Document:

exv4w58

Exhibit 4.58

CU(01) – FIN – 2010–64 – 1459

2011-2013 Comprehensive Service Agreement

between

CHINA UNITED NETWORK

COMMUNICATIONS GROUP

COMPANY LIMITED

and

CHINA UNITED NETWORK

COMMUNICATIONS

CORPORATION LIMITED

October 29, 2010

 

 

Table of Contents

	 	 	 	 	 
	1. Basic Principles
	 	 	4	 
	2. The Components of Integrated Services
	 	 	6	 
	3. Pricing Principle and Payment
	 	 	6	 
	4. Validity
	 	 	7	 
	5. Representations, Warranties and Commitments
	 	 	7	 
	6. Coming Into Force
	 	 	9	 
	7. Force Majeure
	 	 	9	 
	8. Confidentiality
	 	 	9	 
	9. Non Waiver
	 	 	9	 
	10. Notice
	 	 	10	 
	11. Applicable Laws
	 	 	10	 
	12. Dispute Resolution
	 	 	10	 
	13. Other
	 	 	10	 
	Annex I: Lease of Telecommunication Resources
	 	 	12	 
	Annex II: Premises Leasing
	 	 	14	 
	Annex III: Telecom Value-added Services
	 	 	16	 
	Annex IV: Materials Procurement
	 	 	17	 
	Annex V: Project Design and Construction
	 	 	19	 
	Annex VI: Auxiliary Telecommunication Services
	 	 	21	 
	Annex VII: Integrated Services
	 	 	23	 
	Annex VIII: Shared Services
	 	 	25	 

 

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The Comprehensive Service Agreement (hereinafter referred to as “the Agreement”) is signed by the
following Parties on October 29, 2010 in Beijing, People’s Republic of China (hereinafter referred
to as “China”):

(1) Party
A: China United Network Communications Group Company Limited (hereinafter referred to as
“the Unicom Group”)

Address: 21 Financial Street, Xicheng District, Beijing

Legal Representative: CHANG Xiaobing

(2) Party
B: China United Network Communications Corporation Limited (hereinafter referred to as
“CUCL”)

Address: 21 Financial Street, Xicheng District, Beijing

Legal Representative: CHANG Xiaobing

Each of the Parties to the Agreement is individually called “the Party” and collectively “the
Parties”.

Whereas:

(1) Duly organized and validly existing under the laws of China, the Unicom Group is an
integrated telecom service carrier with limited liability. Duly organized and validly existing
under the laws of China, China United Network Communications Limited (hereinafter referred to as
“the Unicom A Share Company”) is a company limited by shares and traded on the Shanghai Stock
Exchange (hereinafter referred to as “the SHSE”) starting from October 9, 2002. The Unicom Group is
the controlling shareholder of the Unicom A Share Company;

(2) The Unicom A Share Company exercises indirect share-holding of China Unicom (Hong Kong) Limited
(hereinafter referred to as “the Unicom Red-chip Company”) through China Unicom (BVI) Limited (“the
Unicom BVI Company”). Registered in the Hong Kong SAR, China (hereinafter referred to as “Hong
Kong”), the Unicom Red-chip Company is a company limited by shares and traded on Hong Kong and the
U. S. exchanges;

(3) CUCL is a foreign-invested company duly organized and validly existing under the laws of China,
with the Unicom Red-chip Company holding 100% of its stake. CUCL mainly operates fixed-line local
telephone services nationwide (including wireless local loop service), public telegraph and telex
services, domestic communications infrastructure services, domestic long-distance fixed-line
telephone services, international long-distance fixed-line telephone services, IP telephone
services (Phone-to-Phone only), 900/1800MHz GSM second-generation digital cellular mobile
communications services, WCDMA third-generation digital cellular mobile communications services,
international satellite private line services, Internet data transmission services, international
data communication services, 26GHz wireless access services as well as mobile communications
services in 31 provinces (autonomous regions and municipalities), including Beijing, Tianjin,
Shanghai, Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian, Guangdong, Hubei, Anhui, Sichuan,
Guizhou, Xinjiang, Chongqing, Shaanxi, Guangxi, Henan, Heilongjiang, Jilin, Jiangxi , Shanxi, Inner

 

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Mongolia, Hunan, Hainan, Yunnan, Ningxia, Gansu, Qinghai and Tibet;

(4) On May 24, 2008, Ministry of Industry and Information Technology (MIIT), National Development
and Reform Commission (NDRC) and Ministry of Finance jointly issued a <Circular on Deepening the
Reform of China’s Telecom System>. Accordingly, the Chinese government moved to deepen the
reform of the telecom system by endorsing the formation of three leading market players that
feature nationwide network resources, roughly equivalent power and size and the capacity to run
fully-integrated services, as well as by encouraging China Telecom to acquire China Unicom’s CDMA
facilities and the merger of China Unicom and China Netcom. In response to the call for deepening
reform and implementing restructuring in the telecom sector, the Unicom Red-chip Company and China
Netcom Group Corporation (Hong Kong) Limited (a company organized as per the laws of Hong Kong and
listed on the Hong Kong Stock Exchange and the New York Stock Exchange, hereinafter referred to as
“the Netcom Red-chip Company”) intended to merge by scheme of arrangement (“the Merger
Transaction”). Following the merger, the Netcom Red-chip Company was delisted from the Hong Kong
Stock Exchange and the New York Stock Exchange to become a wholly owned subsidiary of the Unicom
Red-chip Company; and

(5) For the purpose of enabling the Unicom Red-chip Company and its subsidiaries to run telecom
businesses and in conformity with the relevant provisions of the <Shanghai Stock Exchange
Listing Rules> (hereinafter referred to as “< The SHSE Rules>”) applicable from time to
time and the <Hong Kong Stock Exchange Listing Rules> (hereinafter referred to as “<THE
HKSE Rules>”) applicable from time to time, the Unicom Group and its subsidiaries (excluding
the Unicom A Share Company and its subsidiaries) have established a series of arrangements with
CUCL for continuing connected transactions (hereinafter referred to as the “Arrangement for
Continuing Connected Transactions”). As per <The SHSE Rules> and <The HKSE Rules>, such
continuing connected transactions shall be made public by the Unicom A Share Company and the Unicom
Red-chip Company in conformity with their respective listing Rules as applicable, without the
necessity to seek approval from their respective General Meetings of Shareholders. The Arrangements
for the above continuing connected transactions will be valid for 3 years, starting from 1 January
2011 and ending on December 31, 2013.

As per the specific implementation of the relevant continuing connected transactions, following
joint research and discussions as well as based on equality and mutual benefit, the Parties have
reached the following agreement:

1. Basic Principles

1.1 The “Integrated Services” under the Agreement refers to certain services and facilities
provided from one Party to the other Party or mutually provided between the Parties, with the
receiving Party paying the associated costs (hereinafter referred to as “the Service Fee”). Unless
otherwise agreed to, the Parties keep the right to allow its controlled subsidiaries (to be
determined in light of the <Corporate Accounting Standards> as revised by Ministry of Finance
from time to time) to provide or receive as well as charge or pay for services as per the terms and
conditions of the Agreement.

1.2 The services and/or facilities from any Party to the other Party as per the Agreement shall be
regarded as paid transactions in the business exchanges between companies, where the former Party
has the right to charge a reasonable amount of fees for the service and/or facilities it
provides pursuant to the fair market principle and the latter Party shall fulfill the corresponding
payment obligations.

 

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1.3 The conditions and quality of services and/or facilities provided by either Party to the other
Party shall not be any worse than those of the same or similar services and/or facilities it
provides to any third party. While exercising rights or fulfilling obligations under the Agreement,
the Parties shall observe the principle of fair trade.

1.4 In case that either Party requires the other Party to increase the services and/or facilities
provided under the Agreement, the other Party shall make its best efforts to provide the requested
services and/or facilities, with conditions of such services and/or facilities no worse than those
provided to any third party.

1.5 In case that the services and/or facilities under the Agreement cannot be provided in whole or
in part by one Party due to its own reasons, the Party in question shall promptly notify the other
Party, and do its best to help the other Party to get the same or similar services and/or
facilities from other sources.

1.6 The services and/or facilities provided under the Agreement shall comply with the purpose of
usage as agreed upon by the Parties and the standards prescribed by the State.

1.7 For any losses inflicted upon the counterParty as a result of breach of the Agreement by any
Party, the inflicting Party shall bear the corresponding liabilities to the other Party for the
breach (including but not limited to direct and indirect losses inflicted upon the other Party for
breach of the Agreement). However, the inflicting Party shall not be held liable for losses caused
by force majeure.

1.8 While either Party is fulfilling its obligations under the Agreement, the other Party shall
provide reasonable assistance where necessary.

1.9 Pursuant to the premise of Clause 1.3 of the Agreement and on condition that the charges from
one Party do not exceed those from an independent third party, the Party that receives the services
and/or facilities (hereinafter referred to as “the receiving Party”) agrees to opt for the
counterParty as its preferred service provider.

1.10 If there is an independent third party within the jurisdiction of one Party where the services
are provided, and the third party: (i) provides higher quality of services; or (ii) provides the
same level of services but charges less; then the receiving Party keeps the right to terminate the
services provided by the counterParty within the jurisdiction following a written notice to the
counterParty, for which the receiving Party shall bear no liability.

