**Exhibit 4.27**

 

**24 March 2005**

 

 

**UNICOM NEW HORIZON MOBILE TELECOMMUNICATIONS COMPANY LIMITEDandCHINA UNITED TELECOMMUNICATIONS CORPORATION LIMITEDandCHINA UNITED TELECOMMUNICATIONS CORPORATION**

 

 

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**NETWORK CAPACITY LEASEAGREEMENT**

 

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**CONTENTS**

 
| **CLAUSE**      | ** **                                                            |
|-----------------|-----------------------------------------------------------------------|
| ** **      | ** **                                                            | ** ** |
| 1.              | INTERPRETATION                                                        |   |
|            |                                                                  |   |
| 2.              | LEASE OF NETWORK CAPACITY                                             |   |
|            |                                                                  |   |
| 3.              | CONDITIONS                                                            |   |
|            |                                                                  |   |
| 4.              | TERM AND CAPACITY                                                     |   |
|            |                                                                  |   |
| 5.              | LEASE  FEE                                                            |   |
|            |                                                                  |   |
| 6.              | CALCULATION OF THE CDMA BUSINESS INCOME AND  PAYMENT OF THE LEASE FEE |   |
|            |                                                                  |   |
| 7.              | PROCUREMENT AND CONSTRUCTION OF THE NETWORK                           |   |
|            |                                                                  |   |
| 8.              | ACCEPTANCE AND TESTING OF THE NETWORK                                 |   |
|            |                                                                  |   |
| 9.              | OPERATION, MANAGEMENT AND REVENUE                                     |   |
|            |                                                                  |   |
| 10.             | RISK AND TITLE                                                        |   |
|            |                                                                  |   |
| 11.             | RESPONSIBILITIES OF THE PARTIES                                       |   |
|            |                                                                  |   |
| 12.             | REPRESENTATIONS AND WARRANTIES                                        |   |
|            |                                                                  |   |
| 13.             | PURCHASE OPTION                                                       |   |
|            |                                                                  |   |
| 14.             | INSURANCE                                                             |   |
|            |                                                                  |   |
| 15.             | NETWORK MAINTENANCE                                                   |   |
|            |                                                                  |   |
| 16.             | GUARANTEE AND INDEMNITY                                               |   |
|            |                                                                  |   |
| 17.             | CONFIDENTIALITY                                                       |   |
|            |                                                                  |   |
| 18.             | FORCE MAJEURE                                                         |   |
|            |                                                                  |   |
| 19.             | TERMINATION                                                           |   |
|            |                                                                  |   |
| 20.             | NOTICES                                                               |   |
|            |                                                                  |   |
| 21.             | ASSIGNMENT AND SUB-CONTRACTING                                        |   |
|            |                                                                  |   |
| 22.             | SEVERABILITY                                                          |   |
|            |                                                                  |   |
| 23.             | FURTHER ASSURANCE                                                     |   |
|            |                                                                  |   |
| 24.             | COSTS                                                                 |   |
|            |                                                                  |   |
| 25.             | WAIVERS AND VARIATIONS                                                |   |
|            |                                                                  |   |
| 26.             | ENTIRE AGREEMENT                                                      |   |
|            |                                                                  |   |
| 27.             | SETTLEMENT OF DISPUTES                                                |   |
|            |                                                                  |   |
| 28.             | LANGUAGE                                                              |   |
|            |                                                                  |   |
| SCHEDULE 1 |                                                                  |

 

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**THISAGREEMENT**is made on 24 March 2005

 

**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 40th Floor, Jin Mao Tower, 88 CenturyBoulevard, Shanghai, the PRC (***Lessee***, and upon execution of the TransferAgreement, as defined in clause 1.1 below, the Lessee shall be changed to theNew Operating Entity as defined in recital (G) below); and

 

(3)                                  **CHINA UNITED TELECOMMUNICATIONS CORPORATION**, acompany incorporated under the laws of the PRC whose registered office is at Room 615, Tower 3, Henderson Centre, 18 Jianguomen Nei Dajie,Beijing, the PRC (***Unicom Group***).

 

**WHEREAS**:

 

(A)                              Unicom Group has been approved bythe PRC Government to undertake the construction and operation of the unified CDMA network within thePRC.

 

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

 

(C)                                The Lessor has completed the firstand second Phases of construction and is in the process of completing the thirdPhase of construction.

 

(D)                               China Unicom Corporation Limited (***CUCL***), Unicom Groupand the Lessor entered into a network capacity lease agreement on 22 November 2001(the ***Twelve Provincesand Municipalities CDMA Lease Agreement***) whereby CUCL agreed tolease from the Lessor, and the Lessor also agreed to lease to CUCL, the Capacity onterms and conditions set out in the Twelve Provinces and Municipalities CDMALease Agreement for the purposes of providing CDMA mobile telecommunicationservices in the Twelve Provinces and Municipalities.  Pursuant to the Twelve Provinces andMunicipalities CDMA Lease Agreement, Unicom Group agreed to guarantee theperformance by the Lessor of its obligations under the Twelve Provinces andMunicipalities CDMA Lease Agreement.

 

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(E)                                 The Lessor, Unicom Group and theLessee entered into a network capacity lease agreement on 20 November 2002(the ***9A Areas CDMA LeaseAgreement***) whereby the Lessee agreed to lease from the Lessor,and the Lessor also agreed to lease to the Lessee, theCapacity on terms andconditions set out in the 9A Areas CDMA Lease Agreement for the purposes ofproviding CDMA mobile telecommunication services in the 9A Areas.  Pursuant to the 9A Areas CDMA LeaseAgreement, Unicom Group agreed to guarantee the performance by the Lessor ofits obligations under the 9A Areas CDMA Lease Agreement.  Thereafter, the Lessee transferred all itsrights and obligations under the 9A Areas CDMA Lease Agreement to Unicom NewCentury Telecommunications Corporation Limited (***Unicom New Century***) pursuant to theTransfer Agreement dated 20 November 2002. Pursuant to the merger between CUCL and Unicom New Century, Unicom NewCentury was merged into CUCL and CUCL became the successor to Unicom NewCentury under the 9A Areas CDMA Lease Agreement. The merger and the successionhave become effective from 30 July 2004.

