China Unicom 2001 Interim Results (clean) · More Favorable Revenue Structure Service revenue yoy up 13.0%, mobile proportion of service revenue yoy up 5.3pp to 54.2% ... No. of BTS

2011Interim Results24 August 2011

www.chinaunicom.com.hk

2

Management Present

Mr. Lu Yimin Executive Director & President

Mr. Tong Jilu Executive Director & Senior VP

Mr. Chang Xiaobing Chairman & CEO

Mr. Li Fushen Executive Director & CFO

3

Agenda

Overview

Operating Performance

Financial Results

4

Overall Results

0.124

2,791

30,723

39,913

39,111

79,982

39,979

41,573

82,510

1H2010

0.039

868

28,676

39,837

43,266

83,836

39,884

47,978

88,595

2H2010

25.1%44.3%60,000of which: Mobile

2.6%2.4%40,936Fixed-line

188.9%-8.9%0.113EPS (RMB)

203.8%-5.5%2,637Net Profit

11.6%4.2%32,017EBITDA

2.7%2.5%40,903Fixed-line

13.2%25.3%48,998of which: Mobile

7.8%13.0%90,350Service Revenue

14.4%22.9%101,385Operating Revenue

HoHYoY1H2011(RMB millions)

(3)

(2)

(4)

(1) All financial data in this document exclude the effects of deferred fixed-line upfront connection fees (RMB130 mn in 1H2010, 62 mn in 2H2010 and 15 mn in 1H2011), unless otherwise specified

(2) Operating revenue from external customers, and not equal to the sum of mobile and fixed-line operating revenues due to non-allocated revenue(3) Service revenue is not equal to the sum of mobile and fixed-line service revenues due to non-allocated revenue(4) Net profits for 1H2010, 2H2010 and 1H2011 would be RMB2,921 mn, 930 mn and 2,652 mn, respectively, if including deferred fixed-line upfront

connection fees(5) Including deferred fixed-line upfront connection fees

(1)

(5)

5

28

79,982

9,234 6533,578 (3,125)

90,350

5

Rapid Growth in Revenue & Steady Increase in Market Share

1H2010

3G GSMLocal

Access

1H2011

Internet & Data

ICT & Others

(1) Including broadband, data comm. & other Internet businesses (2) Including local voice, long distance, fixed-line VAS and interconnection(3) The Company’s operating revenue over the sum of operating revenues released by the three listed telcos (excluding fixed-line

upfront connection fees)

Revenue Growth: Higher Than Industry AverageRevenue Growth: Higher Than Industry Average(RMB millions)

driven by :

+11.5pp +4.5pp+0.8pp -3.9pp 0.1pp

(1)

(1)

(2)

Rising Market ShareRising Market Share (3)

1H2010 1H2011

+1.8pp

19.7%21.5%

61H2010 1H2011

Non-voice

Voice

6

More Favorable Revenue Structure

Service revenue yoy up 13.0%, mobile proportion of service revenue yoy up 5.3pp to 54.2%

Non-voice proportion of mobile service revenue yoy up 3.6pp to 35.7%, and non-voice proportion of fixed-line service revenue yoy up 8.5pp to 62.5%

Service Revenue & Its MixService Revenue & Its Mix

1H2010 1H2011

Non-voice

Voice

Mobile Service RevenueMobile Service Revenue(RMB millions) (RMB millions)

Fixed-line Service RevenueFixed-line Service Revenue(RMB millions)

32.1%35.7%

67.9% 64.3%

39,11148,998

(1) Non-allocated revenue(2) Including voice usage, monthly fee and interconnection revenues

(2)

62.5%

37.5%

39,913

54.0%

46.0%

40,903

(2)

1H2010 1H2011

48.9%

45.3%

54.2%Mobile

Fixed-line

79,982

90,350

13.0%

25.3%

1.2% 0.5%(1)(1)

2.5%49.9%

7

23,945

7,560 2,9943,506

4,4755,410

1H10 1H113Q10 4Q10 1Q11 2Q11 1H2010 2H2010 1H2011

42.844.5

46.8

5.2%

9.3%

4,3555,679

7,50213,180

3,946 3,294

(RMB)(’000)