 

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2. The Components of Integrated Services

2.1 The integrated services mutually provided between the Parties under the Agreement and the
associated arrangements are set out in the following annexes:

Annex I: Lease of Telecommunication Resources (provided from Party A to Party B);

Annex II: Premises Leasing (mutually provided);

Annex III: Telecom Value-added Services (provided from Party A to Party B);

Annex IV: Materials Procurement (provided from Party A to Party B);

Annex V: Project Design and Construction (provided from Party A to Party B);

Annex VI: Auxiliary Telecommunication Services (provided from Party A to Party B);

Annex VII: Integrated Services (mutually provided);

Annex VIII: Shared Services (mutually provided)

3. Pricing Principle and Payment

3.1 The pricing principles and/or service fee under the Agreement are set out in the Annexes to the
Agreement.

3.2 Calculation of the exact amount of service fee under the Agreement is subject to the relevant
Chinese accounting standards applicable from time to time.

3.3 In case that the Parties cannot agree upon the amount of service fee under the Agreement, they
shall jointly submit the matter to the competent department for the latter to determine the level
of fees with reference to the spirit and provisions of the Agreement and in accordance with
price-related national policies and regulations. The decision of that department shall be deemed
final and binding on the Parties.

3.4 As per the pricing principles and standards contained in the Agreement and the annex herewith,
either Party shall pay the other Party in a timely fashion for the corresponding services it
receives.

3.5 In case that either Party does not pay the service fee as agreed upon by the Parties in due
course, then for each day exceeding the time limit, the defaulting Party shall pay the other Party
a late fee of 0.05% of the amount overdue; in case that the time limit is exceeded by 60 days and
above, the receiving Party may opt to terminate the corresponding services following a written
notice to the defaulting Party. If the defaulting Party still does not pay the service fee 30 days
after receipt of the notice, the receiving Party may declare termination of the corresponding
services. However, the suspension or termination of such services shall not affect any prior rights
or obligations of the Parties that have already occurred or arisen under the Agreement.

3.6 In October each year, the Parties shall carry out a review of the pricing standards and terms
and conditions for the next fiscal year in regard to the services and facilities provided as per
the Agreement, for which a supplementary agreement is to be signed. If the Parties do not arrive at
a consensus prior to the above deadline in regard to the provisions of the supplementary agreement,
then the pricing standards and relevant provisions for the current year shall apply in the next
fiscal year before the Parties arrive at a consensus or the discrepancies between the Parties are
duly addressed pursuant to Clause 3.3 of the Agreement.

 

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4. Validity

4.1 The Agreement is valid for 3 years (“the Effective Period”), with immediate effect the next day
following satisfaction of the conditions contained in Clause 6 of the Agreement.

4.2 Unless Party B informs Party A via a written notice at least 60 days in advance, the Agreement
shall be automatically renewed for another effective period at the expiry of the Agreement or its
extension period as long as the relevant laws, regulations or regulatory rules are applied.

5. Representations, Warranties and Commitments

5.1 The Parties make the following representations, warranties and commitments to each other:

5.1.1 It has full power and authority (including but not limited to the approval, consent or
permission from competent government departments) to sign the Agreement and its annexes;

5.1.2 The Agreement and its annexes are valid and binding upon signing and sealing in the manner
provided in the Agreement, with compulsory execution permissible as per its terms and conditions;

5.1.3 Any provisions in the Agreement and its annexes are not in violation of the laws and
regulations of China.

5.2 As per relevant laws, regulations and Listing Rules, the Unicom Group agrees to continue to
support the Unicom Red-chip Company and its subsidiary companies (collectively referred to as “the
Relevant Operating Subsidiaries”) in their sustainable development, including:

5.2.1 All the current or future business-related licenses, consents, permissions and approvals
(including the Unicom Group’s operating license for engaging in telecom businesses, the same below)
and other distributed and/or acquired resources (including but not limited to spectrum, frequency,
numbers, trademarks, names and other resources, the same below) from national communications
regulators (e.g., MIIT) and other competent departments that are associated with the CUCL’s listed
businesses will also apply to the relevant operating subsidiaries. The Unicom Group will continue
to hold, retain and update such licenses, consents, permissions, approvals and other resources
pursuant to laws for the exclusive benefit of the relevant operating subsidiaries’ engagement in
listed businesses, and will not conduct any act or omission that may adversely affect the legality,
validity or renewability of such licenses, consents, permissions, approvals and other resources or
the ability of the relevant operating subsidiaries to engage in listed businesses pursuant to laws
and regulations; and will conduct all acts or omissions for obtaining, maintaining, retaining,
updating or extending the legality, validity or renewability of
such licenses, consents, permissions, approvals and other resources as well as the ability of the
relevant operating subsidiaries to engage in listed businesses pursuant to laws and regulations;

 

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5.2.2 To enable the relevant operating subsidiaries to engage in listed businesses, the Unicom
Group will provide assistance to relevant operating subsidiaries to involve them in its existing or
future roaming arrangements with third parties on normal commercial terms;

5.2.3 With regard to the equity/shares of the listed group that is/are in the beneficial ownership
of the Unicom Group, the Unicom Group will not engage in any acts that may lead to the Unicom Group
losing the right of control of the relevant operating subsidiaries. For the avoidance of doubt, the
provisions of the <Accounting Standards> as revised by Ministry of Finance from time to time
shall prevail in the determination of the above right of control. Subject to relevant laws,
regulations and Listing Rules, the Unicom Group will not approve or agree to the occurrence or
implementation of the foregoing acts either;

5.2.4 In case that there are any connected transactions between the relevant operating subsidiaries
and the Unicom Group, the accountants (or auditors, the same below) appointed by the relevant
operating subsidiaries are needed to audit the relevant accounting records of such connected
transactions as per the laws or Listing Rules of the jurisdictions where the shares of the listed
company are traded. For the purpose of carrying out such audits, the Unicom Group agrees to
facilitate the full access by the accountants appointed by the relevant operating subsidiaries to
the accounting records (including the accounting records of the Unicom Group and/or its contacts);

5.2.5 Except through the Unicom Red-chip Company, the Unicom Group will not seek overseas listing
for itself or its affiliated enterprises in regard to any present or future businesses that are
similar to those offered or to be offered by the listed group;

5.2.6 The Unicom Group is committed to the following: as long as the shares of the Unicom A Share
Company and the Unicom Red-chip Company are traded on the stock market, and the Unicom Group is
considered as the controlling shareholder of the Unicom A Share Company and the Unicom Red-chip
Company as well as the contact of the controlling shareholder as per the laws or Listing Rules of
the jurisdictions where the shares are traded, then: (1) the Unicom Group will not engage or
participate in any competitive businesses in China in any form (including but not limited to sole
proprietorship, joint venture or cooperative operation as well as direct or indirect ownership of
the stock or other interests of other companies, but excluding those through the relevant operating
subsidiaries, the same below), and will prevent and keep any of its affiliated enterprises from
doing so; (2) If the Unicom Group and/or any of its affiliated enterprises participates or engages
in any businesses or activities that evolves to competitive businesses at any time, in any form or
in any place in China, the Unicom Group will promptly terminate and/or enable the termination of
the participation, management or operation of such competitive businesses by its respective
affiliated enterprises;

5.2.7 If the Unicom Group or any of its affiliate enterprises obtains any government approval,
authorization or permission to develop any new telecom technologies, products or services, or
wishes to develop any new telecom technologies, products or services, or is allowed to engage in
any other business opportunities, the Unicom Group shall directly notify and/or urge its respective
affiliated enterprise to notify the situation to the relevant operating subsidiary in a
timely fashion, and above all provide such government approvals, authorizations or permissions as
well as such rights to develop new telecom technologies, products and services or to exploit
business opportunities to CUCL or its subsidiaries in view of the needs of the relevant operating
subsidiaries after going through necessary formalities;

 

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5.2.8 The Parties agree that the above representations, warranties and commitments of the Unicom
Group will replace the relevant representations, warranties and commitments contained in
subsections (13), (14), (16), (17) and (18) of Clause 3.2 as well as Clause 5.1 and 5.2 of the
<Restructuring Agreement> signed between the Unicom Group and CUCL on April 21, 2000, while
the rest of the provisions in the <Restructuring Agreement> remain unchanged.

6. Coming Into Force

The agreement shall come into force from the date appearing atop the main text of the Agreement
subject to the review and approval by the Board of Directors of the Unicom A Share Company and the
Unicom Red-chip Company as well as signatures and seals by the Parties.

7. Force Majeure

In the event that one Party cannot fulfill its obligations as per the agreed conditions contained
in the Agreement and its Annexes due to unforeseen force majeure of which the occurrences and
consequences are unavoidable and insuperable, the Party shall promptly inform the situation to the
other Party, and present to the other Party within 15 days the details and valid documents
supporting its inability to fulfill in whole or in part its obligations under the Agreement and its
annexes or listing the reasons for its delayed execution of such obligations. As per the magnitude
of influence of force majeure on the execution of such obligations, the Parties shall decide
whether to suspend, partially exempt or delay the execution of such obligations.

8. Confidentiality

Unless otherwise provided for by laws or regulatory authorities or for the purpose of information
disclosure by Party B to regulatory authorities, without written permission from the counterParty,
neither Party shall provide or disclose any material or information relating to the businesses of
the other Party to any company, enterprise, organization or individual.