 

(F)                                 The Lessor, Unicom Group and theLessee entered into a network capacity lease agreement on 20 November 2003(the ***9B Areas CDMA LeaseAgreement***) whereby the Lessee agreed to lease from the Lessor,and the Lessor also agreed to lease to the Lessee, theCapacity on terms andconditions set out in the 9B Areas CDMA Lease Agreement for the purposes ofproviding CDMA mobile telecommunication services in the 9B Areas.  Pursuant to the 9B Areas CDMA LeaseAgreement, Unicom Group agreed to guarantee the performance by the Lessor ofits obligations under the 9B Areas CDMA Lease Agreement.  Thereafter, the Lessee transferred all itsrights and obligations under the 9B Areas CDMA Lease Agreement to Unicom NewWorld Telecommunications Corporation Limited (***Unicom New World***) pursuant to theTransfer Agreement dated 20 November 2003. Pursuant to the merger between CUCL and Unicom New World which is stillin progress, Unicom New World is in the process of being merged into CUCL andCUCL will, after the completion of the merger, become the successor to UnicomNew World under all of the agreements to which Unicom New World is party,including the 9B Areas CDMA Lease Agreement.

 

(G)                                Since CUCL and Unicom New World(together, the ***NewOperating Entity***) are providing CDMA mobile telecommunicationsservices in the Listed Service Areas, the Lessee wishes to lease Capacity fromthe Lessor, and the Lessor wishes to lease Capacity to the Lessee, on the termsand conditions of this Agreement on the basis that the Lessee shall have theright to transfer its rights and obligations under this Agreement to the NewOperating Entity.

 

(H)                               Unicom Group has agreed toguarantee the performance by the Lessor of its obligations under thisAgreement.

 

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**ITIS AGREED**as follows:

 

## **INTERPRETATION**

##  

**Definitions**

 

1.1                                 In this Agreement (including therecitals) the following words and expressions have the following respectivemeanings unless the context otherwise requires:

 

***9A Areas*** means Jilin, Heilongjiang,Jiangxi, Henan, Shaanxi and Sichuan provinces, Chongqing municipality andGuangxi Zhuang autonomous region and Xinjiang Uygur autonomous region;

 

***9B Areas*** means Shanxi, Hunan, Hainan, Yunnan, Gansu andQinghai provinces and Inner Mongolia, Ningxia Hui and Xizang autonomous regions;

 

***Additional Term*** has the meaning given to it inclause 4.2;

 

***Agreement***means this agreement, including its schedules;

 

***Associate*** has the meaning given to thatterm in the Listing Rules;

 

***Business Day*** means any day on which banks in the PRC areopen for the transaction of normal banking business;

 

***Capacity*** means capacity on the Network, measured interms of total number of Subscribers

 

***CDMA***means CodeDivision Multiple Access technology, which is a digital transmission technologythat accommodates higher throughput by using various coding sequences to mixand separate voice and data signals for wireless communication, and includingall re-configuration, upgrade, enhancement or modification to such technologyfrom time to time (including CDMA 2000 1x and CDMA 2000 3x, each of which isdesigned to increase data transmission speed and improve quality of serviceoperation over existing network infrastructure);

 

***CDMA Business*** means the CDMA mobile telecommunications business operated by theNew Operating Entity in the Listed Service Areas utilising the Network;

 

***CDMA Business Income*** means the service revenuegenerated by the New Operating Entity in the course of operating itsCDMA telecommunication business and the breakdown thereof as further describedin Schedule 1;

 

***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;

 

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***Equipment*** means all necessary hardware, software and accessories which areused or are about to be used in constructing the Network in accordance with thedesigns and specifications agreed between the Lessor and the Lessee, whereapplicable;

 

***Force Majeure Event*** means in relation to theLessee or the Lessor, 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, civildisturbance, riot, terrorism, industrial disputes, weather of exceptionalseverity, binding acts or omissions of any Government Entity;

 

***Government Entity*** means:

 

(a)                                  any nationalgovernment, political subdivision thereof, or local jurisdiction therein;

 

(b)                                 anyinstrumentality, board, commission, court, or agency of any thereof, howeverconstituted; and

 

(c)                                  any association,organization, or institution of which any of the above is a member or to whosejurisdiction any thereof is subject or in whose activities any of the above isa participant;

 

***Initial Term*** has the meaning given to it inclause 4.1;

 

***Lease***means the lease of Capacity by theLessor to the Lessee pursuant to this Agreement;

 

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

 

***Lease Fee***means the amounts payable by the Lessee to the Lessor pursuant toclause 5.1;

 

***Lessor Lien*** means anySecurity Interest from time to time created by or through the Lessor inconnection with the financing of the Network construction;

 

***Listed Group***means China Unicom and itssubsidiaries from time to time;

 

***Listed ServiceAreas***means the Twelve Provincesand Municipalities, the 9A Areas and the 9B Areas;

 

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

 

***Loss*** means any loss, liability, action, claim,proceeding, judgment, penalty, fine, damages, tax, fee, cost or expense;

 

***MII*** means the Ministry of InformationIndustry of the PRC;

 

***Minimum Lease Fee***means the minimum amount of Lease Fee specified inclause 5.1;

 

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***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 CDMA networks, infrastructure and Equipment(whether they are comprised in the same Phase of construction or otherwise)constructed or acquired after the date of this Agreement in the Listed ServiceAreas;

 

***NetworkConstruction Cost***in relation toeach Phase of the Network, the total amount of all payments, costs, expensesand amounts paid or incurred by the Lessor that are directly attributable tothe construction of that Phase, including construction, installation andEquipment procurement costs and expenses, survey and design costs, investmentin technology, software and other intangible assets, insurance premiums 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;

 

***Old CDMA Lease Agreements*** means the Twelve Provinces andMunicipalities CDMA Lease Agreement , the 9A AreasCDMA Lease Agreement and the 9B Areas CDMA Lease Agreement;

 

***Old Lease Fee*** means the lease fee payable bythe Old Operating Entities to the Lessor under the Old CDMA Lease Agreements;

 

***Old OperatingEntities*** means CUCL, Unicom NewCentury and Unicom New World;

 

***Phase*** means a fixed amount of constructed Capacity on the Network agreedupon between the Lessor and the Old Operating Entities;

 

***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);

 

***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 Commencement 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 anyother agreement or arrangement having the effect of conferring security;

 

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***SSE*** means the Shanghai StockExchange;

 

***Subscriber*** means a unit of capacity on the Network, as described in clause12.2(h);

 

***Subsidiary*** means any company:

 

(a)                                  of which anothercontrols the composition of the board of directors of the company; or

 

(b)                                 of which anotherhas direct or indirect control or owns directly or indirectly more than 50 percent. of the voting share capital;

 

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

 

***Transfer Agreement***means the Transfer Agreement inrelation to this Agreement entered into between the Lessee and the NewOperating Entity on the date of this Agreement; and

 

***TwelveProvinces and Municipalities***meansGuangdong, Jiangsu, Zhejiang, Fujian, Liaoning, Shandong, Anhui, Hebei andHubei provinces and Beijing, Shanghai and Tianjin municipalities.