3G Scale Developmentdriving quality and robust growth in mobile business

Quarterly 3G Subscriber GrowthQuarterly 3G Subscriber Growth

Quarterly 3G Revenue GrowthQuarterly 3G Revenue Growth(RMB millions)

(1) Average qoq growth rate

Further Rising 3G ContributionFurther Rising 3G Contribution

Continuously Rising Mobile ARPUContinuously Rising Mobile ARPU

8.4%13.2%

17.7%

26.9%

4.8%10.1%

1H2010 2H2010 1H2011

(1)

31.6%

1H10 2Q111H11 3Q10 4Q10 1Q11

21.8%(1)

3G share of mobile service revenue

3G share of mobile subscribers

8

17,172

14,471

42.0%36.3%

1H2010 1H2011Broadband revenueas % of fixed-line service revenue

52,32243,759

1H2010 1H2011

Rapidly Growing Broadband Users Rapidly Growing Broadband Users

Further Rising Broadband Revenue Share

Further Rising Broadband Revenue Share

(’000)

(RMB millions)

Stable Growth in Fixed-line Service Revenue

Stable Growth in Fixed-line Service Revenue

(RMB millions)

1H2010 1H2011

39,91340,903

2.5%19.6%

18.7%

Continued Rapid Growth in Broadbandfacilitating stable development in fixed-line business

9

Improving Net Profit and Rising Cash Flow

Improvement in Quarterly Net ProfitImprovement in Quarterly Net Profit

2,483

154(426)

1,294

1,657

1,134

2,6372,791

1H10 1H11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Continuous Growth in Cash Flow from Operations

Continuous Growth in Cash Flow from Operations

(RMB millions)

31,08934,352

1H2010 1H2011

10.5%

(RMB millions)

10

No. of BTS

Continue to build 3G network

Optimize & improve GSM network

Push forward construction of optical fiber network

+32.8%203k

+39.0%614kNo. of Carrier Sectors

+13.7%348k

+12.2%1,714k

Launched HSPA+ in 56 key cities

+26.9%74.25 mn

76% +4pp

Expand overall coverageYE Target: cover economically developed towns and key transport linesImprove indoor coverageYE Target: cover nationwide key buildings

Continue to improve overall coverage to provide coverage support to 3G network

Accelerate the construction of optical fiber network to raise broadband speedYE Target: over 40 million families with 20Mbps+ broadband access capabilities

1H2011: further enhanced network capabilities1H2011: further enhanced network capabilities

2H2011: continue to enhance network buildup2H2011: continue to enhance network buildup

No. of BTS

No. of Carrier Sectors

No. of BB Access Ports

Of which % of FTTx Ports

Further Enhanced Network Capabilities

11

accelerate business development to achieve higher revenue growth

11

increase operational efficiency to ensure continuous improvement in profitability

enhance customer service to improve customer perception

Innovation & Service Leader for

Information Life

continue to promote innovation to enhance corporate dynamics and competitiveness

focus on key markets to rapidly expand subscriber base

1

2

3

4

5

2H2011 Outlookrealize breakthrough in scale development and further increase market share

1212

Operating Performance

Overview

Financial Results

Agenda

13

1H2011 1H2010 YoY

Mobile

Subscribers (’000) 181,610 156,962 15.7%

of which: GSM 157,665 149,402 5.5%

3G 23,945 7,560 216.7%

ARPU (RMB) 46.8 42.8 9.3%

of which: GSM 38.3 39.8 -3.8%

3G 117.5 133.0 -11.7%

Fixed-lineLocal Access

Subscribers (’000) 95,458 100,852 -5.3%

of which: Fixed-line 84,986 84,606 0.4%

PHS 10,472 16,246 -35.5%

ARPU (RMB) 26.4 29.6 -10.8%

Fixed-lineBroad-band

Subscribers (’000) 52,322 43,759 19.6%

ARPU (RMB) 57.6 58.5 -1.5%

Service RevenueService Revenue(RMB millions)

(1) Non-allocated revenue

958 449

39,913 40,903

39,11148,998

1H2010 1H2011

Mobile

Fixed-line

(1)(1)

79,982

90,35013.0%

25.3%

2.5%

Overall Operating Performance

14

37,1056,299

1H2010 1H2011

46.842.8

298.3271.2

1H2010 1H2011ARPU (RMB) MOU (minutes)