9. Non Waiver

Unless otherwise provided for by laws, failure by either Party to exercise or delay the exercise of
its rights, power or privilege under the Agreement shall not be deemed waiver of such rights, power
or privilege, and the exercise of such rights, power or privilege in part shall not hinder future
exercise of such rights, power or privilege.

 

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10. Notice

Any notice in relation to the Agreement shall be made in writing and delivered by hand, fax or post
from one Party to the other Party. Notices shall be regarded as delivered when signed by the
recipient (hand delivery), when the sender’s fax machine displays “sent” (facsimile) or on the
third working day in the wake of mailing (postal delivery, in which case the date shall be
automatically extended when coinciding with legal holidays). Notices shall take immediate effect
upon delivery.

11. Applicable Laws

Governed by the laws of China, interpretation and implementation of the Agreement is also subject
to the laws of China.

12. Dispute Resolution

Except for the situation provided for in Clause 3.3 of the Agreement, all disputes arising out of
implementation of the Agreement or relating to the Agreement shall be resolved through friendly
consultations between the Parties. In case that no consensus is reached within thirty (30) days
after one Party makes the request to resolve the dispute through consultations, either Party may
submit the dispute to China International Economic and Trade Arbitration Commission (CIETAC), in
which case three (3) arbitrators are required to resolve the dispute in Beijing by arbitration as
per the then effective arbitration rules. With Chinese as the arbitration language, the arbitration
award shall be final and binding on the Parties. Unless otherwise provided by the arbitral
tribunal, the arbitration costs shall be borne by the losing Party.

13. Other

13.1 Once the Agreement enters into force, the original arrangement of continuing connected
transactions shall be terminated.

13.2 Annex I to Annex VIII of the Agreement forms an integral part of the Agreement and bears the
same effect as the main text of the Agreement. In case that the text of the annexes is inconsistent
with that of the Agreement, the text of the annexes shall prevail.

13.3 As agreed by the Parties, the Parties may opt to amend or supplement the Agreement and its
annexes. All amendments or supplements shall enter into force following signatures and seals in
writing by legal representatives or authorized representatives of the Parties.

13.4 The Agreement is severable, i.e., if any provision of the Agreement or its annexes is
determined as illegal or unenforceable, the effectiveness and implementation of other provisions of
the Agreement and its annexes shall not be affected accordingly.

13.5 The Agreement is made in four original copies, with each Party holding two copies and all the
four copies bearing the same legal effect.

 

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China
United Network Communications Group Company Limited (Seal)

Legal representative or authorized representative:

	 	 	 
	/s/ Zhao Yujun
 

	 	 

China
United Network Communications Corporation Limited (Seal)

Legal representative or authorized representative:

	 	 	 
	/s/ Tong Jilu

	 	 

 

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Annex I: Lease of Telecommunication Resources

1. Lease of Telecommunication Resources

The two Parties agree that Party B lease Party A’s international telecommunications channel
gateways (including international submarine cable landing stations, international land cable entry
points, landing stations or entry extension terminal stations, as well as international satellite
earth stations), international telecommunications service gateways (including international voice
exchanges, the STPs, international ATM/FR nodes, international transmission/DDN, international
nodes for IP networks and international internet gateways (IIGs)), the international submarine
cable capacity, international land cables and other international telecommunications resources (in
short the “International Telecommunications Resources”), as well as other telecommunications
facilities owned by Party A but needed by Party B in its service operations (“Telecommunications
Resources and Facilities”).

2. Contents of the Lease of Telecommunications Resources and Facilities

2.1 Party B leases international telecommunications resources owned by Party A.

2.2 Party B leases other telecommunications resources and facilities owned by Party A.

2.3 The two Parties shall make adjustments where necessary to the scope, type and quantity of
telecommunications resources and facilities at any time. Such adjustments shall be confirmed once a
year.

3. Obligations

3.1 Party B shall be responsible for maintaining the leased international telecommunications
resources at its own expense in accordance with relevant regulations and specifications.

3.2 The two Parties shall determine through consultation which Party is to undertake the
maintenance task in part or in full for the telecommunications facilities, in which case the
relevant costs shall be borne by Party B (unless otherwise agreed by the two Parties); if Party A
undertakes the maintenance task in part or in full for the telecommunications facilities, Party B
shall make compensations to Party A for the costs arising therefrom.

3.3 Party B shall make proper use of the leased telecommunications resources and facilities. In the
validity of this Annex and to the extent permitted by the laws where applicable, Party B shall be
entitled to lease the telecommunications resources and facilities to any of the third parties as
part of its normal Network Elements (NE) lease services, for which the rates shall be based on
relevant state regulations and the principles of equality and fairness.

3.4 If Party B deems it necessary to suspend the telecommunications resources and facilities for
the sake of maintenance and other reasons, a prior notice shall be issued to
Party A within a reasonable period of time.

 

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4. Quality Assurance

4.1 Party A shall ensure that the quality of its telecommunications resources and facilities to be
leased are in line with national standards and regulations.

4.2 Party B shall ensure that its telecommunications equipment connected to the telecommunications
resources and facilities is in line with the quality standards and technical requirements provided
by the competent national authorities.

5. Fees and Payment

5.1 The rental fee to be paid by Party B for the telecommunications resources and facilities shall
be equal to the annual depreciation of such resources and facilities and no higher than the market
price.

5.2 Within three months after the end of each calendar year, the two Parties shall carry out a
review of the rental fee of the telecommunications resources and facilities (if necessary) provided
pursuant to this Annex. Adjustments shall be made in the next year with regard to the rental fee
errors (if any) identified in the review process.

5.3 The expenses to be paid under Clause 3.2 of this Annex shall be determined with reference to
the market price. In case that no market price is available, the price shall be worked out by the
two Parties through negotiation. However, the price shall be negotiated on a “cost plus” basis, and
the “cost acceptable” means the cost to be determined by the two Parties through negotiation.

5.4 Within ten working days following the end of each quarter, Party B shall provide to Party A a
list of rental charges of the previous quarter, as well as a list of the charges and fees provided
pursuant to aforementioned Clause 5.3 of this Annex. Meanwhile, Party B shall pay Party A the
balance of rental charges after deduction of the relevant charges provided pursuant to Clause 5.3
hereinbefore. After the receipt of the payment, Party A shall issue a statement of payment to Party
B. Where dispute arises, adjustments shall be made in the next quarter upon confirmation by the two
Parties.

5.5 The two Parties shall pay rental charges and fees in light of the articles heretofore. In the
event of overdue payment, a penalty charge of 0.05% of the amount due will be imposed on the Party
owing the payment for each day (1 day) of outstanding payment.

 

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Annex II: Premises Leasing

1. Scope and Purposes of Leasing

1.1 Party A and Party B agree to lease premises and related attached equipment owned respectively
by their branches, subsidiaries, affiliated companies or holding enterprises or units (“subsidiary
companies”) to each other for the purpose of production and operation. Both Parties confirm that
subsidiary companies hereinbefore have agreed to entrust Party A and Party B with the rights to
lease the premises under this Annex.

Party A agrees to lease its own premises and related attached equipment under this Annex (“Party
A’s Premises) to Party B; Party B agrees to rent Party A’s Premises and pay the consideration
accordingly. Meanwhile, Party B agrees to lease its own premises and related attached equipment
under this Annex (“Party B’s Premises) to Party A; Party A agrees to rent Party B’s Premises and
pay the consideration accordingly.

1.2 Party A and Party B agree that the premises leased from each other are to be used for business
operation in accordance with the law within the scope permitted. One Party may re-lease the other
Party’s premises to the third parties upon the written permission of the other Party herein.
However, the sub-lessee shall still bear the responsibilities and obligations hereunder for the
leased premises.

2. Lease Term

2.1 The lease term of the premises under the Annex shall be determined by the two Parties in
accordance with the specific leasing circumstances of each leased premise, but shall be subject to
the provisions of Clause 2.2 of this Annex.

2.2 If the Lessee commits one of the acts described hereinafter, the Lessor is entitled to
terminate the lease of the premises under this Annex:

(1) The Lessee subleases or lends the Lessor’s premises to other Parties without the Lessor’s
consent (excluding subleasing or lending to the affiliated companies or associated companies of the
Lessee);

(2) The Lessee breaches the agreed articles of lease purposes, or uses the Lessor’s premises to
carry out unlawful or illegal activities and infringes upon the interests of the public.

2.3 On the expiry of this Annex, if the Lessee waives the right to renew the lease according to
this Annex, but is unable to actually return the rental premises to the Lessor due to business
operation, the Lessor shall extend, as appropriate, the lease term, and shall be entitled to charge
the Lessee for the extended rent. The specific amount shall be determined by the Lessee and the
Lessor through consultation.

3. Rents and Payment

3.1 Party A and Party B agree that the specific rent of the premises and attached
equipment leased to each other shall be determined by both Parties based on the market price or the
depreciation as well as the tax with reference to the rent standard provided by local pricing
authorities and taking into consideration of the specific needs of the two Parties. The rents shall
be no higher than the market price.

