Document:

Exhibit 4.19

 

(English Translation)

 

 

Transfer Agreement

 

with respect to the Comprehensive Services Agreement

 

 

between

 

 

China United Telecommunications Corporation Limited

 

and

 

 

Unicom New World Telecommunications Corporation Limited

 

 

November 20, 2003

 

 

This Agreement (the
“Agreement”) is entered into on November 20, 2003, in

Beijing, China, between:

 

(1)           Party A: China United
Telecommunications Co. Ltd (the “A Share Company”)

 

Address:  40F, Jinmao Building, No. 88, Century
Boulevard, Shanghai, PRC

 

Legal
Representative: Mr. Wang Jianzhou

 

(2)           Party B:
Unicom New World Telecommunications Corporation Limited (“Unicom New World”)

 

Address: 1009,
10F, Ban Yi, No. 18, Jianguomenneidajie, Dongcheng District, Beijing, PRC

 

Legal
Representative: Mr. Wang Jianzhou

 

Whereas:

 

(1)           China
United Telecommunications Corporation (“Unicom Group”), a limited corporation
duly incorporated and validly existing under the laws of the People’s Republic
of China, is an integrated telecommunications business operator and the
controlling shareholder of the A Share Company;

 

(2)           The A
Share Company, a limited corporation duly incorporated and validly existing
under the laws of the People’s Republic of China, has had its common stock
listed on the Shanghai Stock Exchange since October 9, 2002;

 

(3)           Unicom
New World, a limited corporation wholly owned by Unicom Group and a provider of
integrated telecommunications services established on November 4, 2003, has
been injected by Unicom Group with its GSM mobile telecommunications assets in
the following nine provinces and autonomous regions: Shanxi, Inner Mongolia,
Hunan, Hainan, Yunnan, Xizang (no GSM assets), Gansu, Qinghai and Ningxia  (the “Nine Service Areas”).  As approved by the Ministry of Information
Industry in the telex letter numbered [2003]443, Unicom Group authorizes Unicom
New World to engage in the mobile telecommunication services in the Nine
Service Areas ;

 

(4)           Unicom
Group and the A Share Company entered into a memorandum, dated August 12, 2002
(the “Memorandum on Connected Transactions”), regarding certain transactions
after the public offering of the A Share Company between Unicom Group or its
subsidiaries (excluding the A Share Company and any subsidiaries controlled by
it) and China Unicom Limited (the “Unicom Red-Chip Company”), which is
indirectly controlled by the A Share Company, or its subsidiaries;

 

(5)           Unicom
Group is contemplating injecting all of its shares of Unicom New World and its
other offshore interests (collectively, the “Target Interests”) into the Unicom
Red-Chip Company through its wholly-owned overseas subsidiary (the “Offshore
Capital Injection Project”); After the completion of the Offshore Capital
Injection Project, Unicom New World will be one of the subsidiaries of Unicom
Red-Chip Company engaging in telecommunication services within the PRC; and

 

(6)           Unicom
Group and the A Share Company entered into a Comprehensive Services Agreement
on November 20, 2003 (the “Comprehensive Services Agreement”).

 

NOW THEREFORE, for the
purpose of this Offshore Capital Injection Project,

 

1

 

on the basis of equality
and mutual benefit, both Parties hereby have reached the following agreements
after friendly consultations:

 

1.             Provided
that the conditions under Section 6 herein are satisfied, the A Share Company
agrees to transfer immediately all of its rights and obligations under the
Comprehensive Services Agreement and its Annexes to Unicom New World. Unicom
New World consequently agrees to accept all the rights and obligations of the A
Share Company under the Comprehensive Services Agreement.

 

2.             Once
the A Share Company transfers all of its rights and obligations under the
Comprehensive Services Agreement to Unicom New World, Unicom New World shall
immediately assume all such rights and obligations and the A Share Company
shall immediately terminate all such rights and obligations.

