi, Hunan, Hainan, Yunnan, Gansu and Qinghaiprovinces and Inner Mongolia, Ningxia Hui and Xizang****autonomous regions**

 

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**CONTENTS**

 
| **Clause**                                                   |   |
|--------------------------------------------------------------|--------|
|                                                         |   |
| Interpretation                                               |   |
|                                                         |   |
| Lease of Network Capacity                                    |   |
|                                                         |   |
| Conditions                                                   |   |
|                                                         |   |
| Term and Capacity                                            |   |
|                                                         |   |
| Lease  fee                                                   |   |
|                                                         |   |
| Payment                                                      |   |
|                                                         |   |
| Procurement  and Construction of the Network                 |   |
|                                                         |   |
| Acceptance and  Testing of the Network                       |   |
|                                                         |   |
| Operation,  Management and Revenue                           |   |
|                                                         |   |
| Risk  and Title                                              |   |
|                                                         |   |
| Responsibilities of the  Parties                             |   |
|                                                         |   |
| Representations and  Warranties                              |   |
|                                                         |   |
| Purchase Option                                              |   |
|                                                         |   |
| Insurance                                                    |   |
|                                                         |   |
| Network Maintenance                                          |   |
|                                                         |   |
| Guarantee and Indemnity                                      |   |
|                                                         |   |
| Confidentiality                                              |   |
|                                                         |   |
| Force  Majeure                                               |   |
|                                                         |   |
| Termination                                                  |   |
|                                                         |   |
| Notices                                                      |   |
|                                                         |   |
| Assignment and  Sub-Contracting                              |   |
|                                                         |   |
| Severability                                                 |   |
|                                                         |   |
| Further assurance                                            |   |
|                                                         |   |
| Costs                                                        |   |
|                                                         |   |
| Waivers and Variations                                       |   |
|                                                         |   |
| Entire Agreement                                             |   |
|                                                         |   |
| Governing Law;  Settlement of Disputes                       |   |
|                                                         |   |
| Language                                                     |   |
|                                                         |   |
| SCHEDULE 1                                                   |   |
| APPENDIX 1                                                   |   |
| Prospective  Cellular Connected Transactions of the Lessee   |   |
|                                                         |   |
| APPENDIX 2                                                   |   |
| Prospective Cellular  Connected Transactions of China Unicom |   |

 

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**THIS AGREEMENT** is made on 20 November 2003

 

**BETWEEN:**

 

(1)           **UNICOM NEW HORIZONTELECOMMUNICATIONS CORPORATION LIMITED**, a limited liability company incorporatedunder the laws of the PRC whose registered office is at 6th Floor,Tower 3, Henderson Centre, 18 Jianguomen Nei Dajie, Beijing, the PRC (***Lessor***);

 

(2)           **CHINA UNITEDTELECOMMUNICATIONS CORPORATION LIMITED**, a limited liability company incorporatedunder the laws of the PRC whose office is at 9th Floor, 133 BeiDajie Jia, Xidan, Xi Cheng District, Beijing, the PRC (***Lessee***); and

 

(3)           **CHINA UNITEDTELECOMMUNICATIONS CORPORATION**, a company incorporated under the laws of the PRCwhose registered office is at No. 15, Yangfangdian Road, Haidian District,Beijing, the PRC (***Unicom Group***).

 

**WHEREAS**:

 

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

 

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

 

(C)           Construction of the second phase of the Network wascompleted in the first half of 2003. After completion of the initial acceptance procedures of the Network,the Lessor entered 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 acquirefrom it the entire registered capital of the Operating Entity.

 

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

 

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

 

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

 

**IT IS AGREED** as follows:

 

**INTERPRETATION**

 

**Definitions**

 

1.1           In this Agreement (including the recitals) thefollowing words and expressions have the following respective meanings unlessthe context otherwise requires:

 

***Acquisition Agreement***means the Conditional Sale and Purchase Agreementrelating to the entired issued capital of Unicom New World (BVI) Limitedentered into between Unicom BVI and China Unicom on 20 November 2003;

 

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

 

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

 

***Agreement***meansthis agreement, including Schedule 1 to this Agreement;

 

***Associates*** has the meaning given to that term in the ListingRules;

 

***Business Day*** means any day on which banks in the PRC are open forthe transaction of normal banking business;

 

***Capacity*** means capacity on the Network, measured in terms oftotal number of Subscribers, including all Additional Capacity to be deliveredpursuant to clause 4.4;

 

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

 

***CDMA Business*** means the CDMA mobile telecommunications businessoperated by the Operating Entity in the Listed Service Areas utilising theNetwork;

 

***China Unicom*** means China Unicom Limited, a company incorporatedunder the Companies 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 andaccessories used or to be used in constructing the Network, where applicable,in accordance with the designs and specifications agreed between the Lessor andthe Lessee;

 

***Force Majeure Event***means in relation to the Lessee and theLessor, matters beyond the reasonable contemplation of that party, including,but not limited to, fire, lightning, explosion, war, flood, earthquake,typhoon, and other natural disasters, national emergency, civil disturbance,riot, terrorism, industrial disputes, weather of exceptional severity, bindingacts or omissions of any Government Entity;

 

***Government Entity*** means:

 

(a)                                  any national government,political subdivision 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 the above is a member or to whose jurisdictionany thereof is subject or in whose activities any of the above is aparticipant;

 

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

 

***Lease***means the lease of Capacity by the Lessor to theLessee pursuant to this Agreement;

 

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

 

***Lease Fee***meansthe amounts payable by the Lessee to the Lessor pursuant to clause 5.1;

 

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***Lessor Lien*** means any Security Interestfrom time to time created by or through the Lessor in connection with thefinancing of the Network construction;

 

***Listed Group***means China Unicom and its subsidiaries from time totime, including the Operating Entity being acquired;

 

***Listed Service Areas***means Shanxi, Hunan, Hainan,Yunnan, Gansu and Qinghai provinces and Inner Mongolia, Ningxia Hui and Xizang autonomous regions;