 

1.2                                 In this Agreement and the Schedules unless the context requires:

 

(a)                                  the ***headings***are inserted forconvenience only and shall not affect the construction of this Agreement;

 

(b)                                 references to one ***gender*** include all genders;

 

(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 phrasesindicating the singular shall, where the context so admits, include the pluraland vice versa.

 

1.3                                 Schedule 1 attached to this Agreement forms part of thisAgreement.

 

## **LEASEOF NETWORK CAPACITY**

##  

2.1                                 Subject to satisfaction of the Conditions, the Lessor agrees tolease all the Capacity on the Network to the Lessee on the terms set out hereincommencing from 1 January 2005 (the ***Lease Commencement Date***).

 

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2.2                                 With respect to the Old Lease Fee paid by CUCL or Unicom New Worldto the Lessor in 2005 pursuant to the Old CDMA Lease Agreements prior to thesatisfaction of the Conditions, the Lessor and the Lessee shall make adjustmentand settlement as soon as the Conditions have been satisfied so that the amountof the Old Lease Fee already paid in 2005 reaches the same level as the LeaseFee calculated for the relevant period in accordance with this Agreement as ifthis Agreement has been implemented from 1 January 2005.

 

2.3                                 The Lessor agrees that, following the completion of the TransferAgreement, the New Operating Entity shall be permitted to use and operate theNetwork on an exclusive basis to provide CDMA services, including basic voiceservices, mobile data services and value added mobile services, underapplicable PRC laws and regulations, in the Listed Service Areas.

 

2.4                                 In consideration of the satisfactory performance by the Lessor ofits obligations under this Agreement, the Lessee shall pay the Lease Fee inaccordance with clause 5.

 

## **CONDITIONS**

##  

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

 

(a)                                  the Lessor and theLessee having obtained all necessary approvals (regulatory or otherwise) toperform their respective obligations under this Agreement;

 

(b)                                 the passing ofresolutions by the shareholders of the Lessee approving this Agreement at an extraordinary generalmeeting convened for such purpose;

 

(c)                                  the passing of resolutions by the shareholders of China Unicom(other than Unicom Group and its Associates, who shall abstain from voting in connection with theresolutions) approving the Transfer Agreement at anextraordinary general meeting convened for such purpose;

 

(d)                                 all otherconditions precedent contained in the Transfer Agreement having been fulfilledor waived.

 

## **TERM AND CAPACITY**

##  

**Term**

 

4.1                                 The Lessee shall initially lease Capacity for a period of two yearsfrom the Lease Commencement Date (the ***Initial Term***) until 31 December 2006.

 

4.2                                 The Lease shall be renewable for such periods as may be agreed uponbetween the parties (each, an ***Additional Term***) on the same terms (except as to thelength, the Lease Fee and the Minimum Lease Fee for any Additional Term) at theoption of the Lessee providedthat the Lessee has given not less than 180 days’ priorwritten notice to the Lessor.

 

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4.3                                 The Lessor shall lease all its Capacity on the Network to the Lesseeduring the Term.

 

4.4                                 In the event of the followingcircumstances, the Lessee shall have the right torequire the Lessor to expand the Network in the Listed Service Areas toincrease the Capacity constructed on the Network according to a timetableagreed between the Lessor and the Lessee:

 

(a)                                  to allow thequality and quantity of the CDMA services provided by the Lessee to reach therequired industry standards;

 

(b)                                 to allow the Lesseeto launch new services of its CDMA Business; and

 

(c)                                  other circumstancesagreed upon between the Lessor and the Lessee.

 

4.5                                 If, due to any event or under any circumstance, the Lessor fails tomake available any Capacity on the Network which may affect theCDMA services providedby the Lessee to the Subscribers, then the Lessorshall, as soon as practicable (and in any event within five Business Days ofthe Lessor becoming aware of the event or circumstances in question), notifythe Lessee of that fact in writing. Such notification shall set out:

 

(a)                                  the nature of theevent or circumstances and whether they have arisen as a result of any of thecauses set out in clause 4.7;

 

(b)                                 a description ofthe steps, if any, which the Lessor has identified are necessary to rectify thematter or capable of bringing the Capacity into operational service as soon aspracticable; and

 

(c)                                  the likely effectof the event or circumstances on the CDMA services to be provided by theLessee.

 

4.6                                 Following receipt by the Lessee of any notification pursuant toclause 4.5, the Lessee and the Lessor shall discuss in good faith:

 

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

 

(b)                                 the number of CDMASubscribers potentially affected .

 

4.7                                 Notwithstanding the foregoing, if any event or circumstance notifiedby the Lessor to the Lessee under clause 4.5 is, or arises as a result of, oneor more of the following:

 

(a)                                  a Force MajeureEvent;

 

(b)                                 any material breachby the Lessee of any of its material obligations under this Agreement whichprevents the Lessor from performing the relevant obligation under this Agreement;or

 

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(c)                                  compliance with anyapplicable law, the mandatory requirements of any Government Entity or anyother applicable statutory regulations;

 

then, save to the extent that the event arose(in the case of an event under clause 4.7(c) only) as a result of anybreach of this Agreement by the Lessor, the Lessor shall have no liability tothe extent the delay arises from such events, whether under clause 4.8 orotherwise, to provide any Delay Discount (as defined below), or pay any damagesor other compensation to the Lessee as a result of the Capacity not being readyfor service and the Lessee’s provision of CDMA service being effected due tosuch events, and the Lessor shall make available the relevant Capacity on theearliest practicable date on which it is able to do so in light of the relevantevent.

 

**Consequences of Delay in MakingAvailable the Capacity**

 

4.8                                 Subject to clause 4.7, if the Lessor fails to make available anyCapacity on the Network thus affecting the CDMA services provided by theLessee, then the Lessor shall provide the Lessee with a discount (a ***Delay Discount***),calculated as follows:

 
| Delay Discount | =      | the Number of CDMA Subscribers of the  Lessee being Affected by the Delay ***x*** period of delay (number of |
|----------------|--------|--------------------------------------------------------------------------------------------------------------|
|           |   | days)***x***                                                                                                 | ARPU of CDMA Subscribers |   |
|           |   |                                                                                                         | the number of days in the relevant month |

 

In the above formula, the ***Number of CDMA Subscribers of theLessee******beingAffected by the Delay***shall be the figure confirmed by theLessee on the basis of substantive evidence and ***ARPU of CDMA Subscribers*** shall be theaverage monthly ARPU figure of the CDMA subscribers in the relevant areas forthe three months immediately prior to the delay, as calculated and confirmed bythe Lessee.