 

3.             The A
Share Company confirms that, pursuant to Section 6 of the Comprehensive
Services Agreement, Unicom Group has given its irrevocable consent that the A
Share Company may transfer all of its rights and obligations under the
Comprehensive Services Agreement to Unicom New World or its subsidiaries or to
Unicom Red-Chip Company or any of its subsidiaries; no other or further consent
by Unicom Group shall be required for the A Share Company to transfer its
rights and obligations under the Comprehensive Services Agreement to Unicom New
World or its subsidiaries, or Unicom Red-Chip Company or its subsidiaries.

 

4.             Each
Party warrants that it has the full right, power and authority to execute this
Agreement and to perform its obligations hereunder. Upon execution, this
Agreement shall constitute legal, valid and binding obligations on each Party.

 

5.             Unicom
New World agrees to retain and perform, during the term of the Comprehensive
Services Agreement, all the rights and obligations given to the A Share Company
in the past or in the future pursuant to the provisions and conditions set
forth in the Comprehensive Services Agreement.

 

6.             Effectiveness

 

This Agreement
shall become effective simultaneously with the Comprehensive Services Agreement
subject to the following conditions:

 

6.1           Approval
from the Shareholders Meeting of Unicom Red-Chip Company to transfer all of the
rights and obligations under the Comprehensive Services Agreement by the A
Share Company to Unicom New World pursuant to applicable laws, regulations and
listing rules; and

 

6.2           The
requirements under Article 7 of the Comprehensive Service agreement have been
met.

 

7.             Force Majeure

 

In any force
majeure event that is unforeseeable and the consequences of which are
unavoidable or insurmountable and which results in either Party’s failure to
duly perform its obligations hereunder, such Party shall promptly notify the
other Party of such situation and provide within 15 days any valid documents
evidencing the details and explaining the reasons for not being able to perform
all or part of its obligations hereunder or the reasons for any necessary
delays of such performance. Based on the impact of the force majeure event,
both Parties shall decide through negotiations to terminate, partially waive or
postpone such performance.

 

2

 

8.             Confidentiality

 

Except to the extent that disclosure is required by law or by the rules
of the relevant supervisory authorities, or for the purpose of submission to
the Shanghai Stock Exchange by the A Share Company or to the Hong Kong Stock
Exchange by Unicom Red-Chip Company, each Party, without the other party’s
written consent, shall not provide or disclose to any company, enterprise,
organization or person any data and information relating to the other Party’s
operations or businesses.

 

9.             No Waiver

 

Unless otherwise required by law, any failure or delay in exercising
any of its rights, powers or privileges by one Party shall not be construed as
a waiver of such rights, powers or privileges. Any one time or partial exercise
of such rights, powers or privileges shall not affect any further or complete
exercise of such rights, powers or privileges.

 

10.           Notices

 

Any notification given in connection with this Agreement shall be in
writing and shall be delivered by one Party to the other Party by hand, fax or
mail. Such a notification by hand shall be deemed to have been duly given on
the date of delivery. Such a notification via fax shall be deemed to have been
duly given upon the completion of the fax transmission. Such a notification by
mail shall be deemed to have been duly given on the third working day (extended
when there is a public holiday) after the postal date. Notifications become
effective upon their arrival.

 

Addresses of the Parties
hereto for receiving notifications are as follows:

 

China United
Telecommunications Corporation Limited

Attention: Zhao Yilei

Address: 40F, Jinmao
Building, No. 88, Century Boulevard, Shanghai, China

Post Code: 200121

 

Unicom New World
Telecommunications Corporation Limited

Attention: Song Xiaoxi

Address: A133
Xidanbeidajie, Suite 1168, 11th Floor, Xicheng

District, Beijing,China

Postcode: 100032

 

11.           Applicable Law

 

This Agreement is
under the jurisdiction of the laws of the People’s Republic of China and shall
be interpreted and executed in accordance with the laws of the People’s
Republic of China.

 

12.           Dispute Settlement

 

Both Parties shall
endeavour to resolve any dispute over the effectiveness, interpretation or
execution of this Agreement through friendly consultations. Should any dispute
remain unsettled for more than 30 days after its occurrence, either Party is
entitled to bring a lawsuit based on this Agreement before a competent PRC
court.