 

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3.2 Party A and Party B agree that the leasing of each Party’s specific premises may be stipulated
in separate execution documents otherwise signed in order to provide the applicable terms and
conditions. However, the execution documents shall be in line with the principles, guidelines,
terms and conditions provided by this Annex.

3.3 A review of the rent provided in this Article hereto shall be carried out once a year, and
whether adjustments are needed as well as the specific rental prices after adjustments shall be
determined by both Parties through consultations. Only the adjusted rent shall be no higher than
the market price.

3.4 The rent shall be settled once every quarter, and the settlement date shall be the last day of
each quarter. Should the last day be Saturday, Sunday or public holiday, the settlement date shall
be postponed to the first working day after the end of holidays.

3.5 All administrative fees and other fees arising from the lease of Party A and Party B’s premises
charged by the state and local government shall be borne by the Lessor, unless otherwise expressly
stipulated in this Annex.

3.6 The Lessee shall pay the rent to the Lessor in light of the Article hereof. In the event of
overdue payment, a penalty charge of 0.05% of the amount due will be charged by the Lessor for each
day (1 calendar day, similarly hereinafter) of outstanding payment.

4. Repairing and Refurbishment during Lease Term

The Lessor shall undertake the obligations of repairing and refurbishing the premises during the
lease term and bear the costs arising therefrom. Unless otherwise provided by this Annex, the
Lessee shall consult the Lessor and both Parties shall reach written agreements before carrying out
any necessary decoration construction in the leased premises, such as transformation of the main
structure of the premise. However, the Lessor shall not reject or delay the Lessee’s request for
the transformation of the main structure of the premise without reasonable grounds. With the main
structure of the premises remaining untouched, the Lessee can make alteration and addition at its
own expenses without informing the Lessor or obtaining its consent. The additions or values arising
from the decoration, alteration or addition made by the Lessee or the Lessor during the lease term
shall belong to the Lessor.

5. Change of Lessor

5.1 In the event that the Lessor transfers the ownership of its rental premises to the third
parties, this Annex shall remain valid for the new owner of the premises.

5.2 The Lessor shall inform the Lessee three months prior to the sale of the ownership of the
leased premises. Under the same terms the Lessee has the right of preemption to the Premises.

 

15

 

Annex III: Telecom Value-added Services

1. General Description of Service Contents

Party A (or its holding subsidiaries) as a Provider offers various value-added services to Party
B’s subscribers through all kinds of telecommunications networks and data platforms.

2. Settlement

2.1 With regard to the actual cash revenue generated from the value-added services described in
this Annex offered by the Provider to Party B, the settlement shall be made between the respective
branches of Party B and the Provider in line with the average proportion of revenue sharing between
Party B and the CPs/SPs of the same kind who are independent from the Provider in the same market
area.

2.2 Settlement shall be based on Party B’s billing information.

2.3 Both Parties agree that the settlement should be made once a month directly by each Party’s
relevant subordinated bodies in light of the settlement principles provided by this Annex.

3. Obligations

3.1 Where the services under this Annex may be affected due to one Party’s network construction
(including but not limited to capacity expansion or renovation), the Party carrying out the
construction work shall inform the other Party six months in advance.

3.2 Both Parties shall conduct network maintenance in line with related regulations provided by
competent national telecommunications authorities at any time so as to guarantee the normal
operation of the whole network.

3.3 Without the consent of the other Party, neither Party shall suspend the telecommunications
generated from services under this Annex. Where telecommunications were suspended or severely
impeded, both Parties shall take effective measures immediately to recover the telecommunications
service.

 

16

 

Annex IV: Materials Procurement

1. Scope of Materials Procurement Services

1.1 Materials procurement service items provided by Party A to Party B under this Annex include but
not limited to:

	(1)	 	Procurement of imported telecom materials;

	 
	(2)	 	Procurement of domestic telecom materials;

	 
	(3)	 	Procurement of domestic non-telecom materials.

Abovementioned procurement services also include management of bidding and tendering, review of
technical specifications, installation, inquiry, and agent services.

1.2 The proprietary materials sold by Party A directly to Party B mainly include cables, modems and
so on.

1.3 Party A also provides Party B with storage, transportation and other services related to
material procurement services and direct materials procurement.

2. Service Fees and Payment

2.1 Party B shall pay service fees to Party A for purchasing equipment:

(1) The pricing and/or charging standard of the commission on the domestic material procurement
services under this Annex shall not exceed 3% of the material procurement contract amount.

(2) The pricing and/or charging standard of the commission on the imported material procurement
services under this Annex shall not exceed 1% of the material procurement contract amount.

(3) The pricing standard of part of Party A’s proprietary materials sold to Party B under this
Annex shall be determined pursuant to principles and order provided hereinafter: the government
price shall be adopted where it is available; the government-guided price shall be adopted where it
is available; in case that neither government price nor government-guided price is available yet
market price is available, the standard shall be worked out with reference to the market price; in
the event that no government price, government-guided price or market price is available, the
standard shall be worked out by the two Parties through negotiation. However, the price shall be
negotiated on a cost-plus basis, and the “cost acceptable” to the two Parties shall also be
determined through negotiation.

 

17

 

(4) The pricing and/or charging standard of the commission on storage, transportation and
other services related to material procurement services and direct materials procurement under this
Annex shall be determined with reference to the market price. The “market price” herein means price
that is set by the proprietor independently and formed through market competition. The market price
shall be determined pursuant to the following order: (1) the price charged by the independent third
parties offering such
services under normal trading in the area where the service is provided or in the vicinity; or (2)
the price charged by the independent third parties offering such services under normal trading
within China’s territory.

2.2 Party B agrees to pay service fees to Party A each month.

In the event of overdue payment, Party B shall pay Party A a penalty at the rate of 0.05% of the
amount overdue for each day (1 day).

 

18

 

Annex V: Project Design and Construction

1. Main contents

Under this annex, Party A shall provide the following services for Party B in terms of project
design and construction:

(1) Project design, including:

Planning and design, project investigation and survey, communication circuit engineering
(including pipeline projects, fiber and cable projects, and overhead pole line projects),
communication equipment projects (including phone switching project, transmission projects, data
and multimedia projects, communication power and air-conditioning projects, microwave
communication projects and technical support system projects) and corporate communication
projects;

(2) Project construction, including:

Communication equipment, communication lines, communication power (including air conditioners for
communication), communication pipelines and technical business support system;

(3) Project supervision

(4) IT services, including:

Office automation, software testing, network upgrading, R&D of new services and support systems.

2. Pricing principles

Except the situation described in the Clause 2 (2), the service pricing and/or charging standards
for project design and construction under this annex, shall be set in accordance with the market
price. The “market price” under this Article, refers to the price offered by the operators in the
market and formed through market competition. The market price will be determined in the following
order: (1) the price offered by the independent third party for the service under the normal
transaction around the places or areas where the service is provided; or (2) the price offered by
the independent third party of service provider under the normal transaction within the Chinese
territory.

Agreed by the two Parties, the receiving Party shall decide the specific provider for project
design service and technical service by means of bidding. The qualifications and conditions of the
provider shall be no lower than an independent party, and is in the equal position with the
independent third party to engage in the bidding.

 

19

 

	3.	 	Service payments

3.1 Party B shall pay Party A or Party A’s fiduciaries for service fees in a timely manner in
accordance with the pricing and charging standards defined in this annex, the supplementary
agreements of this annex (if any) and the execution documents.

3.2 If Party B fails to pay the relevant service fees as scheduled according to the provisions in
this annex, the supplementary agreements of this annex (if any) and the execution documents, Party
B shall pay Party A 0.05% of the overdue amount as fine for delaying payment every one (1) day
(calendar day, hereinafter inclusive); if the payment is deferred for sixty (60) days, Party A may
inform Party B in written form of the suspension of the service; if Party B fails to pay the
relevant service fees within thirty (30) days upon the receipt of the written notification, Party A
may declare the termination of the relevant services. However, the suspension or termination of the
services will not affect the rights and obligations underway between the two Parties under this
annex.

4. Priority

4.1 Unless otherwise provided, for the same service, if the clauses and conditions provided by
independent third party for Party B are not superior to those provided by Party A, Party B shall
give priority to Party A.

4.2 Party A shall make commitment to Party B that the conditions that Party A provide for the
third party will not be superior to Party B concerning the same or similar services under this
annex.

4.3 Party A has rights to provide services for the third party under the circumstances that
services provided by Party A for Party B under this annex will not be affected.

 

20

 

Annex VI: Auxiliary Telecommunication Services

1. Main contents

The auxiliary telecom services provided by Party A for Party B under this annex include: the
provision of the auxiliary telecom services including pre-sale, sale and after-sale of various
communication services, such as installation, disassembly, transfer and repair of customers’
communication equipment, agential sales of certain communication products, bills printing and
mailing, collecting telephone charges, making telephone cards and developing new customers;
market and customers information collection and feedback; maintenance of auxiliary equipment of
communication bureaus or rooms (such as air conditioners and firefighting equipment) and
telephone booths.

2. Pricing principles

2.1 The pricing and/or charging standards for auxiliary telecom services under this annex shall be
set based on the principles and order defined in this article: the services with prices set by the
government shall follow the governmental prices; the services with prices guided by the government
shall refer to the guidance price offered by the government; those services without government’s
price or guidance price but with the market price will follow the market price; the services
without a government’s price, a guide price or a market price, the two Parties will decide the
price through consultation, which shall be based on the reasonable costs and profits, among which
the reasonable costs refer to the costs consulted and decided by both Party A and Party B.