 

The Delay Discount shall be credited againstthe next instalment of Lease Fee to be made by the Lessee to the Lessor.

 

**Spectrum**

 

4.9                                 The Lessor shall provide the Lessee, or cause the Lessee to beprovided, with all necessary spectrum for theoperation and expansion of the CDMA Business.

 

## **LEASE FEE**

##  

5.1                                 The Lease Fee of the Network shall be:

 

(a)                                  in 2005, 29% of theaudited CDMA Business Income of the Lessee for that year;

 

(b)                                 in 2006, 30% of theaudited CDMA Business Income of the Lessee for that year;

 

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provided that the annual Lease Fee of the Network shall not be less than theMinimum Lease Fee regardless of the amount of CDMA Business Income for thatyear.  The Minimum Lease Fee for 2005shall be 90% of the total amount of lease fee paid by the Old OperatingEntities to the Lessor pursuant to the Old Lease Agreements for 2004.  The Minimum Lease Fee for 2006 shall be 90%of the total amount of Lease Fee paid by the Lessee to the Lessor pursuant tothis Agreement for 2005.

 

The Lease Fee and Minimum Lease Fee in anyAdditional Term shall be re-negotiated in good faith by the parties to thisAgreement.  The methods of calculationand payment of the Lease Fee are set out in Clause 6.

 

## **CALCULATIONOF THE CDMA BUSINESS INCOME AND PAYMENT OF THE LEASE FEE**

##  

6.1                                 Subject to clauses 6.2 through 6.6, the Lease Fee shall be initiallycalculated on the basis of the unaudited CDMA Business Income generated by theLessee during each Quarter and shall be paid (or procured to be paid) quarterlyin arrears by the Lessee to the Lessor within 30 days following the end of eachQuarter during the Term.

 

6.2                                 The Lessee shall issue a report to the Lessor within 20 daysfollowing the end of each Quarter during the Term in respect of the unauditedCDMA Business Income generated during such Quarter.  Such report shall be in the form of Schedule 1and shall contain the amount of the unaudited CDMA Business Income generated bythe Lessee during such Quarter and the total Lease Fee payable by the Lesseethat is calculated on the basis of that amount.

 

6.3                                 When China Unicom conducts its annual audit, the Lessor and theLessee shall adjust and settle the following as soon as practicable:

 

(a)                                  in the event that the Lease Fee of any year calculated on the basisof the audited CDMA Business Income is greater than the Lease Fee of that yearpaid by the Lessee and calculated on the basis of unaudited quarterly CDMABusiness Income of the Lessee, the Lessee shall pay the difference to theLessor as soon as practicable;

 

(b)                                 in the event that the Lease Fee of any year calculated on the basisof the audited CDMA Business Income is less than the Lease Fee of that yearpaid by the Lessee and calculated on the basis of the unaudited quarterly CDMABusiness Income of the Lessee, the Lessor shall refund the difference to theLessee as soon as practicable,

 

provided that, in the event that the LeaseFee paid by the Lessee in respect of the relevant year is less than the MinimumLease Fee upon the above payment adjustment and settlement between the Lessorand the Lessee, the Lessee shall pay the difference to the Lessor as soon aspracticable.

 

6.4                                 Unless otherwise agreed in writing between the Lessor and theLessee, all Lease Fee payments shall be made in Renminbi.

 

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6.5                                 All sums payable by the Lessee 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.

 

6.6                                 The Lessor may charge interest on any outstanding sum payable to ithereunder from the due date to the date on which it actually recovers theoutstanding payments in full from the Lessee, at the daily compound rate of0.01%.

 

## **PROCUREMENTAND CONSTRUCTION OF THE NETWORK**

##  

7.1                                 The Lessor shall procure Equipment for the Network and shall financethe procurement of all Equipment. The Lessor shall invite the Lessee toparticipate in all negotiations with Equipment suppliers, and the Lessee shallbe entitled to approve all Equipment purchases and sign all Equipment purchasecontracts.

 

7.2                                 The Lessor shall ensure that the Network is constructed inaccordance with the detailed design standards, specifications and timetable agreedin writing between the Lessor and Lessee.

 

7.3                                 Subject to complying with its obligations under clause 7.2, theLessor shall comply with any requirement of the Lessee that the purchase of theEquipment be undertaken in a manner that is tax efficient for the Lessee.

 

## **ACCEPTANCEAND TESTING OF THE NETWORK**

##  

8.1                                 In relation to each Phase of the Network, authorised representativesof the Lessor and the Lessee shall attend the initial acceptance and the finalacceptance arranged by the Equipment suppliers in accordance with the Equipmentsupply and installation services contracts, which shall incorporate theacceptance regulations of the Lessor. Representatives of the Lessor and theLessee shall effect initial and final acceptance ofeach Phase by execution and delivery to the Equipment suppliers of an initialacceptance document and a final acceptance document respectively.

 

## **OPERATION,MANAGEMENT AND REVENUE**

##  

9.1                                 On the day of signing by the authorised representatives of theLessor and the Lessee of the initial acceptance document relating to aparticular Phase of the Network, that Phase shall be formally delivered to theLessee for operation, management and maintenance.

 

9.2                                 All operating revenue, including airtime charges, monthlysubscription fees, interconnection charges, income from sales of UIM cards andhandsets and other income generated from the operation of or in connection withthe Network shall be collected by and belong to the Lessee.

 

9.3                                 All costs of operating and managing the Network shall be borne bythe Lessee.

 

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9.4                                 Notwithstanding clause 9.3, the ***Costs***as defined in clause 9.5shall be shared between the Lessor and the Lessee in the following proportion:

 

(a)                                  the Lessor shallbear such proportion of the Costs as calculated according to the followingformula:

 
| total amount  of Capacity  constructed on the Network | - | the actual number of the Lessee’s  cumulative CDMA(Subscribers as at the end of the month before the Costs are incurred)  90% |
|-------------------------------------------------------|---|------------------------------------------------------------------------------------------------------------------------------------|
| total amount of Capacity constructed on the  Network  |

 

(b)                                 the Lessee shallbear such proportion of the Costs as calculated according to the followingformula:

 
| the actual number of the Lessee’s  cumulative CDMA                 |
|-------------------------------------------------------------------------|
| (Subscribers as at the end of the month  before the Costs are incurred) |
| 90%                                                                     |
| total amount of Capacity constructed on the  Network                    |

 

9.5                                 Forthe purposes of clause 9.4, the term ***Costs***means the rentalfees for the exchangecentres and the base stations together with therelevant expenses, including water and electricity charges, heatingcharges and the fuel charges for the relevant equipment etc.