 

13.           Miscellaneous

 

13.1         Based
on mutual consultations, both Parties can make modifications, revisions or
additions to this Agreement and Annexes hereto. No revision or addition shall
become effective until it is duly signed in writing and sealed by both Parties
or their authorized representatives.

 

3

 

13.2         This
Agreement is severable, that is, when any of the clauses in this Agreement or
the Annexes hereto is deemed illegal or unenforceable, the effectiveness and
enforceability of the other clauses contained herein shall by no means be
affected.

 

13.3         This
Agreement has six original copies with each party holding three copies and each
having equal legal binding.

 

4

 

China United
Telecommunications Corporation Limited (Corporate Seal)

 

 

	
  Legal Representative or
  Duly Authorized Representative:

  	
  /s/ Sun Qian

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Unicom New World
  Telecommunications Corporation Limited (Corporate Seal)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Legal Representative or
  Duly Authorized Representative:

  	
  /s/ Tong Jilu

  	
   

  

 

5Exhibit 4.20

 

20 November 2003

 

 

UNICOM
NEW HORIZON

TELECOMMUNICATIONS CORPORATION LIMITED

 

 

CHINA
UNITED TELECOMMUNICATIONS CORPORATION LIMITED

 

 

CHINA
UNITED TELECOMMUNICATIONS CORPORATION

 

 

 

Network Capacity Lease Agreement

for Shanxi, Hunan, Hainan, Yunnan, Gansu and Qinghai

provinces and Inner Mongolia, Ningxia Hui and Xizang

autonomous regions

 

 

 

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

  	
   

  

 

 

THIS AGREEMENT is made on 20 November 2003

 

BETWEEN:

 

(1)           UNICOM NEW HORIZON
TELECOMMUNICATIONS CORPORATION LIMITED, a limited liability company incorporated
under 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 UNITED
TELECOMMUNICATIONS CORPORATION LIMITED, a limited liability company incorporated
under the laws of the PRC whose office is at 9th Floor, 133 Bei
Dajie Jia, Xidan, Xi Cheng District, Beijing, the PRC (Lessee); and

 

(3)           CHINA UNITED
TELECOMMUNICATIONS CORPORATION, a company incorporated under the laws of the PRC
whose 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 Government
to undertake telecommunications infrastructure development and operate a
nationwide 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 construction
of the CDMA mobile telecommunications network for Unicom Group.

 

(C)           Construction of the second phase of the Network was
completed 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 8
January 2002 to carry on the CDMA Business.

 

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

 

(E)           Following completion of the acquisition and with
effect from the Lease Effective Date, the Existing Lease will be terminated and
replaced 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 the
performance by the Lessor of its obligations under this Agreement.

 

IT IS AGREED as follows:

 

INTERPRETATION

 

Definitions

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

China Unicom means China Unicom Limited, a company incorporated
under the Companies Ordinance, Chapter 32 of the Laws of Hong Kong, with limited
liability whose shares are listed on the Stock Exchange and whose American
Depositary Shares are listed on the New York Stock Exchange;

 

Conditions means the conditions precedent set out in clause 3.1;

 

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

 

Force Majeure Event  means in relation to the Lessee and 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, civil disturbance,
riot, terrorism, industrial disputes, weather of exceptional severity, binding
acts 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 jurisdiction
any thereof is subject or in whose activities any of the above is a
participant;

 

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

 

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

 

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

 

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

 

 

Lessor Lien means any Security Interest
from time to time created by or through the Lessor in connection with the
financing of the Network construction;

 

Listed Group means China Unicom and its subsidiaries from time to
time, 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 Securities
on The Stock Exchange of Hong Kong Limited;

 

MII means the Ministry of Information Industry of the
PRC;

 