 

***Listing Rules*** means the Rules Governing the Listing of Securitieson The Stock Exchange of Hong Kong Limited;

 

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

 

***Network***means the CDMA mobile telecommunications network,infrastructure or Equipment, constructed or acquired by or on behalf of theLessor in the Listed Service Areas, including all additional CDMA networks,infrastructure and Equipment (whether they be comprised in the same Phase ofconstruction or otherwise) constructed or acquired after the date of thisAgreement in the Listed Service Areas;

 

***Network Construction Cost***in relation to each Phase of the Network,the total amount of all payments, costs, expenses and amounts paid or incurredby the Lessor that are directly attributable to the construction of that Phase,including construction, installation and Equipment procurement costs andexpenses, survey and design costs, investment in technology, software and otherintangible assets, insurance premiums and capitalised interest on loans inrespect of the construction period of that Phase, any taxes levied or paid inrespect of the procurement of Equipment and the construction of that Phase ofthe Network, including import taxes and customs duties and all costs incurredin relation to any network re-configuration, upgrade, enhancement or modificationsto the technology in respect of that Phase, all such payments, costs, expensesand amounts having been verified and confirmed by certified public accountantsin accordance with PRC accounting principles and standards as capital in natureand being able to satisfy the accounting definition of fixed assets of theLessor in its accounts;

 

***Operating Entity***means Unicom New World Telecommunications CorporationLimited;

 

***Phase*** means a fixed amount of constructed Capacity on theNetwork, as stated in clause 4.12 (in respect of Phase 1 or Phase 2) or agreedby the Lessor and Lessee pursuant to clause 4.13 (in respect of any AdditionalPhase);

 

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

 

***Prospective Cellular Connected Transactions of the Lessee***means those transactions effectedpursuant to the operating agreements in the agreed forms as listed in Appendix1;

 

***Prospective Cellular Connected Transactions of China Unicom***means those transactions effectedpursuant to the operating agreements in the agreed forms as listed in Appendix2;

 

***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 thefirst quarter commencing on the Lease Effective Date;

 

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

 

***Security Interest*** means any mortgage, charge, pledge, lien, encumbrance,assignment, hypothecation, right of set-off or any other agreement orarrangement having the effect of conferring security;

 

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

 

***Subscriber*** means a unit of capacity on the Network, as furtherdescribed in clauses 4.14 and 4.15;

 

***Subsidiary*** means any company:

 

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

 

(b)           of which another has direct or indirectcontrol or owns directly or indirectly more than 50 per cent. of the votingshare capital; and

 

***Term***meansthe Initial Term and all Additional Terms.

 

***Transfer Agreement***means the Transfer Agreement relating to thisAgreement entered into between the Lessee and the Operating Entity on the dateof this Agreement;

 

***Unicom BVI***means China Unicom (BVI) Limited, a companyincorporated in the British Virgin Islands and the immediate holding company ofChina Unicom; and

 

***Unicom BVI Acquisition Agreement***means the Conditional Sale and PurchaseAgreement relating to the entired issued capital of Unicom New World (BVI)Limited entered into by Unicom Group, Unicom Centenarian (BVI) Limited andUnicom BVI on 20 November 2003.

 

1.2           In this 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 all genders;

 

(c)           references to ***parties*** are to the parties to thisAgreement;

 

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

 

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

 

1.3           Schedule 1 to this Agreement forms part of thisAgreement.

 

**LEASEOF NETWORK CAPACITY**

 

2.1           Subject to satisfaction of the Conditions, the Lessoragrees to lease Capacity to the Lessee on the terms set out herein, with effectfrom such date as the Lessor and the Lessee may agree following fulfilment (orwaivers) of the Conditions (the ***Lease Effective Date***).

 

2.2           The Lessor agrees that, following the completion ofthe Transfer Agreement, the Operating Entity shall be permitted to use andoperate the Network on an exclusive basis to provide CDMA services, includingbasic voice services, mobile data services and value added mobile services,under applicable PRC laws and regulations, in the Listed Service Areas.

 

2.3           In consideration of the satisfactory performance bythe Lessor of its obligations under this Agreement, the Lessee shall pay theLease Fee in accordance with clause 5.

 

**CONDITIONS**

 

3.1           The Lease shall not be effective and binding on theparties unless the following conditions have been fulfilled:

 

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(a)           the passing of resolutions by theshareholders of the Lessee approving (i) the Unicom BVI Acquisition Agreementand (ii) the Prospective Cellular Connected Transactions of the Lessee at anextraordinary general meeting of the Lessee convened for such purpose;

 

(b)           the passing of resolutions by theshareholders (other than Unicom Group and its Associates, who shall abstainfrom voting) of China Unicom Limited approving (i) the Acquisition Agreementand (ii) the Prospective Cellular Connected Transactions of China Unicom at anextraordinary general meeting of China Unicom convened for such purpose; and

 

(c)           all other conditions precedent contained inthe Transfer Agreement having been fulfilled or waived.

 

3.2           In the event that the Conditions have not beensatisfied by 30 June 2004 or such later date as the parties may agree in writing,all rights, obligations and liabilities of each party hereto shall be of nofurther effect and no party shall have any claim against any other and thisAgreement shall be void and of no further effect.

 

**TERMAND CAPACITY**

 

**Term**

 

4.1           The Lessee shall initially lease Capacity for a periodof one year from the Lease Effective Date (the ***Initial Term***).

 

4.2           The Lease shall be renewable for further one yearperiods (each an ***AdditionalTerm***) at the option of the Lessee by giving not less than 180days’ prior written notice to the Lessor.