 

## **RISK AND TITLE**

##  

10.1                           The parties agree that title to all parts of the Network procured,acquired or otherwise funded by the Lessor will remain vested in the Lessor untilthe Network is transferred to the Lessee pursuant to clause 13.

 

10.2                           As between the Lessor and the Lessee, during the period ofconstruction of each Phase of the Network, the Lessor shall bear all risks ofloss, theft, damage and destruction of or to the Network. Thereafter and untilthe expiry of the Term the Lessor shall bear all risks of physical loss, damageand destruction of or to the Network caused by an Event of Force Majeure, andthe Lessee shall be responsible for all losses and damage resulting from itsoperation of the Network.

 

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## **RESPONSIBILITIESOF THE PARTIES**

##  

**Lessor’s Responsibilities**

 

11.1                           Without limiting the Lessor’s other obligations hereunder, theLessor’s responsibilities are to:

 

(a)                                  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)                                 obtain all PRC approvals and permits for the import of all equipmentand technology, other supplies and installation services required for theconstruction and operation of the Network, and to use best endeavours to obtainand maintain favourable customs duties;

 

(c)                                  obtain allnecessary funding for the construction and expansion of the Network inaccordance with the Lessee’s requirements;

 

(d)                                 ensure that eachPhase of the Network is constructed in accordance with construction timetableagreed by the Lessor and Lessee;

 

(e)                                  handle all arrangementsin relation to the importation of the Equipment;

 

(f)                                    ensure that theCapacity leased is delivered to the Lessee during the Term;

 

(g)                                 use best endeavoursto ensure that the Network quality standards shall meet the standards agreed bythe Lessor and Lessee;

 

(h)                                 upon request by theLessee to upgrade the software or hardware of the Network, to use bestendeavours to satisfy the request as soon as possible;

 

(i)                                     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, refrainfrom leasing or selling any part of the Network to any third party, orpermitting any third party to use or operate the Network in any manner toprovide telecommunications services, except conducted as contemplated in theTransfer Agreement;

 

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

 

(l)                                     in the event of abreakdown of any part of the Network, provide the Lessee with all necessarycooperation, including liaising with Equipment suppliers and coordinatingrelevant parties.

 

13

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**Lessee’s Responsibilities**

 

11.2                           Without limiting the Lessee’s other obligations hereunder, theLessee’s responsibilities are to:

 

(a)                                  promptly notify theLessor of any event of loss or any event which is likely to result in aninsurance notification claim;

 

(b)                                 provide the Lessorwith such information concerning the condition, use and operation of theNetwork as the Lessor may from time to time reasonably request;

 

(c)                                  permit the Lessor’srepresentatives to inspect the Network during normal working hours, uponreasonable notice;

 

(d)                                 be responsible forthe maintenance and safety of the Network and maintenance of all databases inrelation to the Network;

 

(e)                                  permit the Lessorto use such of its premises as are reasonably required by the Lessor for thepurpose of complying with its obligations under this Agreement;

 

(f)                                    refrain fromsubleasing any part of the Network or assigning its rights under the lease toany party other than a member of the Listed Group, except conducted ascontemplated in the Transfer Agreement; and

 

(g)                                 in accordance withmarket requirements and subscriber demand, use all reasonable efforts topromote and advertise the CDMA Business in the Listed Service Areas.

 

**Unicom Group’s Responsibilities**

 

11.3                           Without limiting Unicom Group’s other obligations hereunder, UnicomGroup’s responsibilities are to:

 

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

 

(b)                                 establish andmaintain roaming and interconnection arrangements with other telecommunicationsoperators.

 

## **REPRESENTATIONSAND WARRANTIES**

##  

**Representations and Warranties ofthe Lessee**

 

12.1                           The Lessee represents and warrantsto the Lessor that:

 

(a)                                  ***Status***:  It is a limited liability 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 beingconducted;

 

14

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

 

(c)                                  ***Legal validity***:This Agreement has been duly authorised, executed and delivered by the Lessee,and this Agreement constitutes legal, valid and binding obligations of theLessee, enforceable in accordance with its terms;

 

(d)                                 ***Non-conflict***: Theentry into and performance by the Lessee of, and the transactions contemplatedby, this Agreement do not and will not (i) conflict with theconstitutional documents of the Lessee; or (ii) conflict with or result indefault under any document which is binding upon the Lessee or any of itsassets nor result in the creation of any Security Interest over any of itsassets;

 

(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***: TheLessee is subject to civil commercial law with respect to its obligations underthis Agreement; and neither Lessee nor any of its assets is entitled to anyright of immunity, and the entry into and performance of this Agreement by theLessee constitute private and commercial acts; and

 

(g)                                 ***Litigation***: Nolitigation, arbitration or administrative proceedings are pending or threatenedagainst Lessee which, if adversely determined, would have a material adverseeffect upon the Lessee’s financial condition or business or its ability toperform its obligations under this Agreement.

 

**Representations and Warranties ofthe Lessor and Unicom Group**

 

12.2                           Each of the Lessor and UnicomGroup jointly and severally represents and warrants to the Lessee that:

 

(a)                                  ***Status***: The Lessoris a company duly incorporated and validly existing under the laws of the PRCand has the corporate power to own its assets and carry on its business as itis now being conducted;

 

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

 

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

 

15

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(d)                                 ***Non-conflict***: Theentry into and performance by the Lessor of, and the transactions contemplatedby, this Agreement do not and will not conflict with: (i) any laws bindingon the Lessor; or (ii) the constitutional documents of the Lessor; or (iii) anydocument which is binding upon the Lessor or any of its assets;

 

(e)                                  ***Authorisation***: Sofar as concerns the obligations of the Lessor, all authorisations, consents,registrations and notifications required under the laws of the PRC inconnection with the entry into, performance, validity and enforceability of,and the transactions contemplated by, this Agreement by the Lessor have beenobtained or effected (as appropriate) and are in full force and effect;

 

(f)                                    ***No breach***: The use of theNetwork by the Lessee in accordance with this Agreement will not cause theLessee to breach any law, regulation, direction, permission, waiver, consent,registration, approval or other authorisation;

 

(g)                                 ***No Immunity***: TheLessor is subject to civil commercial law with respect to its obligations underthis Agreement; 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; and

 

(h)                                 Currently, the Network has a total Capacity of 42,040,000Subscribers approximately (which is calculated on the basis of a nominal valueof 0.015 Erlang per Subscriber during peak periods; the Lessor and the Lesseemay vary the nominal value per Subscriber in light of actual usage and otherrelevant factors).