Network means the CDMA mobile telecommunications network,
infrastructure or Equipment, constructed or acquired by or on behalf of the
Lessor in the Listed Service Areas, including all additional CDMA networks,
infrastructure and Equipment (whether they be comprised in the same Phase of
construction or otherwise) constructed or acquired after the date of this
Agreement 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 incurred
by the Lessor that are directly attributable to the construction of that Phase,
including construction, installation and Equipment procurement costs and
expenses, survey and design costs, investment in technology, software and other
intangible assets, insurance premiums and capitalised interest on loans in
respect of the construction period of that Phase, any taxes levied or paid in
respect of the procurement of Equipment and the construction of that Phase of
the Network, including import taxes and customs duties and all costs incurred
in relation to any network re-configuration, upgrade, enhancement or modifications
to the technology in respect of that Phase, all such payments, costs, expenses
and amounts having been verified and confirmed by certified public accountants
in accordance with PRC accounting principles and standards as capital in nature
and being able to satisfy the accounting definition of fixed assets of the
Lessor in its accounts;

 

Operating Entity means Unicom New World Telecommunications Corporation
Limited;

 

Phase means a fixed amount of constructed Capacity on the
Network, as stated in clause 4.12 (in respect of Phase 1 or Phase 2) or agreed
by the Lessor and Lessee pursuant to clause 4.13 (in respect of any Additional
Phase);

 

PRC means the People’s Republic of China (excluding, for
the 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 effected
pursuant to the operating agreements in the agreed forms as listed in Appendix
1;

 

Prospective Cellular Connected Transactions of China Unicom means those transactions effected
pursuant to the operating agreements in the agreed forms as listed in Appendix
2;

 

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 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 or
arrangement having the effect of conferring security;

 

 

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

 

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

 

Subsidiary means any company:

 

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

 

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

 

Term means
the Initial Term and all Additional Terms.

 

Transfer Agreement means the Transfer Agreement relating to this
Agreement entered into between the Lessee and the Operating Entity on the date
of this Agreement;

 

Unicom BVI means China Unicom (BVI) Limited, a company
incorporated in the British Virgin Islands and the immediate holding company of
China Unicom; and

 

Unicom BVI Acquisition Agreement means the Conditional Sale and Purchase
Agreement relating to the entired issued capital of Unicom New World (BVI)
Limited entered into by Unicom Group, Unicom Centenarian (BVI) Limited and
Unicom 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 not
affect the construction of this Agreement;

 

(b)           references to one gender include all genders;

 

(c)           references to parties are to the parties to this
Agreement;

 

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

 

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

 

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

 

LEASE
OF NETWORK CAPACITY

 

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

 

2.2           The Lessor agrees that, following the completion of
the Transfer Agreement, the Operating Entity shall be permitted to use and
operate the Network on an exclusive basis to provide CDMA services, including
basic 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 by
the Lessor of its obligations under this Agreement, the Lessee shall pay the
Lease Fee in accordance with clause 5.

 

CONDITIONS

 

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

 

 

(a)           the passing of resolutions by the
shareholders of the Lessee approving (i) the Unicom BVI Acquisition Agreement
and (ii) the Prospective Cellular Connected Transactions of the Lessee at an
extraordinary general meeting of the Lessee convened for such purpose;

 

(b)           the passing of resolutions by the
shareholders (other than Unicom Group and its Associates, who shall abstain
from voting) of China Unicom Limited approving (i) the Acquisition Agreement
and (ii) the Prospective Cellular Connected Transactions of China Unicom at an
extraordinary general meeting of China Unicom convened for such purpose; and

 

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

 

3.2           In the event that the Conditions have not been
satisfied 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 no
further effect and no party shall have any claim against any other and this
Agreement shall be void and of no further effect.

 

TERM
AND CAPACITY

 

Term

 

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

 

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

 

Initial
Capacity Commitment

 

4.3           During the Initial Term, the Lessee shall lease the
following 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

  

 

Additional
Capacity

 

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

 

4.5           Subject to clause 4.6, the Lessor shall ensure that
all Capacity which the Lessee has committed to lease or requested pursuant to
clause 4.3 or clause 4.4 is supplied by the due date of delivery of the
Capacity (the Capacity
Delivery Date) and otherwise in accordance with the notification
provided by the Lessee under clause 4.4. In addition, the Lessor shall also use
best endeavours to provide all such further Capacity as the Lessee may from
time to time request on less than 180 days’ notice, either by supplying
existing surplus Capacity, or through additional or accelerated expansion of
the Network in the Listed Service Areas or by other appropriate means.