 

**InitialCapacity Commitment**

 

4.3           During the Initial Term, the Lessee shall lease thefollowing total amounts of Capacity:

 
| First Quarter  | -      | such Capacity as  is notified to the Lessor by not later than 15 December 2003                    |
|----------------|--------|---------------------------------------------------------------------------------------------------|
|           |   |                                                                                              |
| 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 Capacity commitment in respect ofthe Initial Term, subject to giving not less than 180 days’ prior writtennotice to the Lessor, the Lessee may lease such additional Capacity as it mayrequire during the Term (***AdditionalCapacity***).  Such noticeshall specify the total amount of Additional Capacity required, the date bywhich the Additional Capacity is required to be delivered, and otherrequirements and details in relation to the Additional Capacity.

 

4.5           Subject to clause 4.6, the Lessor shall ensure thatall Capacity which the Lessee has committed to lease or requested pursuant toclause 4.3 or clause 4.4 is supplied by the due date of delivery of theCapacity (the ***CapacityDelivery Date***) and otherwise in accordance with the notificationprovided by the Lessee under clause 4.4. In addition, the Lessor shall also usebest endeavours to provide all such further Capacity as the Lessee may fromtime to time request on less than 180 days’ notice, either by supplyingexisting surplus Capacity, or through additional or accelerated expansion ofthe Network in the Listed Service Areas or by other appropriate means.

 

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4.6           Unless otherwise agreed between the Lessor and theLessee, the Lessor shall not be obliged to deliver any Additional Capacity ifto do so would require the Lessor to expand the Network beyond Phase 2 (asdescribed in clause 4.12).  However, ifthe Lessor agrees to provide any such Additional Capacity, the provisions ofthis Agreement (including the determination of Network Construction Cost andthe Lease Fee) shall apply equally in relation to all such Additional Capacitywhich the Lessor has agreed to provide.

 

4.7           Subject to clause 4.6, if at any time any event occursor circumstances arise which may delay the delivery of any Capacity on thescheduled Capacity Delivery Date, then the Lessor shall, as soon as practicable(and in any event within five Business Days of the Lessor becoming aware of theevent or circumstances in question), notify the Lessee of that fact in writing.Such notification shall set out:

 

(a)           the nature of the event or circumstancesand whether they have arisen as a result of any of the causes set out in clause4.9;

 

(b)           a description of the steps, if any, whichthe Lessor has identified are necessary to rectify the matter and bring theCapacity into operational service on the relevant Capacity Delivery Date or assoon as practicable thereafter; and

 

(c)           the likely effect of the event orcircumstances on the achievability of the Capacity Delivery Date.

 

4.8           Following receipt by the Lessee of any notificationpursuant to clause 4.7, the Lessee and the Lessor shall discuss in good faith:

 

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

 

(b)           any proposed change to the relevant Capacity DeliveryDate.

 

4.9           Notwithstanding the foregoing, if any event orcircumstance notified by the Lessor to the Lessee under clause 4.7 is, orarises as a result of, one or more of the following:

 

(a)           a Force Majeure Event;

 

(b)           any material breach by the Lessee of anyof its material obligations under this Agreement which prevents the Lessor fromperforming the relevant obligation under this Agreement; or

 

(c)           compliance with any applicable law, themandatory requirements of any Government Entity or any other applicablestatutory regulations;

 

then, save to theextent 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 Lessor shallhave no liability to the extent the delay arises from such events, whetherunder clause 4.10 or otherwise, to provide any Delay Discount (as definedbelow), or pay any damages or other compensation to the Lessee as a result ofthe Capacity not being ready for service by the Capacity Delivery Date as aresult of such events and that Capacity Delivery Date shall be extended to theearliest practicable date on which the Lessee requires, and the Lessor 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 any Capacity is notready for operational service by the relevant Capacity Delivery Date, then theLessor 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 Delay Discountshall be credited against next Lease Fee payment to be made by the Lessee (or

 

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caused to be madeby the Lessee) to the Lessor.

 

**Reductionof Capacity**

 

4.11         The Lessee may not reduce the amount of Capacityleased by it hereunder during the Initial Term. However, subject to providingnot less than 180 days’ prior written notice to the Lessor, or with the priorwritten consent of the Lessor, the Lessee may reduce the amount of Capacityleased with effect from the commencement of any Additional Term, provided thatthe Lessee must lease all Capacity which it has requested or otherwisecommitted to lease for at least one year following the date of delivery orrenewal of the lease of such Capacity (as the case may be). Any reduction inthe total amount of leased Capacity shall be effected in reverse of the orderin which Capacity was originally delivered and leased hereunder, such thatCapacity last delivered prior to the request for reduction shall be reducedfirst.

 

**NetworkCapacity**

 

4.12         The Lessor represents to the Lessee that Phase 1 andPhase 2 of the Network has a combined total Capacity of approximately 4.5165million Subscribers.

 

4.13         Subject to clause 4.6, the Lessor and Lessee shall,based on the Lessee’s requests for Additional Capacity from time to time, agreethe total amount of Capacity to be constructed for each Additional Phase.

 

**SubscriberCapacity**

 

4.14         All Phase 1 and Phase 2 Capacity leased hereundershall be calculated based on a nominal value of Erlang per Subscriber duringpeak periods to be agreed between the Lessor and the Lessee for each localregion.

 

4.15         The parties may, in light of actual usage patterns andother relevant factors, agree to vary the nominal value per Subscriber inrespect of Capacity constructed during any Additional Phase.

 

**Spectrum**

 

4.16         The Lessor shall, based on the amount of all committedCapacity and any Additional Capacity requested under clause 4.4, provide orprocure that the Lessee is provided with all necessary spectrum for theoperation and expansion of the CDMA Business.

 

**NetworkUpgrade**

 

4.17         Unless otherwise agreed between the Lessor and theLessee, the Lessor shall not be obliged to re-configure, upgrade, enhance orotherwise modify the Network.  However,if the Lessor agrees to do so, clauses 4.4 to 4.10 and clause 7 shall apply *mutatis mutandis* in relation to all suchre-configurations, upgrades, enhancement and modifications which the Lessor hasagreed to provide.

