June 2, 2008

China Netcom and China Unicom to Merge

China Netcom and China Unicom jointly announced on June 2, 2008 that Unicom proposed to Netcom a merger of the two companies by way of a scheme of arrangement. Under the terms, the holder of every Netcom share will be entitled to receive 1.508 new Unicom shares and the holder of every Netcom ADS (American depositary shares) will be entitled to receive 3.016 new Unicom ADSs. The proposal is subject to the approval of shareholders of China Netcom and China Unicom.

The merger of China Netcom and China Unicom is in line of the trend of convergence of fixed-line and mobile networks, and is expected to enable the merged group to set clear strategy. Netcom and Unicom desire to complement each other, widen their scope of services and enhance their technological and product innovations. The merged group is expected to become a larger and more competitive telecom carrier which can provide integrated telecom services nationwide and satisfy customer needs by providing more diversified products. The
services will include mobile and fixed-line telecom, broadband, data and value-added services.

Of the proposed merger, Mr. Zuo Xunsheng, Chairman of China Netcom, said, “We believe the merged group will gain the right to provide integrated services. The convergence of fixed-line and mobile networks is expected to enable the merged group to make significant progress in its broadband business. More importantly, the merger may combine China Netcom’s stable cash flow with China Unicom’s growth potential. This is expected to boost
the merged group’s future development and enable it to be better positioned to seize the opportunities in China’s growing market for mobile telecom and broadband services. We believe this will pave the way for the merged group’s sustainable development and enhance shareholder value".

According to a presentation related to the merger, the two companies cited the following synergies:

*Enhanced strategic positioning
*Create synergies and shareholders’ value
*Improved market position
*Improved management strength and organizational structure
*Greater resources and strengths to achieve economies of scale
*Enhanced technological and product innovation to suit ever-changing market trends
*Optimized capital structure and enhanced financial capabilities

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