The government’s price under this article refers to the price set by the competent price agency
or other competent agencies of the government based on the extent of pricing power and scope in
accordance with the Price Law of P.R.C.

The government’s guidance price under this article refers to the benchmark price and floating
range set by the competent price agency or other competent agencies of the government as a guide
for the market operators based on the extent of pricing power and scope in accordance with the
Price Law of P.R.C.

The market price under this article refers to the price set by the operators in the market via
the market competition. The market price will be set in the following order: (1) the price
offered by the independent third party for the service under the normal transaction around the
place or areas where the service is provided; or (2) the price offered by the independent third
party of service provider under the normal transaction within the Chinese territory.

2.2 The specific amount of service fees under this annex shall be calculated pursuant to the
relevant accounting principles in China (if applicable).

2.3 Party A and Party B shall examine and verify (if necessary) every service and facility
provided under this annex and the pricing standards set for the next accounting year before
December 31 of every year.

 

21

 

2.4 Party A and Party B are expected to sign specific execution documents as needed concerning
the services provided. The execution documents shall specify the services required by Party B and
the binding principles, criteria and clauses and conditions under this annex.

3. Service payments

3.1 Party B shall pay Party A or Party A’s fiduciaries for service fees in a timely manner in
accordance with the pricing and charging standards defined in this annex, the supplementary
agreements of this annex (if any) and the execution documents.

3.2 If Party B fails to pay the relevant service fees as scheduled according to the provisions in
this annex, the supplementary agreements of this annex (if any) and the execution documents, Party
B shall pay Party A 0.05% of the overdue amount as fine for delaying payment every one (1) day
(calendar day, hereinafter inclusive); if the payment is deferred for sixty (60) days, Party A may
inform Party B in written form of the suspension of the service; if Party B fails to pay the
relevant service fees within thirty (30) days upon the receipt of the written notification, Party
A may declare the termination of the relevant services. However, the suspension or termination of
the services will not affect the rights and obligations underway between the two Parties under
this annex.

4. Priority

4.1 For the same service, if the clauses and conditions provided by independent third party for
Party B are not superior to those provided by Party A, Party B shall give priority to Party A.

4.2 Party A shall make commitment to Party B that the conditions that Party A provide for the
third party will not be superior to Party B concerning the same or similar services under this
annex.

4.3 Party A has rights to provide services for the third party under the circumstances that
services provided by Party A for Party B under this annex will not be affected.

 

22

 

Annex VII: Integrated Services

1. Main contents

Party A and Party B agree to provide or receive the services from each other in accordance with
the clauses and conditions under this annex, including catering service, equipment leasing (except
the facilities/equipment covered by the Framework Agreement on Leasing of Communication
Resources), vehicle service, medical care, labor service, security, hotel service, meeting
service, gardening (afforestation), decoration, products sale, infrastructure agents, equipment
maintenance, market development, technical support, R&D, cleaning service, parking service,
employment training, warehousing (such as storage of telecom equipment, including parts and
circuits), advertisements (such as those made by Party B and published on the media of Party A)
and publication/printing, property management and ICT services (including support services such as
construction and installation, system integration service, software development, products sales
and agency service, operation and maintenance service and consultancy service).

2. Pricing principles

2.1 The pricing and/or charging standards for auxiliary telecom services under this annex shall
be set based on the principles and order defined in this article: the services with prices set by
the government shall follow the governmental prices; the services with prices guided by the
government shall refer to the guidance price offered by the government; those services without
government’s price or guidance price but with the market price will follow the market price; the
services without a government’s price, a guide price or a market price, the two Parties will
decide the price through consultation, which shall be based on the reasonable costs and profits,
among which the reasonable costs refer to the costs consulted and decided by both Party A and
Party B.

2.2 The specific amount of service fees under this annex shall be calculated pursuant to the
relevant accounting principles in China (if applicable).

2.3 Party A and Party B shall examine and verify (if necessary) every service and facility
provided under this annex and the pricing standards set for the next accounting year before
December 31 of every year.

2.4 Party A and Party B are expected to sign specific execution documents as needed concerning
the services provided. The execution documents shall specify the services required by Party B and
the binding principles, criteria and clauses and conditions under this annex.

3. Service payments

3.1 Party B shall pay Party A or Party A’s fiduciaries for service fees in a timely manner in
accordance with the pricing and charging standards defined in this annex, the supplementary
agreements of this annex (if any) and the execution documents.

 

23

 

3.2 If Party B fails to pay the relevant service fees as scheduled according to the
provisions in this annex, the supplementary agreements of this annex (if any) and the execution
documents, Party B shall pay Party A 0.05% of the overdue amount as fine for delaying payment
every one (1) day (calendar day, hereinafter inclusive); if the payment is deferred for sixty (60)
days, Party A may inform Party B in written form of the suspension of the service; if Party B
fails to pay the relevant service fees within thirty (30) days upon the receipt of the written
notification, Party A may declare the termination of the relevant services. However, the
suspension or termination of the services will not affect the rights and obligations underway
between the two Parties under this annex.

4. Priority

4.1 For the same service, if the clauses and conditions provided by independent third party for
Party B are not superior to those provided by Party A, Party B shall give priority to Party A.

4.2 Party A shall make commitment to Party B that the conditions that Party A provide for the
third party will not be superior to Party B concerning the same or similar services under this
annex.

4.3 Party A has rights to provide services for the third party under the circumstances that
services provided by Party A for Party B under this annex will not be affected.

 

24

 

Annex VIII: Shared Services

1. Contents of services

Party A and Party B agree to provide or receive relevant services from each other based on the
clauses and conditions agreed upon under this annex, including (but not limited to): (1) the
Headquarter HR service provided by Party B for Party A; (2) the services of business support
center (BSC) provided by the two Parties for each other and the hosting service related to the
services in the Article 1 (1) and (2) provided by Party B for Party A; (3) other shared services
such as sites and the Headquarters’ listed service provided by Party A for Party B.

2. Headquarter HR service

The HR services offered by Party B for Party A include shared service of administrative personnel
and business operational management personnel at the Headquarter and the hosting management of
Party A’s businesses, finance and personnel.

3. BSC Services

3.1 BSC services provided by Party B for Party A include:

(1) Collecting the data on international communication services, billing and generation of the
monthly account and account checking and settlement with overseas operators;

(2) Collecting and distributing the roaming data about the whole network-based services, including
but not limited to the smart network (such as 300 and 800), IP cards, PHS SMS and generation the
inter-province roaming statement of accounting;

(3) Settlement with other domestic operators or settlement entities for the whole network;

(4) Intra-network settlement;

(5) Providing statistical reports on business data for the associated units of Party A;

(6) VoIP
and 167 billing for the original Jitong Network Communications
Company Limited;

3.2 BSC services provided by Party A for Party B include:

(1) Producing and issuing telephone cards and IC cards on the backbone smart networks of Party A
(hereinafter referred to as telecommunication cards), including identifying qualifications of,
evaluating and managing card providers and relevant raw materials providers; organizing the bidding
among card providers and signing framework agreement on telecommunication cards procurement;
overseeing the contracts execution by manufacturers and provincial companies; formulating the
annual theme plan of telecommunication cards; according to the theme plan, organizing the
subscription and production of telecom cards by provincial companies; signing, executing the
contracts on code cards of Party A and organizing their production.

 

25

 

(2) Managing telecom cards service, including development of the regulations on production of
telecom cards and graphic design; gathering statistical data on cards business for operational
analysis.

3.3 Obligations of the Parties

(1) Party B is obligated to complete the international settlement, inter-network settlement and
inter-province settlement of all services in a timely and accurate manner pursuant to the rules
about international settlement, inter-network settlement and inter-province settlement introduced
by the competent agency of communication industry of the State Council and report to Party A as
required.

(2) Party A is obligated to complete the design, production and management of the valued cards
according to the required time limit, quantity and quality, which are agreed upon between the two
Parties.

(3) Party A shall meet and complete other business demands presented by Party B on time based on
the business system and network capabilities.

4. Use of site

4.1 Purpose of site use

(1) Party A agrees to provide its site, No. 21 office building located at the Financial Street,
Xicheng District, Beijing (including air conditioners, power supply, utilities equipment and
other relevant auxiliary facilities within), for Party B according to Party B’s demand.

(2) Party B takes the above-mentioned site as its main working place.

4.2 Commitment and guarantee. Party A guarantees that it has right to provide the above-mentioned
site for use (including air conditioners, power supply, utilities equipment and other relevant
auxiliary facilities within) for Party B. If any third party, in any condition and for any reason,
takes objection to Party A’s ownership and/or right of use with the above-mentioned site or
assets, and hence Party B’s rights under this annex cannot be fulfilled or are subject to any
harm, Party A agrees to undertake and pay all the losses incurred to Party B. Party A promises to
provide Party B’s auditors with the accounting records about Party A and its associated personnel
concerning the associated transaction.

5. Other shared services listed by the Headquarter

Party A provides Party B with other shared services listed by the Headquarter, such as
advertisements, publicity, R&D, business reception, maintenance and repair as well as property
management.