13,180

35,165

35,818

3,946

39,111

48,998

1H2010 1H2011

(RMB millions)

Mobile Service Revenue & Its MixMobile Service Revenue & Its Mix

14

181,610156,962

1H2010 1H2011

Mobile SubscribersMobile Subscribers

Mobile ARPU & MOUMobile ARPU & MOU

(’000)

9.3%

15.7%

10.0%

25.3%

GSM 3G

1.9%

234.0% Mobile Data TrafficMobile Data Traffic(Million MB)

489.1%

Mobile Businessrapidly growing revenue with more favorable structure

15

242.5229.8

259.5260.2

1H2010 1H2011Voice Usage (bn minutes)M OU (minutes)

24,835 24,755

10,022 10,936

308 127

35,165 35,818

1H2010 1H2011

157,665149,402

38.339.8

1H2010 1H2011Subs ('000) ARPU (RMB)

15

(RMB millions)

5.5%

-3.8%

9.1%

1.9%

-0.3%

Others Voice VAS

Voice Usage & MOUVoice Usage & MOU

5.5%

-0.3%

7,330

2,058

256.2%

(Million MB)

1H2010 1H2011

Service RevenueService Revenue

Subscribers & ARPUSubscribers & ARPU GSM Data TrafficGSM Data Traffic

Transform GSM sales and marketing model to improve growth quality and sales and marketing efficiency

Differentiate products and tariff plans

Raise customer loyalty to reduce churn rate

2H2011 Strategy2H2011 Strategy

Mobile BusinessGSM business maintained stable

1616

further expand targeted customer segments

utilize resources more efficiently and raise the share of contracted subscribers

push forward win-win cooperation and increase incentives of third-party distribution channels

leverage strong eco-system to introduce more diversified smartphones to meet needs of different

customer segments

launch more differentiated products with WCDMA advantages

3G Growth Strategy in 20113G Growth Strategy in 2011Seize O

pportunities to Realize B

reakthrough in 3G

Scale Developm

ent

Mobile Businessseize opportunities to realize breakthrough in 3G scale development

17

119.9133.0

117.5

1H2010 2H2010 1H2011

1H2010 1H2011

(RMB millions)

17

(RMB)

51.2%48.8%

Voice Non-voice

21.0%15.7%

24.1%

End of 2010 End of Mar2011

End of Jun2011

659.8638.5 660.7

1H2010 2H2010 1H2011

3,946

13,180

MOUMOU

Proportion of Contracted UsersProportion of Contracted UsersARPUARPU

Revenue Growth & MixRevenue Growth & Mix

-2.0%

-11.7%(as % of total 3G subscribers)

0.1%

3.5%(Minutes)

Mobile Businessrapid growth in 3G business

18

12,5534,240

29,775

1H2010 2H2011 1H2011

Prosperous Mobile Internet Eco-systemProsperous Mobile Internet Eco-system3G Data Traffic3G Data Traffic

Avg. 3G Data Usage/User/MonthAvg. 3G Data Usage/User/Month

197143

266

1H2010 2H2010 1H2011

35.0%

（MB）

(Million MB)

602.2%

86.0%

137.2%

Self-developed applications

Third-party applications

… …

Mobile Business3G data traffic continued to rise significantly

More and more mainstream Internet applications go mobile

Mobile Internet applications are emerging rapidly

Weibo subscribers exceed 200 mn in China

19

screen≥3.5 inches

WO•3G RMB1,000 Smartphonecapacitive

touch screen

CPU ≥600MHz

price≤RMB1,000

ZTE V880 Coolpad W706 Lenovo A60

…

6,0425,183

2,045659

3,638

4,551

8,2586,669

3,250

679

First Half June

Second Half June

First Half July

Second Half July

First Half August

Daily Sales of First RMB1,000 Smartphone V880

Average daily sales Average daily additions of 3G contracted subscribers

Launched additional 30+ strategic 3G handsets to meet needs of different customer segments

First RMB1,000 wide-screen smartphone launched this June has been well received by the market, and has become an important force to drive 3G growth in mass market

As of 15 August, total sales of V880 ﹥350,000Highest sales in a single day﹥10,000Total contracted subscribers acquired﹥260,000