 

 

4.6           Unless otherwise agreed between the Lessor and the
Lessee, the Lessor shall not be obliged to deliver any Additional Capacity if
to do so would require the Lessor to expand the Network beyond Phase 2 (as
described in clause 4.12).  However, if
the Lessor agrees to provide any such Additional Capacity, the provisions of
this Agreement (including the determination of Network Construction Cost and
the Lease Fee) shall apply equally in relation to all such Additional Capacity
which the Lessor has agreed to provide.

 

4.7           Subject to clause 4.6, if at any time any event occurs
or circumstances arise which may delay the delivery of any Capacity on the
scheduled 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 the
event or circumstances in question), notify the Lessee of that fact in writing.
Such notification shall set out:

 

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

 

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

 

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

 

4.8           Following receipt by the Lessee of any notification
pursuant 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 Delivery
Date.

 

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

 

(a)           a Force Majeure Event;

 

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

 

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

 

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

 

Consequences
of failure to achieve Capacity Delivery Dates

 

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

 

	
  Delay Discount

  	
   

  	
  =

  	
   

  	
  Daily Lease Fee
  of relevant delayed Capacity x period of delay (number of days)

  

 

The Delay Discount
shall be credited against next Lease Fee payment to be made by the Lessee (or

 

 

caused to be made
by the Lessee) to the Lessor.

 

Reduction
of Capacity

 

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

 

Network
Capacity

 

4.12         The Lessor represents to the Lessee that Phase 1 and
Phase 2 of the Network has a combined total Capacity of approximately 4.5165
million 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, agree
the total amount of Capacity to be constructed for each Additional Phase.

 

Subscriber
Capacity

 

4.14         All Phase 1 and Phase 2 Capacity leased hereunder
shall be calculated based on a nominal value of Erlang per Subscriber during
peak periods to be agreed between the Lessor and the Lessee for each local
region.

 

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

 

Spectrum

 

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

 

Network
Upgrade

 

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

 

LEASE
FEE

 

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

 

5.2           The parties agree that, by applying the formula set
out in Schedule 1, the current estimate of the Lease Fee per Subscriber for all
Phase 1 Capacity and Phase 2 Capacity, subject to clause 5.3, is RMB56.4 per
Quarter.

 

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

 

 

acceptance of each
Phase of the Network constructed after Phase 1 (each an Additional Phase), a
firm of auditors jointly selected by the Lessor and Lessee is appointed to
perform procedures agreed upon with the Lessor and Lessee to verify the final
Network Construction Cost in respect of such Additional Phase. The Lessor shall
provide the Lessee and the firm of auditors so appointed with certified copies
or originals of all such supporting invoices and receipts and other documentary
evidence and information as the Lessee or such auditors may require in order to
verify the Network Construction Cost in respect of any Additional Phase of the
Network. The auditors’ fees for carrying out the aforesaid procedures shall be
borne by the Lessor and the Lessee in equal shares.

 

5.4           In the event that the final Network Construction Cost
calculated under clause 5.3 in respect of an Additional Phase differs from the
Network Construction Cost calculated at the time of initial acceptance of such
Additional Phase by more than 1.0%, the final Network Construction Cost shall be
substituted for the initial Network Construction Cost used in calculating the
Lease Fee by applying the formula contained in Schedule 1, and any adjustment
in such Lease Fee shall apply from the commencement of the applicable Term.  Subject to the foregoing, subsequent
quarterly payments of the Lease Fee shall be increased or decreased as
appropriate to reflect the adjustment to the Lease Fee pursuant to this clause
5.4.