 

**LEASEFEE**

 

5.1           The Lease Fee shall be determined so as to enable theLessor to recover the Network Construction Cost within seven years, togetherwith 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 applying the formula setout in Schedule 1, the current estimate of the Lease Fee per Subscriber for allPhase 1 Capacity and Phase 2 Capacity, subject to clause 5.3, is RMB56.4 perQuarter.

 

5.3           The Lessor and the Lessee shall procure that, as soonas reasonably practicable following final

 

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acceptance of eachPhase 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 Network Construction Costcalculated under clause 5.3 in respect of an Additional Phase differs from theNetwork Construction Cost calculated at the time of initial acceptance of suchAdditional Phase by more than 1.0%, the final Network Construction Cost shall besubstituted for the initial Network Construction Cost used in calculating theLease Fee by applying the formula contained in Schedule 1, and any adjustmentin such Lease Fee shall apply from the commencement of the applicable Term.  Subject to the foregoing, subsequentquarterly payments of the Lease Fee shall be increased or decreased asappropriate to reflect the adjustment to the Lease Fee pursuant to this clause5.4.

 

5.5           The Lease Fee in respect of each Additional Phase ofthe Network shall, subject to clauses 5.3 and 5.4, be calculated by applyingthe formula set out in Schedule 1 and agreed by the Lessor and the Lessee assoon as reasonably practicable following initial acceptance and delivery ofeach such Additional Phase and shall apply to all Capacity leased from thatPhase.

 

**PAYMENT**

 

6.1           Subject to clauses 6.2 and 7.3, the Lease Fee shall,based on the actual amount of Capacity (in terms of volume and number of days)leased by the Lessee during each Quarter, be paid (or caused to be paid)quarterly in arrears by the Lessee to the Lessor within 30 days following theend of each Quarter during the Term. The total Lease Fee payable by the Lessee in respect of a Quarter shallbe calculated by applying the formula set out in Schedule 1. If new Capacity isdelivered into service after the Lease Effective Date, all Lease Fees inrespect thereof will be payable commencing from the date such Capacity isdelivered 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 to the Lessee withintwo days following the end of each Quarter during the Term in respect of allCapacity leased during such Quarter. Such invoice shall contain details of all Capacity leased during therelevant Quarter, as well as the Lessor’s calculation, by applying the formulaset out in Schedule 1, of the total Lease Fee payable by the Lessee for suchQuarter.

 

6.3           Unless otherwise agreed in writing between the Lessorand the Lessee, all Lease Fee payments shall be made in Renminbi.

 

6.4           All sums payable to the Lessor under this Agreementshall be made in immediately available funds by electronic funds transfer tosuch account as the Lessor shall by not less than seven days’ prior writtennotice notify to the Lessee.

 

6.5           The Lessor may charge interest on any outstanding sumpayable to the Lessor hereunder from the due date to the date of receipt ofpayment in full by the Lessor, at the daily compound rate of 0.01%.

 

**PROCUREMENTAND CONSTRUCTION OF THE NETWORK**

 

7.1           The Lessor shall procure the Network and shall financethe procurement of all Equipment. Except for Phase 1 and Phase 2 of theNetwork, the Lessor shall invite the Lessee to participate in all negotiationswith Equipment suppliers, and the Lessee shall be entitled to approve allEquipment purchases and sign all Equipment purchase contracts.

 

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7.2           The Lessor shall ensure that the Network isconstructed in accordance with the detailed design standards, specificationsand timetable agreed in writing between the Lessor and Lessee.  Subject to clause 4.6, the Lessor and Lesseeshall, within 60 days following the issue by the Lessee of a request forAdditional Capacity under clause 4.4, agree in writing the detailed designstandards, specifications and construction timetable for any required expansionof the Network to meet such Additional Capacity requirements.

 

7.3           Subject to complying with its obligations under clause7.2, the Lessor shall use its best endeavours to ensure that the Equipment isprocured and the Network constructed for the lowest achievable cost, and shallcomply with any requirement of the Lessee that the purchase of the Equipment beundertaken in a manner which is tax efficient for the Lessee.

 

**ACCEPTANCEAND TESTING OF THE NETWORK**

 

8.1           In relation to each Additional Phase of the Network,authorised representatives of the Lessor and the Lessee shall attend theinitial acceptance and the final acceptance arranged by the Equipment suppliersin accordance with the Equipment supply and installation services contracts,which shall incorporate the acceptance regulations of the Lessor. Representativesof the Lessor and the Lessee shall effect initial and final acceptance of eachAdditional Phase by execution and delivery to the Equipment suppliers of aninitial acceptance document and a final acceptance document, respectively.  The Lessee may elect to be represented oraccompanied by authorised representatives of the Operating Entity.

 

**OPERATION**, MANAGEMENT AND REVENUE

 

9.1           On the day of signing by the authorisedrepresentatives of the Lessor and the Lessee of an initial acceptance documentrelating to a particular Additional Phase of the Network, that Phase shall beformally delivered to the Operating Entity for operation, management andmaintenance.

 

9.2           All operating revenue, including airtime charges,monthly subscription fees, interconnection charges, income from sales of UIMcards and handsets and other income generated from or in connection with theoperation of the Network shall be collected by and belong to the OperatingEntity.

 

9.3           All costs of operating and managing the Network shallbe borne by the Operating Entity.

 

**RISKAND TITLE**

 

10.1         The parties agree that title to all parts of theNetwork procured, acquired or otherwise funded by the Lessor will remain vestedin the Lessor until the Network is transferred to the Lessee pursuant to clause13.