6. Cost sharing of shared services

Party A and Party B agree that costs incurred by the HR service provided for Party A from Party B,
BSC services provided for each other, and sites and other shared services listed by the Headquarter
(including depreciation of equipment and assets added for the shared service under this agreement
and the actual rental fee, property management fee and labor cost) will be shared between the two
Parties based on each other’s ratio of total assets (Among which, Party A’s total assets exclude
those of its overseas subsidiaries and
listed companies, the sharing ratio will be decided upon consultation after the two Parties offer
total assets listed the their financial statements to each other and will be adjusted every year
based on the change of the two Parties’ total assets ). The specific settlements will be jointly
worked out by the two Parties.

 

26exv4w59

Exhibit 4.59

 

 

DATED
         January 23,          2011

CHINA UNICOM (HONG KONG) LIMITED

AND

TELEFÓNICA S.A.

AGREEMENT TO ENHANCE THE

STRATEGIC ALLIANCE

 

 

 

CONTENTS

	 	 	 	 	 
	Clause	 	Page	 
	 
	 	 	 	 
	1. Interpretation
	 	 	1	 
	2. Enhancement of Strategic Alliance
	 	 	3	 
	3. Acquisition of China Unicom Ordinary Shares by Telefónica
	 	 	4	 
	4. Acquisition of Treasury Shares in Telefónica by China Unicom
	 	 	4	 
	5. Deliverables by the Parties
	 	 	4	 
	6. Warranties
	 	 	5	 
	7. Commitment to appoint China Unicom Nominee Director to the Telefónica Board
	 	 	5	 
	8. Announcements
	 	 	6	 
	9. General
	 	 	6	 
	10. Notices
	 	 	7	 
	11. Governing Law and Dispute Resolution
	 	 	8	 
	12. Counterparts
	 	 	9	 

 

- i -

 

THIS
AGREEMENT is made on           January 23,           2011

BETWEEN:

	(1)	 	CHINA UNICOM (HONG KONG) LIMITED, a company incorporated in Hong Kong and having its
registered office at 75th Floor, The Center, 99 Queen’s Road Central, Hong Kong (“China
Unicom”); and

	(2)	 	TELEFÓNICA, S.A., a company incorporated in Spain, whose registered office is at Gran Via 28,
28013 Madrid, Spain (“Telefónica”).

WHEREAS:

	(A)	 	China Unicom is a leading company in the global telecommunications providing full service
telecommunications services in the People’s Republic of China (the “PRC”) and is listed on the
New York Stock Exchange and the Hong Kong Stock Exchange. Through its Affiliates, China
Unicom is engaged in GSM and WCDMA cellular business in 31 provinces, autonomous regions and
municipalities in the PRC, the provision of international and domestic long distance calls,
domestic telephone services, Internet services, data communications, and other related
value-added telecommunications services. China Unicom has also established business
organisations engaging in related international businesses in Hong Kong, the United States,
Japan and Europe.

	(B)	 	Telefónica is a leading integrated telecommunications company providing fixed and mobile
services with presence in 25 countries and is listed on the Spanish Stock Exchange, the New
York Stock Exchange, the London Stock Exchange, the Tokyo Stock Exchange, the Buenos Aires
Stock Exchange, the Sao Paulo Stock Exchange and the Lima Stock Exchange.

	(C)	 	As at the date of this Agreement, Telefónica owns 1,972,315,708 shares in China Unicom,
representing approximately 8.37% of China Unicom’s issued share capital.

	(D)	 	As at the date of this Agreement, China Unicom owns 40,730,735 shares in Telefónica,
representing approximately 0.892% of Telefónica’s issued share capital which China Unicom
acquired pursuant to the Subscription Agreement entered into by Telefónica and China Unicom on
6 September 2009.

	(E)	 	On 6 September 2009 China Unicom and Telefónica entered into the Strategic Alliance Agreement
(the “Strategic Alliance Agreement”). The parties are satisfied with the development of their
strategic alliance and cooperation and desire to further enhance their strategic alliance and
cooperation through a further mutual investment in the shares of each other on the terms
provided herein.

THE PARTIES AGREE as follows:

	1.	 	INTERPRETATION

	 
	1.1	 	In this Agreement:

“Affiliate” means, with respect to a Party, any person which directly or indirectly
controls, is controlled by or is under common control with such party, where “control” means
the power to direct the management and policies of the controlled
person through the holding of the majority of the voting rights of the controlled person or
the ability to appoint more than half of the members of the board of directors (or its
equivalent) of the controlled person;

 

- 1 -

 

“Business Day” means a day other than a Saturday, Sunday or public holiday in Hong Kong,
Beijing and Madrid;

“China Unicom Acquisition” has the meaning given to that term in Clause 4.1;

“China Unicom Board” means the board of directors of China Unicom from time to time;

“China Unicom Board Approval Date” means 21 January 2011, the date on which the China Unicom
Board passes a resolution approving the China Unicom Acquisition;

“China Unicom Nominee Director” has the meaning given to that term in Clause 7.1;

“China Unicom Ordinary Shares” means the ordinary shares of HK$0.10 each in the capital of
China Unicom and listed on the Hong Kong Stock Exchange;

“Date of Completion” means the date specified in Clause 4.2;

“Dispute” has the meaning given to that term in Clause 11.2;

“EUR” and “€” means Euro, the single currency of member states of the European Communities
that adopt or have adopted the Euro as their lawful currency under the legislation of the
European Community for Economic Monetary Union;

“HK$” means Hong Kong dollars, the lawful currency of Hong Kong;

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC;

“Hong Kong Stock Exchange” means The Stock Exchange of Hong Kong Limited;

“Listing Rules” means the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited, as amended from time to time;

“Notice” means a notice to be given pursuant to the terms of this Agreement, and shall be
construed in accordance with Clause 10;

“Parties” means China Unicom and Telefónica and “Party” means either of them;

“Spanish Stock Exchange” means the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges as
connected through Spanish Continuous Market (Mercado Continuo);

“Telefónica Acquisition” has the meaning given that in Clause 3.1;

“Telefónica Board” means the board of directors of Telefónica from time to time;

“Telefónica Ordinary Shares” means the ordinary shares of EUR1.00 each in the capital of
Telefónica and listed on the Spanish Stock Exchange;

 

- 2 -

 

“Telefónica Price Per Share” means EUR 17.16, being the arithmetic average (rounded to two
decimal places) of each of the closing prices per Telefónica Ordinary Share, as shown on the
Bloomberg Screen by the ticker “TEF SM Equity HP” for the 30 consecutive days in which the
Telefónica Ordinary Shares are traded on the Madrid Stock Exchange immediately preceding
(and including) 14 January 2011;

“Telefónica Shares” means Telefónica Ordinary Shares and/or Telefónica Treasury Shares, as
the case may be;

“Telefónica Treasury Shares” means Telefónica Ordinary Shares repurchased by and held in
treasury by Telefónica itself; and

“USD” means United States dollars, the lawful currency of the United States.

	1.2	 	In this Agreement, a reference to:

	 	1.2.1	 	a “person” includes, without limitation, a reference to any individual, firm,
company, corporation or other body corporate, government, state or agency of a state or
any joint venture, association or partnership, trade union or employee representative
body (whether or not having a separate legal personality);

	 	1.2.2	 	a “Clause” or “Schedule”, unless the context otherwise requires, is a
reference to a clause of, or a schedule to, this Agreement;

	 	1.2.3	 	unless the context otherwise requires, the singular shall include the plural
and vice versa; and

	 	1.2.4	 	any legal term under the laws of Hong Kong for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any legal concept
or thing shall in respect of any jurisdiction other than Hong Kong be deemed to include
what most nearly approximates in that jurisdiction to the Hong Kong legal term and a
reference to any Hong Kong statute or ordinance shall be construed so as to include
equivalent or analogous laws of any other jurisdiction.

	1.3	 	The headings in this Agreement do not affect its interpretation.

	 
	2.	 	ENHANCEMENT OF STRATEGIC ALLIANCE

	2.1	 	Since signing of Strategic Alliance Agreement in September 2009, Telefónica and China Unicom
have made progress in the areas of cooperation, in particular, the procurement, expansion of
and service to MNCs, coordination and cooperation in international telecommunications
organisations, network design and optimization, joint management training.

	2.2	 	By signing this Agreement, both Parties have agreed to enhance their Strategic Alliance, and
to deepen the cooperation in procurement, mobile service platforms, service to MNCs, wholesale
carriers, roaming, technology/R&D, international business development, cooperation and Sharing
of Best Practices.

 

- 3 -

 

	3.	 	ACQUISITION OF CHINA UNICOM ORDINARY SHARES BY TELEFÓNICA

	 
	3.1	 	Telefónica shall, directly or through any of its Affiliates, purchase such number of China
Unicom Ordinary Shares for the aggregate consideration of USD 500,000,000, executed at such
price(s), at such time(s), in such manner and in such number of transaction(s) as Telefónica
may in its absolute discretion determine (the “Telefónica Acquisition”), provided that the
Telefónica Acquisition shall be completed within a nine-month period after the date hereof.

	 
	4.	 	ACQUISITION OF TREASURY SHARES IN TELEFÓNICA BY CHINA UNICOM

	4.1	 	China Unicom shall acquire from Telefónica, and Telefónica shall sell to China Unicom,
21,827,499 Telefónica Treasury Shares, free and clear of all encumbrances and executed in one
transaction (the “China Unicom Acquisition”).