 

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

 

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 the
end of each Quarter during the Term. 
The total Lease Fee payable by the Lessee in respect of a Quarter shall
be calculated by applying the formula set out in Schedule 1. If new Capacity is
delivered into service after the Lease Effective Date, all Lease Fees in
respect thereof will be payable commencing from the date such Capacity is
delivered and ready for use, and the first payment, covering the period from
the date the Capacity is delivered and ready for use to the beginning of the
next Quarter, shall be payable in arrears within 30 days following the end of
the Quarter in which it is delivered.

 

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

 

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

 

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

 

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

 

PROCUREMENT
AND CONSTRUCTION OF THE NETWORK

 

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

 

 

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

 

7.3           Subject to complying with its obligations under clause
7.2, the Lessor shall use its best endeavours to ensure that the Equipment is
procured and the Network constructed for the lowest achievable cost, and shall
comply with any requirement of the Lessee that the purchase of the Equipment be
undertaken in a manner which is tax efficient for the Lessee.

 

ACCEPTANCE
AND 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 the
initial acceptance and the final acceptance arranged by the Equipment suppliers
in accordance with the Equipment supply and installation services contracts,
which shall incorporate the acceptance regulations of the Lessor. Representatives
of the Lessor and the Lessee shall effect initial and final acceptance of each
Additional Phase by execution and delivery to the Equipment suppliers of an
initial acceptance document and a final acceptance document, respectively.  The Lessee may elect to be represented or
accompanied by authorised representatives of the Operating Entity.

 

OPERATION, MANAGEMENT AND REVENUE

 

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

 

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

 

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

 

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 until the Network is transferred to the Lessee pursuant to clause
13.

 

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

 

RESPONSIBILITIES
OF THE PARTIES

 

Lessor’s
Responsibilities

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Lessee’s
Responsibilities

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

Unicom
Group’s Responsibilities

 

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

 

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

 

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

 

REPRESENTATIONS
AND WARRANTIES

 

Representations
and 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 validly
existing under the laws of the PRC and has the corporate power to own its
assets and carry on its business as it is being conducted;

 

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

 

(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 the Lessee, enforceable in
accordance with its terms;

 

(d)           Non-conflict: The entry into and performance
by the Lessee of, and the transactions contemplated by, this Agreement do not
and will not (i) conflict with the constitutional documents of the Lessee; or
(ii) conflict with or result in default under any document which is binding
upon the Lessee or any of its assets nor result in the creation of any Security
Interest over any of its assets;

 

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

 

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

 

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

 

 

Representations
and Warranties of the Lessor and Unicom Group

 

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

 

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

 

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

 

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

 

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

 

(e)           Authorisation: So far as concerns the
obligations of the Lessor, all authorisations, consents, registrations and
notifications required under the laws of the PRC in connection with the entry
into, performance, validity and enforceability of, and the transactions
contemplated 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 with
this Agreement will not cause the Operating Entity to breach any law,
regulation, direction, permission, waiver, consent, registration, approval or
other authorisation; and

 

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

 

Representations
and Warranties of Unicom Group

 

12.3         Unicom Group also represents and warrants to the
Lessee that:

 

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

 

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

 

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

 

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

 

(e)           Authorisation: So far as concerns the
obligations of Unicom Group, all authorisations, consents, registrations and
notifications required under the laws of the PRC in connection with the entry
into, performance, validity and enforceability of, and the transactions
contemplated 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 and
effect and there are no circumstances which indicate that such licence will or
is likely to be revoked, in whole or in part. In accordance with applicable PRC
laws and regulations, Unicom Group is permitted to authorise the Lessee to
provide CDMA mobile telecommunications services by using the Network;

 

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

 

PURCHASE
OPTION

 

13.1         The Lessor hereby grants the Lessee an option to
purchase the Network (the Purchase
Option).

 

13.2         The Purchase Option may be exercised at any time
during the Term and within 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 between the Lessor and the Lessee based on the
appraised value of the Network determined in accordance with applicable PRC
laws and regulations, and taking into account prevailing market conditions and
other relevant factors, provided that the acquisition price will not be greater
than such price as would, after taking into account all Lease Fee payments made
by the Lessee to the Lessor and deducting all Delay Discounts due to the Lessee
under 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 this
clause 13 shall be carried out in accordance with the relevant provisions of
the Shanghai Stock Exchange listing rules and all applicable PRC laws and
regulations (or the Listing Rules and all applicable Hong Kong laws after
completion of the Transfer Agreement).