 

10.2         As between the Lessor and the Lessee, during theperiod of construction of each Additional Phase of the Network, the Lessorshall 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 necessarygovernment and other approvals, authorisations, licences and other documentsnecessary or desirable for the construction, operation, maintenance andupgrading of the Network;

 

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(b)           to obtain all PRC approvals and permits forthe import of all equipment and technology, other supplies and installationservices required for the construction and operation of the Network, and to usebest endeavours to obtain and maintain favourable customs duties;

 

(c)           to obtain all necessary funding for theconstruction and expansion of the Network in accordance with the Lessee’srequirements;

 

(d)           to ensure that each Additional Phase of theNetwork is constructed in accordance with construction timetable agreed by theLessor and Lessee;

 

(e)           to handle all arrangements in relation tothe importation of the Equipment;

 

(f)            to ensure that the Capacity leased isdelivered to the Lessee before the relevant Capacity Delivery Date;

 

(g)           to use best endeavours to ensure that theNetwork is constructed for the lowest cost achievable based on the technicalspecifications and subject to prevailing economic circumstances, provided thatthe Network quality standards shall meet the standards agreed by the Lessor andLessee;

 

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

 

(i)            to make available to the Lessee during theTerm the benefit of all manufacturer’s warranties in relation to the Equipmentand other product support;

 

(j)            unless agreed in writing with the Lesseeand Unicom Group and save as contemplated by the Transfer Agreement, not tolease or sell any part of the Network to any third party, or permit any thirdparty to use or operate the Network in any manner to provide telecommunicationsservices;

 

(k)           without the prior written consent of theLessee, not to use or operate the Network in any manner to providetelecommunications services, or to compete in any other manner with the ListedGroup; and

 

(l)            in the event of a breakdown of any part ofthe Network, to provide the Lessee all necessary cooperation, including liasingwith Equipment suppliers and coordinating relevant parties.

 

**Lessee’sResponsibilities**

 

11.2         Withoutlimiting the Lessee’s other obligations hereunder, the Lessee’sresponsibilities are:

 

(a)           to promptly notify the Lessor of any eventof loss or any event which is likely to result in an insurance notificationclaim;

 

(b)           to provide the Lessor with such informationconcerning the condition, use and operation of the Network as the Lessor mayfrom time to time reasonably request;

 

(c)           to permit the Lessor’s representatives toinspect the Network during normal working hours, upon reasonable notice;

 

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

 

(e)           to permit the Lessor to use such of itspremises as are reasonably required by the Lessor for the purpose of complyingwith its obligations under this Agreement;

 

----

 

(f)            to refrain from subleasing any part of theNetwork or assign its rights under the lease to any party other than theOperating Entity or another member of the Listed Group; and

 

(g)           in accordance with market requirements andsubscriber demand, to use all reasonable efforts to promote and advertise theCDMA Business in the Listed Service Areas.

 

**UnicomGroup’s Responsibilities**

 

11.3         Withoutlimiting Unicom Group’s other obligations hereunder, Unicom Group’sresponsibilities are:

 

(a)           to obtain and maintain all necessarygovernment and other approvals, authorisations, licences and other documentsnecessary or desirable for the construction, operation, maintenance andupgrading of the Network; and

 

(b)           to establish and maintain roaming andinterconnection arrangements with other telecommunications operators.

 

**REPRESENTATIONSAND WARRANTIES**

 

**Representationsand Warranties of the Lessee**

 

12.1         The Lessee represents and warrants to the Lessor that:

 

(a)           **Status**:  It is a limited liability company duly incorporated and validlyexisting under the laws of the PRC and has the corporate power to own itsassets and carry on its business as it is being conducted;

 

(b)           **Power and authority**: It has the corporate power to enter intoand perform, and has taken all necessary corporate action to authorise theentry into, performance and delivery of, this Agreement and the transactionscontemplated by this Agreement;

 

(c)           **Legal validity**: This Agreement has been dulyauthorised, 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 and performanceby the Lessee of, and the transactions contemplated by, this Agreement do notand will not (i) conflict with the constitutional documents of the Lessee; or(ii) conflict with or result in default under any document which is bindingupon the Lessee or any of its assets nor result in the creation of any SecurityInterest over any of its assets;

 

(e)           **Authorisation**: All authorisations, consents,registrations and notifications required by the Lessee in connection with theentry into, performance, validity and enforceability of, this Agreement and thetransactions contemplated by this Agreement, have been obtained or effected (asappropriate) and are in full force and effect;

 

(f)            **No Immunity**: The Lessee is subject to civilcommercial law with respect to its obligations under this Agreement; andneither Lessee nor any of its assets is entitled to any right of immunity, andthe entry into and performance of this Agreement by the Lessee constituteprivate and commercial acts; and

 

(g)           **Litigation**: No litigation, arbitration oradministrative proceedings are pending or threatened against Lessee which, ifadversely determined, would have a material adverse effect upon the Lessee’sfinancial condition or business or its ability to perform its obligations underthis Agreement.

 

----

 

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

 

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

 

(a)           **Status**: The Lessor is a company dulyincorporated and validly existing under the laws of the PRC and has thecorporate power to own its assets and carry on its business as it is now beingconducted;

 

(b)           **Power and authority**: The Lessor has the corporatepower to enter into and perform, and has taken all necessary corporate actionto authorise the entry into, performance and delivery of, this Agreement andthe transactions contemplated by this Agreement;

 

(c)           **Legal validity**: This Agreement constitutes theLessor’s legal, valid and binding obligation;

 

(d)           **Non-conflict**: The entry into and performanceby the Lessor of, and the transactions contemplated by, this Agreement do notand will not conflict with: (i) any laws binding on the Lessor; or (ii) theconstitutional documents of the Lessor; or (iii) any document which is bindingupon the Lessor or any of its assets;

 

(e)           **Authorisation**: So far as concerns theobligations 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 the Network by the Operating Entity in accordance withthis Agreement will not cause the Operating Entity to breach any law,regulation, direction, permission, waiver, consent, registration, approval orother authorisation; and

 

(g)           **No Immunity**: The Lessor is subject to civil commerciallaw with respect to its obligations under this Agreement; and neither theLessor nor any of its assets is entitled to any right of immunity, and theentry into and performance of this Agreement by the Lessor constitute privateand commercial acts.