 

**Representations and Warranties ofUnicom Group**

 

12.3                           Unicom Group also represents andwarrants to the Lessee that:

 

(a)                                  ***Status***: UnicomGroup is a company duly incorporated and validly existing under the laws of thePRC and has the corporate power to own its assets and carry on its business asit is now being conducted;

 

(b)                                 ***Power and authority***:Unicom Group has the corporate power to enter into and perform, and has takenall necessary corporate action to authorise the entry into, performance anddelivery of, this Agreement and the transactions contemplated by thisAgreement;

 

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

 

(d)                                 ***Non-conflict***: Theentry into and performance by Unicom Group of, and the transactionscontemplated by, this Agreement do not and will not conflict with: (i) anylaws binding on Unicom Group; or (ii) the constitutional documents ofUnicom Group; or (iii) any document which is binding upon Unicom Group orany of its assets;

 

16

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(e)                                  ***Authorisation***: Sofar as concerns the obligations of Unicom Group, all authorisations, consents,registrations and notifications required under the laws of the PRC inconnection with the entry into, performance, validity and enforceability of,and the transactions contemplated by, this Agreement by Unicom Group have been obtainedor 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) issuedby the MII dated 1 August 2001 is in full force and effect and there areno circumstances which indicate that such licence will or is likely to berevoked, in whole or in part. In accordance with applicable PRC laws andregulations, Unicom Group is permitted to authorise the Lessee to provide CDMAmobile telecommunications services by using the Network;

 

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

 

## **PURCHASE OPTION**

##  

13.1                           The Lessor hereby grants the Lessee an option to purchase theNetwork (the ***PurchaseOption***).

 

13.2                           The Purchase Option may be exercised at any time during the Term andwithin one year thereafter by the Lessee giving notice in writing (a ***Purchase Option Notice***)to the Lessor. The acquisition price of the Network shall be negotiated betweenthe Lessor and the Lessee based on the appraised value of the Networkdetermined in accordance with applicable PRC laws and regulations, and takinginto account prevailing market conditions and other relevant factors, providedthat the acquisition price will not be greater than such price as would, aftertaking into account all Lease Fee payments made by all of the Old OperatingEntities to the Lessor in accordance with this Agreement or any Old CDMA LeaseAgreement and deducting all Delay Discounts due to the Lessee under clause 4.8,enable the Lessor to recover the Network Construction Cost, together with aninternal rate of return on its investment of 8% (the ***Purchase Price***).

 

13.3.                        The purchase of the Network by the Lessee under this clause 13 shallbe carried out in accordance with the relevant provisions of the Listing Rules ofthe SSE and all applicable PRC laws and regulations (or the Listing Rules andall applicable Hong Kong laws after completion of the Transfer Agreement).

 

13.4                           As soon as practicable following the issue of a Purchase OptionNotice, the Lessor and Lessee shall negotiate in good faith and execute anagreement 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.

 

17

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13.5                           The Network shall be sold free from all Security Interests and withall rights attached to it at the date of completion of the sale and purchase ofthe Network.

 

13.6                           The Lessor and the Lessee shall procure that, as soon as reasonablypracticable following final acceptance of each Phase of the Network, a firm ofauditors jointly selected by the Lessor and Lessee is appointed to performprocedures agreed upon with the Lessor and Lessee to verify the final NetworkConstruction Cost in respect of such Phase. The Lessor shall provide the Lesseeand the firm of auditors so appointed with certified copies or originals of allsuch supporting invoices and receipts and other documentary evidence andinformation as the Lessee or such auditors may require in order to verify the Network Construction Cost in respect of anyPhase of the Network. The auditors’ fees for carrying out the aforesaidprocedures shall be borne by the Lessor and the Lessee in equal shares.

 

## **INSURANCE**

##  

14.1                           During the construction period of each Phase of the Network, theLessor shall fully and continuously maintain insurance over the Network. Therelevant insurance premiums shall be paid by the Lessor and form part of theNetwork Construction Cost.  Suchinsurance policies shall name the Lessor as the beneficiary.  Following receipt by the Lessor of anyproceeds of such insurance, the Lessor shall apply all the proceeds to repairthe Network.

 

14.2                           After each Phase of the Network has been constructed and madeavailable to the Lessee for use , 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 the Lessee.  The Lessor andthe Lessee shall be named as joint beneficiaries under all such insurancepolicies.

 

14.3                           The proceeds of any insurance taken out over the Network shall beapplied in repairing or replacing the part of the Network that has been damagedor lost.  If the costs of such repair orreplacement exceed the amount of relevant proceeds of insurance, the excessshall be paid by the Lessor and shall form part of the Network Construction Costin case the damage or loss occurs during the construction period, and shall bepaid by or on behalf of the Lessee and form part of the operating cost of theNetwork in case the damage or loss occurs during the operating period.

 

14.4                           In the event of loss of, or damage to, the Network, the Lessor andLessee shall agree upon the detailed steps which can be taken to repair orreplace the Network so as to overcome, rectify and minimise such loss ordamage.

 

## **NETWORK MAINTENANCE**

##  

15.1                           The Lessee shall at all timesduring 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

 

18

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(b)                                 maintain theNetwork in accordance with the generally accepted best practice of other mobiletelecommunications operators in the PRC.

 

15.2                           The costs, fees and expenses in complying with the obligations ofthe Lessee under clause 15.1 shall be shared between the Lessor and the Lesseeaccording to the following proportions:

 

(a)                                  the Lessor shallbear such proportion of the costs, fees and expenses in complying with theobligations of the Lessee under Clause 15.1 as calculated according to thefollowing formula:

 
| total amount  of Capacity  constructed on the Network | - | the actual number of the Lessee’s  cumulative CDMA  (Subscribers as at the end of the month before the Costs are incurred)90% |
|-------------------------------------------------------|---|------------------------------------------------------------------------------------------------------------------------------------|
| total amount of Capacity constructed on the  Network  |

 

(b)                                 the Lessee shallbear such proportion of the costs, fees and expenses in complying with theobligations of the Lessee under Clause 15.1 as calculated according to thefollowing formula:

 
| the actual number of the Lessee’s  cumulative CDMA                 |
|-------------------------------------------------------------------------|
| (Subscribers as at the end of the month  before the Costs are incurred) |
| 90%                                                                     |
| total amount of Capacity constructed on the  Network                    |

 

15.3                           The Lessee shall permit the Lessor’s representatives to inspect theNetwork during normal business hours, upon reasonable notice, for the purposeof ascertaining whether the Lessee is in compliance with its obligations underclause 15.1.