Mobile Businessmore diversified 3G handsets to drive subscriber growth

20

1,512

6,809

5,088

2,3882,172

New Breakthrough in Third-party ChannelsNew Breakthrough in Third-party Channels

Signed in Suning, Telephone World,

Five Star Appliance, 360buy

Signed in Guomei

Signed in 5 regional chain store firms in Guangdong

Signed in FunTalk,

HiSap

Signed in 75 regional chain

store firms

Jan 2011 Mar 2011 Apr 2011 Jun 2011 Jul 20112010

Rapidly Rising Number of Strategic Chain Stores

Push forward cell-based all-channel all-service sales and marketing practices

Fully promote the transformation of sales outlets as well as experiential marketing practices

Further expand regional third-party channels and enhance cooperation with third-party channels

2H2011 Strategy2H2011 Strategy

By cooperating with more and more national and regional chain stores, the number of strategic chain stores has reached 6,809

Proportion of 3G subscribers acquired by third-party channels reached 51% in 1H2011, yoy up 16pp

Mobile Businessenhanced sales capabilities of distribution channels

21

Local Access

95,458100,852

26.429.6

1H2010 1H2011Subs ('000) ARPU (RMB)

4,234 5,263420 805

20,788 17,663

14,471 17,172

40,90339,913

1H2010 1H2011

21

(RMB millions)

(1) Including local voice, long distance, fixed-line VAS and interconnection

18.7%

Service Revenue & Its MixService Revenue & Its Mix

-15.0%

(1)Broadband

2.5%

24.3%

Broadband Subscribers & ARPUBroadband Subscribers & ARPU

52,32243,759

57.658.5

1H2010 1H2011Subs ('000) ARPU (RMB)

19.6%

Local Access Subscribers & ARPULocal Access Subscribers & ARPU

-5.3%

ICT

91.7%

Fixed-line Businessrapid growth in broadband offset the decline in fixed-line voice

Data Comm. & Others

22

Penetration rate among BB residential subscribers:

8.7%

“WO Family”: Rising Penetration“WO Family”: Rising Penetration

3.70 mnSubscribers:

Automotive information

Stock trading

Mobile OA

Govt. enforcement

Monitoring & surveillance

Capturing leading positions in the following industry applications, which helped develop more than 3 million subscribers in 1H2011

automotive aviation central govt.-

owned companies

securities insurancebanking

“WO Business”: Gaining Momentum“WO Business”: Gaining Momentum

Enhance sales capabilityEnrich product offeringsImprove customer perceptionPromote convergence of 3 networks

Gaining influence in the following sectors/segments:

2H2011:realize scale development

Business Integrationsteadily rising penetration of “WO Family” and “WO Business”

23

提升客户感知，重塑品牌形象Increase Expansion Efforts on Youth Market Increase Expansion Efforts on Youth Market

Promote information applications

Promote business

integration

Highlight WCDMA

advantages

Rich 3G handset offerings and attractive tariffs and subsidies Free assigned data package to promote data consumption

Increase WLAN coverage, and promote cross-sales of broadband and 2G/3G products

Optimize sales &

marketing system

Such as campus VPN, integrated campus information platform

Accelerate buildup of distribution channels, and enhance promotion of relevant products via e-channels Increase sales and customer service capabilities of distribution channels

Assigned data applications: WO YOU, mobile music, mobile reading, video sharing

15 handsets offered for WO Pai 3G packages

60 minutes voice (local & long distance integrated) + 300 minutes voice (to 3 assigned Unicom phone numbers) + 100 SMS + 60MB + 500MB (for assigned data applications)

WO Pai RMB36 PackageExample

Business Integrationintroducing “WO Pai” brand in 2H to expand into youth market

2424

Operating Performance

Overview

Financial Results

Agenda

25

4.4% 3.4%

10.4% 8.7%

9.4% 14.8%

7.1%8.4%

1H2010 1H2011

Others

Mobile Data

SMS

Voice VAS

21.3%5,105Interconnection

44.3%60,000Operating Revenue

18.2%26,403of which: Voice & Monthly Fee

(RMB millions) 1H2011 YoY

Service Revenue 48,998 25.3%

VAS 17,310 41.2%

Mobile RevenueMobile Revenue

31.3%35.3%

-11.9%2,389Interconnection

-4.4%2,313VAS

2.4%40,936Operating Revenue

19.3%22,123Internet & Data

(RMB millions) 1H2011 YoY

Service Revenue 40,903 2.5%

of which: Voice 12,961 -17.2%

Fixed-line RevenueFixed-line Revenue

VAS Composition17,172

14,471

42.0%36.3%

1H2010 1H2011as % of fixed-line service revenue

(RMB millions)Broadband Service Revenue

25(1) Revenue from external customers, excluding inter-segment revenue

(1)(1)