 

**Representationsand Warranties of Unicom Group**

 

12.3         Unicom Group also represents and warrants to theLessee that:

 

(a)           **Status**: Unicom Group is a company dulyincorporated and validly existing under the laws of the PRC and has thecorporate power to own its assets and carry on its business as it is now beingconducted;

 

(b)           **Power and authority**: Unicom Group has the corporatepower to enter into and perform, and has taken all necessary corporate actionto authorise the entry into, performance and delivery of, this Agreement andthe transactions contemplated by this Agreement;

 

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

 

(d)           **Non-conflict**: The entry into and performanceby Unicom Group of, and the transactions contemplated by, this Agreement do notand will not conflict with: (i) any laws binding on Unicom Group; or (ii) theconstitutional documents of Unicom Group; or (iii) any document which isbinding upon Unicom Group or any of its assets;

 

(e)           **Authorisation**: So far as concerns theobligations of Unicom Group, 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 Unicom Group have been obtained or effected(as appropriate) and are in full force and effect;

 

----

 

(f)            **CDMA Licence**: Unicom Group’s CDMA licence (Licence No.[2001] Yi Zi No. 01) issued by the MII dated 1 August 2001 is in full force andeffect and there are no circumstances which indicate that such licence will oris likely to be revoked, in whole or in part. In accordance with applicable PRClaws and regulations, Unicom Group is permitted to authorise the Lessee toprovide CDMA mobile telecommunications services by using the Network;

 

(g)           **No Immunity**: Unicom Group is subject tocivil commercial law with respect to its obligations under this Agreement; andneither Unicom Group nor any of its assets is entitled to any right ofimmunity, and the entry into and performance of this Agreement by Unicom Groupconstitute private and commercial acts.

 

**PURCHASEOPTION**

 

13.1         The Lessor hereby grants the Lessee an option topurchase the Network (the ***PurchaseOption***).

 

13.2         The Purchase Option may be exercised at any timeduring the Term and within one year thereafter by the Lessee giving notice inwriting (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 the Lessee under thisclause 13 shall be carried out in accordance with the relevant provisions ofthe Shanghai Stock Exchange listing rules and all applicable PRC laws andregulations (or the Listing Rules and all applicable Hong Kong laws aftercompletion of the Transfer Agreement).

 

13.4         As soon as practicable following the issue of a PurchaseOption Notice, the Lessor and Lessee shall negotiate in good faith and executean agreement in relation to the sale and purchase of the Network.  The agreement shall reflect the termsreferred to in this clause 13, as well as such other terms as the Lessor andthe Lessee shall agree. In the agreement, the Lessor shall provide suchrepresentations and warranties as are reasonably requested by the Lessee inrelation to the Network and other related matters.

 

13.5         The Network shall be sold free from all SecurityInterests and with all rights attached to it at the date of completion of thesale and purchase of the Network.

 

**INSURANCE**

 

14.1         During the construction period of each AdditionalPhase of the Network, the Lessor shall fully and continuously maintaininsurance over the Network. The relevant insurance premiums shall be paid bythe 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 has been constructedand made available to the Lessee, insurance of that Phase of the Network shallbe effected and maintained fully and continuously valid by or on behalf of theLessee on such terms and with such qualified insurance company as agreed by theLessor and the Lessee.  The relevantinsurance premiums, which form part of the cost of operating the Network, shallbe paid by or on behalf of the Lessee. The Lessor and the Lessee shall be named as joint beneficiaries underall such insurance policies.

 

14.3         The proceeds of any insurance taken out over theNetwork shall be applied in repairing or

 

----

 

replacing the partof the Network 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 andform part of the operating cost of the Network in case the damage or lossoccurs during 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 which can be taken torepair or replace the Network so as to overcome, rectify and minimise such lossor damage.

 

**NETWORKMAINTENANCE**

 

15.1         The Lessee shall at all times during the Term:

 

(a)           take all necessary or desirable steps tosafeguard all parts of the Network and keep the Network in good repair andcondition, subject to fair wear and tear; and

 

(b)           maintain the Network in accordance with thegenerally accepted best practice of other mobile telecommunications operatorsin the PRC.

 

15.2         The Lessee shall bear all costs, fees and expenses incomplying with its obligations under clause 15.1.

 

15.3         The Lessee shall permit the Lessor’s representativesto inspect the Network during normal business hours, upon reasonable notice,for the purpose of ascertaining whether the Lessee is in compliance with itsobligations under clause 15.1.

 

**GUARANTEEAND INDEMNITY**

 

16.1         In consideration of the Lessee entering into thisAgreement, Unicom Group unconditionally and irrevocably guarantees the due andpunctual performance by the Lessor of its obligations under this Agreement. Ifand each time the Lessor fails for any reason to perform or observe itsobligations under this Agreement, Unicom Group shall forthwith upon demandunconditionally perform (or procure the performance of) the obligation inrelation 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 the Lessee on demandfor any loss or damage suffered by any member of the Listed Group as a resultof any defect in any of the Equipment or any loss or damage caused by anynegligence, default, act or omission of the Lessor or Unicom Group under thisAgreement or in connection with the Network. The aggregate liability of UnicomGroup for any claim shall not exceed the total amount of Lease Fee paymentsmade by the Lessee to the Lessor and the total Purchase Price paid by theLessee for the Network.

 

**CONFIDENTIALITY**

 

17.1         At all times during the Term, each party shall, andshall procure that their respective directors, officers, employees and agentsshall, keep confidential and shall not, without the prior written consent ofthe other parties, disclose to any third party this Agreement or any of theterms of this Agreement or any documents or materials supplied by or on behalfof either party in connection with this Agreement, save that any such partyshall be entitled upon giving notice to the other parties to make suchdisclosure:

 

(a)           in connection with any proceedings arisingout of or in connection with this Agreement to the extent that any party mayconsider necessary to protect its interests; or

 

(b)           if required to do so by an order of a courtof competent jurisdiction whether in pursuance of any procedure for discoveringdocuments or otherwise or pursuant to any law or any regulation of any stockexchange or securities regulatory authority; or

 

----

 

(c)           to its auditors or legal advisors or otherprofessional advisers; or

 

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

 

(e)           if required to do so by any applicable lawor in order for such party to comply with its obligations under this Agreement.