 

13.4         As soon as practicable following the issue of a Purchase
Option Notice, the Lessor and Lessee shall negotiate in good faith and execute
an agreement in relation to the sale and purchase of the Network.  The agreement shall reflect the terms
referred to in this clause 13, as well as such other terms as the Lessor and
the Lessee shall agree. In the agreement, the Lessor shall provide such
representations and warranties as are reasonably requested by the Lessee in
relation to the Network and other related matters.

 

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

 

INSURANCE

 

14.1         During the construction period of each Additional
Phase of the Network, the Lessor shall fully and continuously maintain
insurance over the Network. The relevant insurance premiums shall be paid by
the Lessor and form part of the Network Construction Cost.  Such insurance policies shall name the
Lessor as the beneficiary.  Following
receipt by the Lessor of any proceeds of such insurance, the Lessor shall apply
all the proceeds to repair the Network.

 

14.2         After each Phase of the Network has been constructed
and made available to the Lessee, insurance of that Phase of the Network shall
be effected and maintained fully and continuously valid by or on behalf of the
Lessee on such terms and with such qualified insurance company as agreed by the
Lessor and the Lessee.  The relevant
insurance premiums, which form part of the cost of operating the Network, shall
be paid by or on behalf of the Lessee. 
The Lessor and the Lessee shall be named as joint beneficiaries under
all such insurance policies.

 

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

 

 

replacing the part
of the Network that has been damaged or lost. 
If the costs of such repair or replacement exceed the amount of relevant
proceeds of insurance, the excess shall be paid by the Lessor and shall form
part of the Network Construction Cost in case the damage or loss occurs during
the construction period, and shall be paid by or on behalf of the Lessee and
form part of the operating cost of the Network 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 and Lessee shall agree upon the detailed steps which can be taken to
repair or replace the Network so as to overcome, rectify and minimise such loss
or damage.

 

NETWORK
MAINTENANCE

 

15.1         The Lessee shall at all times during the Term:

 

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

 

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

 

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

 

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

 

GUARANTEE
AND INDEMNITY

 

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

 

16.2         Unicom Group agrees to indemnify the Lessee on demand
for any loss or damage suffered by any member of the Listed Group as a result
of any defect in any of the Equipment or any loss or damage caused by any
negligence, default, act or omission of the Lessor or Unicom Group under this
Agreement or in connection with the Network. The aggregate liability of Unicom
Group for any claim shall not exceed the total amount of Lease Fee payments
made by the Lessee to the Lessor and the total Purchase Price paid by the
Lessee for the Network.

 

CONFIDENTIALITY

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

FORCE
MAJEURE

 

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

 

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

 

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

 

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

 

(d)           immediately after the end of the Force
Majeure Event, the Affected Party shall notify the other parties in writing
that the Force Majeure Event has ended, the duration of the Force Majeure
Event, and shall resume performance of its obligations under this 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 any Additional Term. The Lessor may not terminate this Agreement except
in accordance with this clause 19.1 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
terminate this 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
this Agreement (save for any breach which is caused by the party seeking to
rely on it) and, in the case of such a breach which is capable of remedy, fails
to remedy the same within 90 days after receipt of a written notice giving full
particulars of the breach and requiring it to be remedied.

 

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

 

19.4         The rights to terminate this Agreement given by this
clause 19 shall not prejudice any other right or remedy of any party in
respect 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 or
obligations which have accrued prior to termination, no party shall have any
further obligation to the others under this Agreement.