	4.2	 	Completion of the China Unicom Acquisition shall take place as soon as practicable after the
date hereof, on the date agreed by the Parties but in any event no later than on 27 January
2011 (the “Date of Completion” or “T”). Before 16:00 (Madrid time) of the Date of Completion,
China Unicom and Telefónica shall deliver a joint instruction to Banco Bilbao Vizcaya
Argentaria, S.A., along with an executed copy of this Agreement, instructing Banco Bilbao
Vizcaya Argentaria, S.A. as member of the Spanish Stock Exchanges to communicate the sale on
behalf of Telefónica and the acquisition on behalf of China Unicom of the number of Telefónica
Treasury Shares stipulated in Clause 4.1 above to the Spanish Stock Exchanges. On the Date
of Completion, China Unicom shall irrevocably instruct Iberclear participant acting on its
behalf to accept the settlement of the purchase and sale of the Telefónica Treasury Shares
communicated to the Spanish Stock Exchanges by Banco Bilbao Vizcaya Argentaria, S.A., on
behalf of Telefónica. Settlement of the purchase and sale of the Telefónica Treasury Shares
shall occur in accordance with market practice three settlement business days (“T+3”) after it
has been communicated to the Spanish Stock Exchanges and through Iberclear. Telefónica shall
make available to Banco Bilbao Vizcaya Argentaria, S.A. the Telefónica Treasury Shares. China
Unicom shall make available to the Iberclear participant acting on its behalf the funds in the
amount of EUR 374,559,882.84, which corresponds to the number of Telefónica Treasury Shares to
be sold by Telefónica to China Unicom, multiplied by the Telefónica Price Per Share (the
“Aggregate Purchase Price”). In the event that any administrative approval is required in
order to proceed with the closing of the China Unicom Acquisition, if such approval is not
obtained, both Parties will agree in good faith alternative procedures and timing to effect
completion of the China Unicom Acquisition.

	 
	5.	 	DELIVERABLES BY THE PARTIES

	 
	5.1	 	At the Date of Completion:

	 	5.1.1	 	Telefónica shall deliver to China Unicom:

	 	(a)	 	a written confirmation duly signed by the Secretary of the
Telefónica Board certifying that all statements contained in Schedule 1 are
true and accurate in all respects as at the date of this Agreement and as at
the Date of Completion; and

 

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	 	(b)	 	a copy (certified as true copy by the secretary of the
Telefónica Board) of the resolutions of the Telefónica Board approving the
Telefónica Acquisition, the China Unicom Acquisition, the execution by
Telefónica of this Agreement and performance of all of its obligations
contemplated hereunder;

	 	5.1.2	 	China Unicom shall deliver to Telefónica:

	 	(a)	 	a written confirmation duly signed by a director of China
Unicom certifying that all statements contained in Schedule 2 are true and
accurate in all respects as at the date of this Agreement and as at the Date of
Completion; and

	 	(b)	 	a copy (certified as true copy by an officer of China Unicom)
of the resolutions of the China Unicom Board approving the China Unicom
Acquisition and execution by China Unicom of this Agreement and performance of
all of its obligations contemplated hereunder, including acknowledgement of the
Telefónica Acquisition.

	6.	 	WARRANTIES

	6.1	 	As at the date of this Agreement, Telefónica warrants to China Unicom that each warranty set
out in Schedule 1 is true, accurate, complete and not misleading. Likewise, on the Date of
Completion, Telefónica is deemed to warrant to China Unicom that each of the warranties set
out in Schedule 1 is true, accurate, complete and not misleading by reference to the facts and
circumstances as at the Date of Completion. For this purpose only, where there is an express
or implied reference in any of these warranties to the “date of this Agreement”, that
reference is to be construed as a reference to the Date of Completion.

	6.2	 	As at the date of this Agreement, China Unicom warrants to Telefónica that each warranty set
out in Schedule 2 is true, accurate, complete and not misleading. Likewise, on the Date of
Completion, China Unicom is deemed to warrant to Telefónica that each of the warranties set
out in Schedule 2 is true, accurate, complete and not misleading by reference to the facts and
circumstances as at the Date of Completion. For this purpose only, where there is an express
or implied reference in any of these warranties to the “date of this Agreement”, that
reference is to be construed as a reference to the Date of Completion.

	 
	7.	 	COMMITMENT TO APPOINT CHINA UNICOM NOMINEE DIRECTOR TO THE TELEFÓNICA BOARD

	7.1	 	To the extent not prohibited under the applicable laws and the by-laws of Telefónica,
Telefónica irrevocably and unconditionally undertakes to propose at the next general
shareholders’ meeting of Telefónica the appointment of an individual designated by China
Unicom as a new director of the Telefónica Board (the “China Unicom Nominee Director”).

	7.2	 	Telefónica’s obligation under Clause 7.1 above shall be subject to completion of the China
Unicom Acquisition and to China Unicom maintaining on the date of appointment of the China
Unicom Nominee Director the aggregate number of Telefónica Shares held (and acquired) by China
Unicom as a result of the China
Unicom Acquisition and the closing of the Subscription Agreement entered into by Telefónica
and China Unicom on 6 September 2009 (the “Aggregate Participation”).

 

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	7.3	 	China Unicom shall ensure that the China Unicom Nominee Director possesses the necessary
qualifications and experience to act as a director of Telefónica as required under applicable
rules and regulations, including the rules of the relevant stock exchanges to which Telefónica
is subject or submits, except for the requirement set forth in Telefónica’s by-laws that
requires that new directors held, for more than three years prior to the appointment, a number
of shares of Telefónica representing a nominal value of at least EUR3,000; such requirement
shall be waived by the Telefónica Board in relation to the China Unicom Nominee Director prior
to the next general shareholders’ meeting of Telefónica. Telefónica undertakes that a copy
(certified as true copy by the secretary of the Telefónica Board) of the resolutions of the
Telefónica Board approving such waiver shall be delivered to China Unicom as soon as
practicable after such Telefónica Board meeting, and in any event, no later that the
appointment of China Unicom Nominee Director to the Telefónica Board.

	7.4	 	Telefónica further undertakes that upon the expiry of the term of office of the China Unicom
Nominee Director and provided that China Unicom continues to maintain the Aggregate
Participation in Telefónica, the Telefónica Board shall evaluate to propose the appointment of
a China Unicom Nominee Director at any subsequent general shareholders’ meeting of Telefónica.

	8.	 	ANNOUNCEMENTS

	8.1	 	Subject to Clause 8.2, no announcement or communication concerning the transactions
contemplated by this Agreement shall be made or issued by either Party without the prior
written consent of the other Party.

	 
	8.2	 	Clause 8.1 does not apply to an announcement or communication:

	 	8.2.1	 	previously consented to, which may be repeated by either Party provided that
the prevailing facts and circumstances in respect of the announcement or communication
previously consented to were not materially different; or

	 	8.2.2	 	required by law, by a rule of a stock exchange or by a governmental authority
or other authority with relevant powers to which a Party is subject or submits, whether
or not the requirement has the force of law, provided that such announcement or
communication shall only be made after consultation with the other Party and after
taking into account the other Party’s reasonable requirements as to its timing, content
and manner of making or despatch.

	9.	 	GENERAL

	9.1	 	The consummation of the Telefónica Acquisition and the China Unicom Acquisition contemplated
herein does not affect the validity and enforceability of the Subscription Agreement entered
into by Telefónica and China Unicom on 6 September 2009 and the Strategic Alliance Agreement,
both of which shall remain in full force and effect.

	9.2	 	A variation of this Agreement is only valid if it is in writing and signed by or on behalf of
each Party.

 

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	9.3	 	The failure to exercise or delay in exercising a right or remedy provided by this Agreement
or by law does not impair or constitute a waiver of the right or remedy or an impairment of or
a waiver of other rights or remedies. No single or partial exercise of a right or remedy
provided by this Agreement or by law prevents further exercise of the right or remedy or the
exercise of another right or remedy.

	9.4	 	Either Party’s rights and remedies contained in this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.

	9.5	 	Except to the extent that they have been performed and except where this Agreement expressly
provides otherwise, the warranties, representations, obligations and undertakings contained in
this Agreement remain in force after completion of the China Unicom Acquisition and of the
Telefónica Acquisition.

	9.6	 	The invalidity, illegality or unenforceability of any provision of this Agreement does not
affect the continuation in force of the remainder of this Agreement.

	9.7	 	This Agreement shall be binding upon and enure to the benefit of each Party and its or any
subsequent successors.

	9.8	 	Each Party agrees to take all such actions or procure that all such actions be taken as are
reasonable in order to implement the terms of this Agreement or any transaction, matter or
thing contemplated by this Agreement.

	9.9	 	Each Party shall pay its own costs relating to the negotiation, preparation, execution and
performance by it of this Agreement and of each document referred to in it.

	9.10	 	A Party shall, on reasonable request from the other Party, do and execute or cause to be done
and executed all such further acts, deeds, things and documents as may be necessary to give
effect to the terms of this Agreement.