 

17.2         Nothing in clause 17.1 shall prevent the Lessee fromdisclosing information, documents or other materials in connection with theLease to the Operating Entity.

 

**FORCEMAJEURE**

 

18.1         If the Lessee or Lessor (the ***Affected Party***) isprevented, hindered or delayed from or in performing any of its obligationsunder this Agreement by a Force Majeure Event:

 

(a)           the Affected Party’s obligations under thisAgreement are suspended from notification of the event in accordance withclause 18.1(b) while the Force Majeure Event continues but only to the extentthat it is so prevented, hindered or delayed;

 

(b)           immediately after the occurrence of theForce Majeure Event the Affected Party shall promptly notify the other partiesin writing of the Force Majeure Event, the time and date on which the ForceMajeure Event started and the effects of the Force Majeure Event on its abilityto perform its obligations under this Agreement;

 

(c)           the Affected Party shall take allreasonable endeavours to mitigate the effects of the Force Majeure Event on theperformance of its obligations under this Agreement; and

 

(d)           immediately after the end of the ForceMajeure Event, the Affected Party shall notify the other parties in writingthat the Force Majeure Event has ended, the duration of the Force MajeureEvent, and shall resume performance of its obligations under this Agreement.

 

**TERMINATION**

 

19.1         The Lessee may terminate this Agreement by not lessthan 180 days’ prior written notice, such termination to take effect from theend of any Additional Term. The Lessor may not terminate this Agreement exceptin accordance with this clause 19.1 or clause 19.2.

 

19.2         Without prejudice to any other rights or remedies theymay have (either under this Agreement or at law), the Lessor or the Lessee mayterminate this Agreement if the other (or, in the case of the Lessee, UnicomGroup) commits any continuing or material breach of any of the provisions ofthis Agreement (save for any breach which is caused by the party seeking torely on it) and, in the case of such a breach which is capable of remedy, failsto remedy the same within 90 days after receipt of a written notice giving fullparticulars of the breach and requiring it to be remedied.

 

19.3         For the purpose of clause 19.2, a breach shall beconsidered capable of remedy if the party in breach can comply with theprovision in question in all respects other than as to the time of performance (providedthat time of performance is not of the essence).

 

19.4         The rights to terminate this Agreement given by thisclause 19 shall not prejudice any other right or remedy of any party inrespect of the breach concerned (if any) or any other breach.

 

19.5         Upon the termination of this Agreement for any reason,subject as otherwise provided in this Agreement and to any rights orobligations which have accrued prior to termination, no party shall have anyfurther obligation to the others under this Agreement.

 

19.6         Notwithstanding clause 19.1, this Agreement mayterminate 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 clear of allSecurity Interests (other than Lessor Liens);

 

(b)           all maintenance to the Network due forperformance during the Term shall have been completed in accordance with clause15, with all deferred maintenance items completed; and

 

(c)           all damage to the Network shall have beenpermanently repaired and certified in accordance with the requirements of therelevant Equipment manufacturer.

 

**NOTICES**

 

20.1         Any notice to be given pursuant to this Agreementshall be in writing and signed by (or on behalf of) the person giving it.  It shall be served by sending it by fax, ordelivering it by hand, or sending it by prepaid recorded delivery, specialdelivery or registered post, to the address or fax number set out in clause20.2 and in each case marked for the attention of the relevant party (or tosuch other address or fax number as shall have been duly notified in accordancewith this clause).  Any notice so servedby 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, at the timeof transmission; and

 

(c)           in the case of prepaid recorded delivery,special delivery or registered post, at 9 a.m. on the second Business Dayfollowing the date of posting

 

provided that ineach 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 to timein this clause are to local time in the country of the addressee.

 

20.2         The addresses and fax numbers of the parties for thepurpose of clause 20.1 are as follows:

 
| **Lessor**             |   |                                                                             |
|------------------------|--------|----------------------------------------------------------------------------------|
|                   |   |                                                                             |
| Address:               |   | 1227, 12th Floor, 133 Bei Dajie Jia,  Xidan, Xi Cheng District, Beijing, the PRC |
|                   |   |                                                                             |
| Fax:                   |   | +86 10 6611 0768                                                                 |
|                   |   |                                                                             |
| For the  attention of: |   | Zhang Yun Gao                                                                    |
|                   |   |                                                                             |
| **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:               |   | 1167, 11th  Floor, 133 Bei Dajie Jia, Xidan, Xi Cheng District,                  |

 

----

 
|                   |   | Beijing, the PRC |
|------------------------|--------|------------------|
|                   |   |             |
| Fax:                   |   | +86 10 6611 4366 |
|                   |   |             |
| For the  attention of: |   | Li Zhang Ting    |

 

20.3         A party may notify the other parties of a change toits name, relevant addressee, address or fax number for the purposes of thisclause 20, provided that such notice shall only be effective on:

 

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

 

(b)           if no date is specified or the datespecified is less than five Business Days after the date on which notice isgiven, the date following five Business Days after notice of any change hasbeen given.

 

**ASSIGNMENTAND SUB-CONTRACTING**

 

21.1         The rights or benefits under this Agreement may not beassigned (nor may any cause of action arising in connection with any of them beassigned) by the Lessor or Unicom Group or their respective successor in titlewithout the prior written consent the Lessee. Each of the Lessor and Unicom Group irrevocably agrees that the Lesseemay transfer or sub-contract any of its rights and obligations under thisAgreement to the Operating Entity or another member of the Listed Group.

 

21.2         The Lessor may, with the Lessee’s prior writtenconsent, sub-contract any of its obligations under this Agreement provided thatthe 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 is held to beinvalid or unenforceable, then such provision shall (so far as it is invalid orunenforceable) be given no effect and shall be deemed not to be included inthis Agreement but without invalidating any of the remaining provisions of thisAgreement.