 

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

 

 

Redelivery

 

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

 

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

 

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

 

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

 

NOTICES

 

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

 

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

 

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

 

(c)           in the case of prepaid 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 by hand or by fax occurs after 6 p.m. on a Business
Day or on a day which is not a Business Day, service shall be deemed to occur
at 9 a.m. on the next following Business Day.

 

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

 

20.2         The addresses and fax numbers of the parties for the
purpose 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 to
its name, relevant addressee, address or fax number for the purposes of this
clause 20, provided that such notice shall only be effective on:

 

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

 

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

 

ASSIGNMENT
AND SUB-CONTRACTING

 

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

 

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

 

SEVERABILITY

 

22.1         If any provision of this Agreement is held to be
invalid or unenforceable, then such provision shall (so far as it is invalid or
unenforceable) be given no effect and shall be deemed not to be included in
this Agreement but without invalidating any of the remaining provisions of this
Agreement.

 

FURTHER
ASSURANCE

 

23.1         Each party agrees to perform (or procure the
performance of) all further acts and things, and execute and deliver (or
procure the execution and delivery of) such further documents, as may be
required by law or as the other parties may reasonably require to implement
and/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 pay
its own costs and expenses (including legal costs) incurred in connection with
the negotiation, preparation and implementation of this Agreement.

 

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

 

WAIVERS
AND VARIATIONS

 

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

 

 

25.2         No variation of this Agreement (or of any of the
documents referred to in this Agreement) shall be valid unless it is in writing
and signed by or on 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 waiver of any provisions of this Agreement, nor shall it affect any
rights, obligations or liabilities under or pursuant to this Agreement which
have already accrued up to the date of variation, and the rights and
obligations of the parties under or pursuant to this Agreement shall remain in
full force and effect, except and only to the extent that they are so varied.

 

ENTIRE
AGREEMENT

 

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

 

GOVERNING
LAW; SETTLEMENT OF DISPUTES

 

27.1         This Agreement and the relationship between the
parties shall be governed 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 Agreement through friendly negotiation and consultation.

 

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

 

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

 

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

 

LANGUAGE

 

28.1         This Agreement shall be written in a Chinese version
and an English version in two originals each. If there exists any dispute
between the parties as to the interpretation of the two versions, then the two
versions shall be read in conjunction to determine the parties’ intention at
the time of signing. If the parties’ real intention still cannot be ascertained
by such reading, the Chinese version shall prevail.

 

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

 

 

SIGNED on behalf
of Unicom New Horizon

Telecommunications Corporation Limited

 

 

	
  By:

  	
  /s/ Zhang Yungao

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Zhang Yungao

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Legal
  Representative

  or Authorized
  Representative

  	
   

  

 

 

SIGNED on behalf
of China United

Telecommunications Corporation Limited

 

 

	
  By:

  	
  /s/ Sun Qian

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Sun Qian

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Legal
  Representative

  or Authorized
  Representative

  	
   

  

 

 

SIGNED on behalf
of China United

Telecommunications Corporation

 

 

	
  By:

  	
  /s/ Wang
  Jianzhou

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Wang Jianzhou

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Legal Representative

  or Authorized
  Representative

  	
   

  

 

 

SCHEDULE 1

 

Quarterly
Lease Fee Payment Calculation Formula

 

The total quarterly Lease
Fee payable in respect of any Phase of the Network shall be calculated as
follows:

 

 

Where:

 

Q = Quarterly Lease Fee
payment

 

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

 

Mij = Total Capacity
leased during the Quarter in a particular Term j and constructed as part of
Phase i

 

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

 

D = Total number of days
during the Quarter

 

i = Natural numbers
denoting the Phase number of the Network

 

j = Natural numbers
denoting the Term in which the Capacity is leased

 

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

 

	
  

  	
  =Ci x 4.6441%

  

 

Where:

 

Ci = Network Construction
Cost per Subscriber for Phase i

 

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

 

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

 

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

 

 

APPENDIX 1

 

Prospective
Cellular Connected Transactions of the Lessee

 

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

 

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

 

 

APPENDIX 2

 

Prospective
Cellular Connected Transactions of China Unicom

 

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

 

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

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