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New Unicom to Spend RMB 100 bln on 3G Expansion

China Unicom Press Release, 8/13/08

China Unicom (NYSE: CHU; 0762.HK; 600050.SH) may spend up to RMB 100 bln on 3G expansion in 2009 and 2010, once its merger with China Netcom (NYSE: CN; 0906.HK) is complete. The new company, which will be known as China Unicom (Hong Kong) Limited, is expected to obtain a 3G license for mainland China, causing a significant increase in wireless capital expenditure for 2009 and 2010.

The existing annual caps on equipment procurement charges payable by China Unicom Corporation Limited (CUCL), Unicom';s mainland subsidiary, to parent company Unicom Group are RMB 75 mln and RMB 95 mln in 2008 and 2009, respectively. However, because the extent and volume of equipment procurement is now expected to increase substantially, these caps have been revised for each of the three years ending 31 December 2008, 2009 and 2010 to RMB 75 mln, RMB 350 mln, and RMB 550 mln, respectively.

After the merger, Netcom will become a wholly-owned subsidiary of Unicom, with Netcom';s direct parent, Netcom BVI, owning a 29.49% stake in the company. Continuing transactions between Netcom';s subsidiaries and parents will become continuing transactions of Unicom, including an annual cap of service charges payable by CNC China, Netcom';s mainland subsidiary, to the Netcom Parent, of RMB 4.4 bln for each of the three years 2008, 2009 and 2010. Netcom also plans to replace copper cables with fiber optic cables in certain parts of its service regions, in a 3-5 year project expected to cost up to RMB 15 bln.

Keywords: network construction Netcom BVI CNC China restructuring 0762.HK 0906.HK 2008 2009 2010 3G 600050.SH China Netcom China Unicom China Unicom Corporation Limited CHU CN procurement telecom wireless capex fiber optics

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