 

**FURTHERASSURANCE**

 

23.1         Each party agrees to perform (or procure theperformance of) all further acts and things, and execute and deliver (orprocure the execution and delivery of) such further documents, as may berequired by law or as the other parties may reasonably require to implementand/or give effect to this Agreement and the transactions contemplated by it.

 

**COSTS**

 

24.1         Subject to clause 24.2, each of the parties shall payits own costs and expenses (including legal costs) incurred in connection withthe negotiation, preparation and implementation of this Agreement.

 

24.2         Any stamp duty or other duties payable in connectionwith this Agreement, and matters contemplated hereunder shall be borne by theLessor and the Lessee in equal shares.

 

**WAIVERSAND VARIATIONS**

 

25.1         No failure or delay on the part of any party inexercising any right, power or remedy hereunder shall operate as a waiverthereof nor shall any single or partial exercise of any right, power or remedypreclude any further exercise thereof or the exercise of any other right, poweror remedy. No waiver shall be effective unless expressed in writing signed foror on behalf of the party granting it.

 

----

 

25.2         No variation of this Agreement (or of any of thedocuments referred to in this Agreement) shall be valid unless it is in writingand 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 variation shall constitutea general waiver of any provisions of this Agreement, nor shall it affect anyrights, obligations or liabilities under or pursuant to this Agreement whichhave already accrued up to the date of variation, and the rights andobligations of the parties under or pursuant to this Agreement shall remain infull force and effect, except and only to the extent that they are so varied.

 

**ENTIREAGREEMENT**

 

26.1         This Agreement constitutes the entire agreementbetween the parties in respect of the subject matter of this Agreement.

 

**GOVERNINGLAW; SETTLEMENT OF DISPUTES**

 

27.1         This Agreement and the relationship between theparties shall be governed by, and interpreted in accordance with, PRC law.

 

27.2         The parties agree to use their best efforts to settleall disputes, controversies or conflicts arising from or in connection withthis Agreement through friendly negotiation and consultation.

 

27.3         Each of the parties agree that the courts of the PRCare to have exclusive jurisdiction to settle any disputes which may arise inconnection with this Agreement.

 

27.4         Each party agrees to waive and not to claim anyimmunity from any proceedings and legal actions and from all forms of executionto which it or its property is now or hereafter becomes entitled under the lawsof any jurisdiction.

 

27.5         During the arbitration or court proceedings, theparties shall continue to perform their respective obligations under thisAgreement except for the part in dispute which is being referred to arbitrationor court proceedings.

 

**LANGUAGE**

 

28.1         This Agreement shall be written in a Chinese versionand an English version in two originals each. If there exists any disputebetween the parties as to the interpretation of the two versions, then the twoversions shall be read in conjunction to determine the parties’ intention atthe time of signing. If the parties’ real intention still cannot be ascertainedby such reading, the Chinese version shall prevail.

 

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

 

----

 

SIGNED on behalfof **Unicom New HorizonTelecommunications Corporation Limited**

 

 
| By:    | /s/ Zhang Yungao                                     |   |
|--------|------------------------------------------------------|--------|
|   |                                                 |   |
| Name:  | Zhang Yungao                                         |   |
|   |                                                 |   |
| Title: | Legal  Representative

or Authorized  Representative |   |

 

 

SIGNED on behalfof **China UnitedTelecommunications Corporation Limited**

 

 
| By:    | /s/ Sun Qian                                         |   |
|--------|------------------------------------------------------|--------|
|   |                                                 |   |
| Name:  | Sun Qian                                             |   |
|   |                                                 |   |
| Title: | Legal  Representative

or Authorized  Representative |   |

 

 

SIGNED on behalfof **China UnitedTelecommunications Corporation**

 

 
| By:    | /s/ Wang  Jianzhou                                  |   |
|--------|-----------------------------------------------------|--------|
|   |                                                |   |
| Name:  | Wang Jianzhou                                       |   |
|   |                                                |   |
| Title: | Legal Representative

or Authorized  Representative |   |

 

----

 

##### **SCHEDULE 1**

#####  

**QuarterlyLease Fee Payment Calculation Formula**

 

The total quarterly LeaseFee payable in respect of any Phase of the Network shall be calculated asfollows:

 

 

Where:

 

Q = Quarterly Lease Feepayment

 

Pi = Lease Fee perSubscriber per Quarter in Phase i of the Network

 

Mij = Total Capacityleased during the Quarter in a particular Term j and constructed as part ofPhase i

 

dj = Number of days in aparticular Term j in a Quarter for which Capacity is leased

 

D = Total number of daysduring the Quarter

 

i = Natural numbersdenoting the Phase number of the Network

 

j = Natural numbersdenoting the Term in which the Capacity is leased

 

The quarterly Lease Feeper Subscriber for a particular Phase shall be calculated as follows:

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

 

Where:

 

Ci = Network ConstructionCost per Subscriber for Phase i

 

n = Number of Quartersduring seven years, being n = 4 x 7 = 28

 

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

 

In respect of Phase 1 andPhase 2, the recoupment period of seven years specified in clause 5.1shall be deemed to commence from 8 January 2002.

 

----

 

##### **APPENDIX 1**

#####  

###### **ProspectiveCellular Connected Transactions of the Lessee**

######  

1.             CDMA Network Capacity LeaseAgreement dated 20 November 2003 among Unicom New Horizon TelecommunicationsCompany Limited, Unicom Group and the A Share Company.

 

2.             Comprehensive ServicesAgreement dated 20 November 2003 between Unicom Group and the A Share Company.

 

----

 

##### **APPENDIX 2**

#####  

###### **ProspectiveCellular Connected****Transactions of China Unicom**

######  

1.             Transfer Agreement dated 20 November 2003between the A Share Company and the Target Company regarding the transfer ofrights and obligations under a CDMA network capacity lease agreement.

 

2.             Transfer Agreement dated 20 November 2003between the A Share Company and the Target Company regarding the transfer ofrights and obligations under a comprehensive services agreement.

 

----