	9.11	 	Each Party may not, without the prior written consent of the other Party, assign, transfer,
declare a trust for the benefit of or in any other way alienate any of its obligations or
rights under this Agreement whether in whole or in part except that Telefónica or China
Unicom, as the case may be, may designate any of its subsidiaries to be the registered holder
of the China Unicom Ordinary Shares or the Telefónica Treasury Shares, as the case may be, to
be acquired as contemplated hereunder provided always that such Party shall remain fully
liable for all obligations, covenants and undertakings set out herein.

	10.	 	NOTICES

	 
	10.1	 	A Notice under or in connection with this Agreement shall be:

	 	10.1.1	 	in writing and in English; and

	 	10.1.2	 	delivered personally, sent by fax with confirmation receipt followed by mail posted
within 24 hours or sent by courier to the Party due to receive the Notice at the
address referred to in Clause 10.2 or such other address as a Party may specify by
notice in writing to the other Party received before the Notice was despatched.

 

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	10.2	 	For the purposes of this Clause 10.2, a Notice shall be sent to the addresses and for the
attention of those persons set out below:

	 	10.2.1	 	in the case of China Unicom:

	 	 	 
	Address:

	 	21 Jin Rong Street, Xicheng District, Beijing 100140, PRC
	Fax Number:

	 	+8610 6625 9544
	Attention:

	 	Wang Xia

	 	10.2.2	 	in the case of Telefónica:

	 	 	 
	Address:

	 	Gran Via 28, 28013 Madrid, Spain
	Fax Number:

	 	+34 91 727 1405
	Attention:

	 	Ramiro Sánchez de Lerín García-Ovies
	 

	 	Group General Counsel

or to such other address or fax number as the relevant Party may have notified to the other
by not less than five (5) days’ written notice to the other Party before the Notice was
despatched.

	10.3	 	Unless there is evidence that it was received earlier, a Notice is deemed given if:

	 	10.3.1	 	delivered personally, when left at the address referred to in Clause 10.1; or

	 
	 	10.3.2	 	sent by courier, five (5) Business Days after posting it; or

	 	10.3.3	 	sent by fax, when confirmation of its transmission has been recorded on the sender’s
fax machine.

	11.	 	GOVERNING LAW AND DISPUTE RESOLUTION

	11.1	 	This Agreement is governed by and shall be construed in accordance with the laws of Hong
Kong.

	11.2	 	Any dispute, controversy or claim arising from, out of or in connection with this Agreement,
including any question regarding its existence, validity, interpretation, breach or
termination (a “Dispute”) shall be determined in accordance with this Clause 11.

	11.3	 	Any Dispute shall be referred to and finally resolved by arbitration under the UNCITRAL
Arbitration Rules (the “Rules”) which Rules are deemed to be incorporated by reference into
this Clause and as may be amended by the rest of this Clause.

	11.4	 	The seat of arbitration shall be Hong Kong and the appointing authority shall be the Hong
Kong International Arbitration Centre (the “HKIAC”). The language to be used in the
arbitration proceedings shall be English.

	11.5	 	The arbitration tribunal shall consist of three arbitrators, one of whom shall be appointed
by Telefónica, the other of whom shall be appointed by China Unicom and the third presiding
arbitrator shall be appointed by China Unicom and Telefónica jointly, or failing agreement
between the Parties within twenty (20) Business Days, by the HKIAC.

 

- 8 -

 

	11.6	 	No person shall be nominated or appointed as an arbitrator under Clause 11.5 unless that
person has substantial experience in the conduct of commercial disputes and is fluent in
English.

	11.7	 	The arbitration award shall be final and binding on the Parties from the day it is made and
the Parties agree to be bound thereby and to act accordingly.

	11.8	 	Judgment upon any award rendered by the arbitral tribunal may be entered in, and application
for judicial confirmation, recognition or enforcement of the award may be made by or in, any
court of competent jurisdiction, and each Party irrevocably submits to the jurisdiction of
such court for the purposes of this Clause 11 and for the confirmation, recognition or
enforcement of any award rendered by the arbitral tribunal, whether in accordance with the
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958
or otherwise.

	12.	 	COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which when executed
and delivered is an original and all of which together evidence the same agreement.

 

- 9 -

 

EXECUTED by the Parties on the date and year stated above

	 	 	 
	SIGNED by

	 	 )
	for and on behalf of

	 	 ) /s/ Chang Xiaobing
	CHINA UNICOM (HONG KONG) LIMITED

	 	 )
	 
	 	 
	SIGNED by

	 	 )
	for and on behalf of

	 	 ) /s/ Cesareo Alierta Izuel
	TELEFÓNICA S.A.

	 	 )

 

- 10 -

 

SCHEDULE 1

TELEFÓNICA WARRANTIES

	1.	 	CAPACITY AND AUTHORITY

	1.1	 	Telefónica has full corporate power, authority and capacity, has taken all actions necessary,
to enter into, execute, deliver, exercise its rights and perform its obligations under this
Agreement and to carry out the transactions contemplated hereby.

	1.2	 	No action or thing is required to be taken, fulfilled or done and no approvals, filings or
notifications are required for Telefónica to enter into, execute, deliver, exercise its rights
and perform its obligations under this Agreement, or in relation to the Telefónica
Acquisition, the China Unicom Acquisition, or the carrying out of the other transactions
contemplated by this Agreement, as the case may be, except for the public disclosure regarding
the execution of this Agreement, the Telefónica Acquisition and/or the China Unicom
Acquisition, as required under the securities regulations of Spain or any other relevant
jurisdictions.

	1.3	 	Telefónica’s obligations under this Agreement and each document to be executed at or before
the Completion of the China Unicom Acquisition constitutes, or when the relevant document is
executed will constitute, valid, legal and binding obligations of Telefónica enforceable in
accordance with their respective terms.

	 
	2.	 	SHARES

	2.1	 	Telefónica has full title to the Telefónica Treasury Shares and has existing authority to
transfer the Telefónica Treasury Shares to China Unicom in accordance with the terms of this
Agreement.

	2.2	 	The Telefónica Treasury Shares will be transferred pursuant to this Agreement free and clear
from all encumbrances and will rank pari passu in all respects with the existing Telefónica
Ordinary Shares, together with all rights and entitlements accruing after the date of the
China Unicom Acquisition and the right to receive all dividends or other distributions
declared, paid or made or proposed to be made on such Telefónica Shares after the date of the
China Unicom Acquisition.

	2.3	 	The transfer of the Telefónica Treasury Shares to China Unicom in accordance with the terms
of this Agreement will comply with all statutory requirements and all relevant laws of Spain,
and with the rules and regulations of the Spanish Stock Exchange, including all applicable
disclosure requirements in respect of share transfers.

	2.4	 	The transfer of the Telefónica Treasury Shares pursuant to this Agreement will not cause any
breach of any agreement to which Telefónica and/or any of its subsidiaries is a party or by
which it is or any of them is bound and will not infringe or exceed any limits on, powers of,
or restrictions on or the terms of any contract, obligation or commitment whatsoever of,
Telefónica and/or any of its subsidiaries.

	2.5	 	The transfer of the Telefónica Treasury Shares will not be subject to any pre-emptive or
similar rights or restrictions on voting and transfers.

 

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	3.	 	EFFECT OF AGREEMENT AND SUBSCRIPTION

Neither this Agreement nor the transfer of the Telefónica Treasury Shares will:

	3.1	 	constitute or give rise to a breach of or default under: (a) any law, rule, regulation,
judgment, order, authorisation or decree of any government, governmental or regulatory body,
arbitrator, administrative agency or court, domestic or foreign, having jurisdiction over
Telefónica or its properties or assets; or (b) the constitutional documents of Telefónica; or

	3.2	 	give rise to any rights of any third party in respect of any assets of Telefónica.

 

- 12 -

 

SCHEDULE 2

CHINA UNICOM WARRANTIES

	1.	 	CAPACITY AND AUTHORITY

	1.1	 	China Unicom has full corporate power, authority and capacity, and has taken all actions
necessary, to enter into, execute, deliver, exercise its rights and perform its obligations
under this Agreement and to carry out the transactions contemplated hereby.

	1.2	 	No action or thing is required to be taken, fulfilled or done and no approvals, filings or
notifications are required for China Unicom to enter into, execute, deliver, exercise its
rights and perform its obligations under this Agreement, or in relation to the China Unicom
Acquisition or the carrying out of the other transactions contemplated by this Agreement, as
the case may be, except for the public disclosure regarding the execution of this Agreement
and the acquisition of the Telefónica Treasury Shares as required under the Listing Rules.

	1.3	 	China Unicom’s obligations under this Agreement and each document to be executed at or before
the completion of the China Unicom Acquisition constitutes, or when the relevant document is
executed will constitute, valid, legal and binding obligations of China Unicom enforceable in
accordance with their respective terms.

	2.	 	EFFECT OF AGREEMENT AND SUBSCRIPTION

This Agreement will not:

	2.1	 	constitute or give rise to a breach of or default under: (a) any law, rule, regulation,
judgment, order, authorisation or decree of any government, governmental or regulatory body,
arbitrator, administrative agency or court, domestic or foreign, having jurisdiction over
China Unicom or any of its properties or assets; or (b) the constitutional documents of China
Unicom; or

	2.2	 	give rise to any rights of any third party in respect of any assets of China Unicom.

 

- 13 -

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