 

## **GUARANTEE AND INDEMNITY**

##  

16.1                           In consideration of the Lessee entering into this Agreement, UnicomGroup unconditionally and irrevocably guarantees the due and punctualperformance by the Lessor of its obligations under this Agreement. If and eachtime the Lessor fails for any reason to perform or observe its obligationsunder this Agreement, Unicom Group shall forthwith upon demand unconditionallyperform (or procure the performance of) the obligation in relation to whichsuch failure has occurred in the manner prescribed in this Agreement and sothat the same benefits shall be received by the Lessee as would have been soreceived if such obligation had been duly performed and/or observed by theLessor.

 

19

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16.2                           Unicom Group agrees to indemnify on demand the Lessee for any lossor damage suffered by any member of the Listed Group as a result of any defectin, or any loss of or damage to, any of the Equipment caused by any negligence,default, act or omission of the Lessor or Unicom Group under this Agreement orin connection with the Network. The aggregate liability of Unicom Group for anyclaim shall not exceed the total amount of Lease Fee payments made by the allof the Old Operating Entities to the Lessor under this Agreement or any OldCDMA Lease Agreement as well as the total Purchase Price paid by the Lessee forthe Network.

 

## **CONFIDENTIALITY**

##  

17.1                           At all times during the Term each party shall, and shall procurethat their respective directors, officers, employees and agents shall, keepconfidential and shall not, without the prior written consent of the otherparties, disclose to any third party this Agreement or any of the terms of thisAgreement or any documents or materials supplied by or on behalf of eitherparty in connection with this Agreement, save that any such party shall beentitled upon giving notice to the other parties 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 doso by an order of a court of competent jurisdiction whether in pursuance of anyprocedure for discovering documents or otherwise or pursuant to any law or anyregulation of any stock exchange or securities regulatory authority; or

 

(c)                                  to its auditors orlegal advisors or other professional advisers; or

 

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

 

(e)                                  if required to doso by any applicable law or in order for such party to comply with itsobligations under this Agreement.

 

17.2                           Nothing contained in clause 17.1 shall preclude the Lessee fromdisclosing to any member of the Listed Group any information, document or othermaterials relating to the Lease.

 

## **FORCE MAJEURE**

##  

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 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;

 

20

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(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 itsobligations under 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 afterthe end of the Force Majeure Event, the Affected Party shall notify the otherparties in writing that the Force Majeure Event has ended and the duration ofthe Force Majeure Event, and shall resume performance of its obligations underthis Agreement.

 

## **TERMINATION**

##  

19.1                           The Lessee may terminate this Agreement by not less than 180 days’prior written notice, such termination to take effect from the end of theInitial Term or any Additional Term.  TheLessor may not terminate this Agreement except in accordance with this clause19.1 or clause 19.2.

 

19.2                           Without prejudice to any other rights or remedies they may have(either under this Agreement or at law), the Lessor or the Lessee may terminatethis Agreement if the other (or, in the case of the Lessee, Unicom Group)commits any continuing or material breach of any of the provisions of thisAgreement (save for any breach which is caused by the party seeking to rely onit) and, in the case of such a breach which is capable of remedy, fails toremedy 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 be considered capableof remedy if the party in breach can comply with the provision in question inall respects other than as to the time of performance (provided that time ofperformance is not of the essence).

 

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

 

19.5                           Upon the termination of this Agreement for any reason, subject asotherwise provided in this Agreement and to any rights or obligations whichhave accrued prior to termination, no party shall have any further obligationto the others under this Agreement.

 

19.6                           Notwithstanding clause 19.1, this Agreement may terminate at anytime with the written agreement of the parties.

 

21

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**Redelivery**

 

19.7                           Subject to clause 13, the Lessee shall redeliver the Network to theLessor within 90 days following the termination of the Lease.  At the time of such redelivery:

 

(a)                                  the Network shallbe free and clear of 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 theNetwork shall have been permanently repaired and certified in accordance withthe requirements of the relevant Equipment manufacturer.

 

## **NOTICES**

##  

20.1                           Any notice to be given pursuant to this Agreement shall be inwriting 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 ofdelivery by hand, when delivered;

 

(b)                                 in the case ofdelivery by fax, at the time of transmission; and

 

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

 

provided that in each case where delivery byhand or by fax occurs after 6 p.m. on a Business Day or on a day which isnot a Business Day, service shall be deemed to occur at 9 a.m. on the nextfollowing Business Day.

 

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

 

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20.2                           The addresses and fax numbers of the parties for the purpose ofclause 20.1 are as follows:

 
| **Lessor**            |                                                                                  |
|-----------------------|---------------------------------------------------------------------------------------|
|                  |                                                                                  |
| Address:              | 6th Floor, Tower 3, Henderson  Centre, 18 Jianguomen  Nei Dajie, Beijing, 100005, PRC |
|                  |                                                                                  |
| Fax:                  | +86 10 6611 0768                                                                      |
|                  |                                                                                  |
| For the attention of: | Zhang Yun Gao                                                                         |
|                  |                                                                                  |
| **Lessee**            |                                                                                  |
|                  |                                                                                  |
| Address:              | 40th Floor, Jin Mao Tower, 88  Century Boulevard,  Shanghai, the PRC                  |
|                  |                                                                                  |
| Fax:                  | +86 10 6650 4066                                                                      |
|                  |                                                                                  |
| For the attention of: | The Directors                                                                         |
|                  |                                                                                  |
| **Unicom Group**      |                                                                                  |
|                  |                                                                                  |
| Address:              | Room 615, Tower 3, Henderson Centre,                                             |
|                  | 18 Jianguomen Nei Dajie, 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 to its 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 specifiedin the notice as the date on which the change is to take place; or

 

(b)                                 if no date isspecified or the date specified is less than five Business Days after the dateon which notice is given, the date following five Business Days after notice ofany change has been given.

 

## **ASSIGNMENTAND SUB-CONTRACTING**

##  

21.1                           The rights or benefits under this Agreement may not be assigned (normay any cause of action arising in connection with any of them be assigned) bythe Lessor or Unicom Group or their respective successor in title without theprior written consent of 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 New Operating Entity or another member of the Listed Group.

 

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21.2                           The Lessor may, with the Lessee’s prior written consent,sub-contract any of its obligations under this Agreement provided that theLessor procures that the sub-contractor complies with the Lessor’s obligationsunder this Agreement as if it were a party to this Agreement in place of theLessor. Nothing in this clause 21 will relieve the Lessor of any of itsliabilities or obligations under this Agreement.

 

## **SEVERABILITY**

##  

22.1                           If any provision of this Agreement is held to be invalid orunenforceable, 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.

 

## **FURTHER ASSURANCE**

##  

23.1                           Each party agrees to perform (or procure the performance of) allfurther acts and things, and execute and deliver (or procure the execution anddelivery of) such further documents, as may be required by law or as the otherparties may reasonably require to implement and/or give effect to thisAgreement and the transactions contemplated by it.

 

## **COSTS**

 

24.1                           Subject to clause 24.2, each of the parties shall pay its own Costsand expenses (including the legal costs) incurred in connection with thenegotiation, preparation and implementation of this Agreement.

 

24.2                           Any stamp duty or other duties payable in connection with thisAgreement, and matters contemplated hereunder shall be borne by the Lessor andthe Lessee in equal shares.

 

## **WAIVERS AND VARIATIONS**

##  

25.1                           No failure or delay on the part of any party in exercising anyright, power or remedy hereunder shall operate as a waiver thereof nor shallany single or partial exercise of any right, power or remedy preclude anyfurther exercise thereof or the exercise of any other right, power or remedy.No waiver shall be effective unless expressed in writing signed for or onbehalf of the party granting it.

 

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

 

25.3                           Unless expressly agreed, no variation shall constitute a general waiverof any provisions of this Agreement, nor shall it affect any rights,obligations or liabilities under or pursuant to this Agreement which havealready accrued up to the date of variation, and the rights and obligations ofthe parties under or pursuant to this Agreement shall remain in full force andeffect, except and only to the extent that they are so varied.

 

24

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## **ENTIRE AGREEMENT**

##  

26.1                           This Agreement constitutes the entire agreement between the partiesin respect of the subject matter of this Agreement and supersedes all Old CDMALease Agreements.

 

## **SETTLEMENT OF DISPUTES**

##  

27.1                           This Agreement and the relationship between the parties shall begoverned by, and interpreted in accordance with, PRC law.

 

27.2                           The parties agree to use their best efforts to settle all disputes,controversies or conflicts arising from or in connection with this Agreementthrough friendly negotiation and consultation. If the parties fail to reach agreement on the length, the Lease Fee orthe Minimum Lease Fee for any Additional Term, either the Lessor or the Lesseemay refer the matter to mediation at Hong Kong International Arbitration Centre(HKIAC) and in accordance with its Mediation Rules.

 

27.3                           Each of the parties agrees that the courts of the PRC are to haveexclusive jurisdiction to settle any disputes which may arise in connectionwith this Agreement.

 

27.4                           Each party agrees to waive and not to claim any immunity from anyproceedings and legal actions and from all forms of execution to which it orits property is now or hereafter becomes entitled under the laws of anyjurisdiction.

 

27.5                           During the arbitration or court proceedings, the parties shallcontinue to perform their respective obligations under this Agreement exceptfor the part in dispute which is being referred to arbitration or courtproceedings.

 

## **LANGUAGE**

##  

28.1                           This Agreement shall be written in a Chinese version and an Englishversion in two originals each. If there exists anydispute between the parties as to the interpretation of the two versions, thenthe 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.

 

**INWITNESS**whereofthe parties hereto have executed this Agreement on the date shown at thebeginning of this Agreement.

 

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| SIGNED on behalf of the Lessor   |               |
|----------------------------------|--------------------|
|                             |               |
|                             |               |
| By:                              | /s/ Zhang Yungao   |   |   |
|                             |               |
| Name:                            | Zhang Yungao       |   |   |
|                             |               |
|                             |               |
| SIGNED on behalf of the Lessee   |               |
|                             |               |
|                             |               |
| By:                              | /s/ Sun Qian       |   |   |
|                             |               |
| Name:                            | Sun Qian           |   |   |
|                             |               |
|                             |               |
| SIGNED on behalf of Unicom Group |               |
|                             |               |
|                             |               |
| By:                              | /s/ Chang Xiaobing |   |   |
|                             |               |
| Name:                            | Chang Xiaobing     |   |   |

 

26

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##### **SCHEDULE 1**

#####  

**Quarterly CDMA****Service Revenue**

**Breakdown of CDMA****Service Revenue**

 
| Prepared by: Provincial Branch |   | Unit of Amount: RMB |   |   |
|--------------------------------|--------|---------------------|--------|--------|

 
| **Items**                                                    | ** ** | **Rows**          | ** ** | **Amount for  the current  quarter** | ** ** | **Note**                                                                                                                                 |
|--------------------------------------------------------------|------------|-------------------|------------|--------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                   | ** ** | ** **        | ** ** | ** **                           | ** ** | ** **                                                                                                                               |
| **Total Service  Revenue**                                   |       | 1=2+3+4+5+  6+7-8 |       |                                 |       | Formula for calculating the lease fee in row 11 is described as following:                                                               |
| ** **                                                   |       |              |       |                                 |       |                                                                                                                                     |
| 1. Monthly fee                                               |       | 2                 |       |                                 |       | Assuming that under PRC GAAP, service  revenue generated by CUCL from the principal business (in row 1) equals to A                      |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| 2. Usage fee                                                 |       | 3                 |       |                                 |       | Lease fee payable to Unicom Horizon, i.e. leasing revenue of Unicom  Horizon equals to B                                                 |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| 3. Revenue from value-added services                         |       | 4                 |       |                                 |       | Under the connected transaction agreements,  the settlement represents R% of the service revenue  calculated in accordance with HK GAAP. |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| 4. Interconnection revenue                                   |       | 5                 |       |                                 |       | Under HK GAAP, the service  revenue generated by CUCL equals to C                                                                        |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| 5. Business revenues from digital circuits  and leased lines |       | 6                 |       |                                 |       | C=A-(A-B)* 3%                                                                                                                            |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| 6. Others                                                    |       | 7                 |       |                                 |       | Formula : B=C*R%= [A-(A-B)*3%]*R%                                                                                                        |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| **Business Tax**                                             |       | 8                 |       |                                 |       | Where: B=[A*(1-3%)]  / (1/R%-3%)                                                                                                         |
| ** **                                                   |       |              |       |                                 |       |                                                                                                                                     |
| **Costs incurred by  Principal Business**                    |       | 9                 |       |                                 |       |                                                                                                                                     |
| ** **                                                   |       |              |       |                                 |       |                                                                                                                                     |
| ......                                                 |       | 10                |       |                                 |       |                                                                                                                                     |
|                                                         |       |              |       |                                 |       |                                                                                                                                     |
| In which, CDMA lease fee payable to Unicom  Horizon          |       | 11                |       |                                 |       |                                                                                                                                     |

 

27

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