18.7%

Revenue and Its Composition

26

11.1%7.9%7.1%

14.3%

16.4%14.0%

12.3%15.5%

13.8%

32.3%28.0%

7.9% 7.7%

3.2%

1H2010 1H2011

26

19,047

+193

-51

+8,625

+627

+4,822

+948

+1,275

+1,710

+1,284

+19,291

YoY (RMB millions) 1H2011 YoY%

Operating expenses 97,719 24.6%

Interconnection charges 7,763 19.8%

Depreciation & amortization

28,351 6.4%

Networks, operations & support

14,034 10.0%

Employee benefit 12,520 8.2%

Adjusted selling & marketing

16,653 40.8%

G&A and others 7,162 9.6%

Adjusted cost of telecom products sold

11,236 330.3%

Net finance costs 773 -6.2%

Net other income 601 47.3%

Total costs & expenses 97,891 24.2%

Operating Expenses Structure(as % of operating revenue)

Operating Expenses Structure(as % of operating revenue)

Interconnection charges

Depreciation & amortization

Networks, operations & support

Employee benefit

Adjusted selling & marketing

G&A and others

Adjusted cost of telecom products sold

95.1% 96.4%

(1)

(1)

Costs & Expenses and Their Structure

(1) In 1H2011, 3G handset subsidy of RMB3.06 billion was recognized as the loss of telecom products sold (Sales of Telecom Products minus Cost of Telecom Products Sold). For analysis purpose, the above subsidy expense was deducted from Cost of Telecom Products Sold and added to Selling & Marketing Expense.

2727

14,03412,759

13.8%15.5%

1H2010 1H2011

28,35126,641

28.0%32.3%

1H2010 1H2011

Depreciation & AmortizationDepreciation & Amortization

(RMB millions)

Continuous expansion of 3G and broadband networks led to rising depreciation. In 1H2011, depreciation & amortization yoy up RMB1.71 billion, or 6.4%.

Due to expanded networks and rising energy and rental prices, networks, operations & support expense yoy up RMB1.28 billion, or 10.0% in 1H2011.

Networks, Operations & SupportNetworks, Operations & Support

(RMB millions)

as % of operating revenue

6.4% 10.0%

Analysis of Major Expenses (1)

28

4,7344,479

11.6%11.2%

1H2010 1H2011

1,1242,004

2,878

2,6813,057

491

5,935

4,685

1,615

1H2010 2H2010 1H2011

5,9875,741

16.7%16.3%

1H2010 1H2011

491

3,057

13,596

11,340

1H2010 1H2011

Total S&M + 3G SubsidyTotal S&M + 3G Subsidy(RMB millions)

14.3%16.4%

GSM S&M ExpensesGSM S&M Expenses(RMB millions)

3G S&M + 3G Subsidy3G S&M + 3G Subsidy(RMB millions)

as % of operating revenue

as % of GSM service revenue

as % of 3G service revenue

S&M expenses3G handset subsidy

16,653

40.8%

11,831

4.3% 40.9%

45.1%

61.3%

190.1%

26.7%

Fixed-line S&M ExpensesFixed-line S&M Expenses(RMB millions)

as % of fixed-line service revenue

5.7%

Analysis of Major Expenses (2)

29

868

2,792 2,637

1H2010 2H2010 1H2011

28,67630,723 32,017

31.6%32.4%37.2%

1H2010 2H2010 1H2011

EBITDA & EBITDA MarginEBITDA & EBITDA Margin Net ProfitNet Profit

-5.5%

1H EBITDA yoy up 4.2%

Net Profit of RMB 2.64 billion, yoy down 5.5% but improved HoH

4.2%

29

(RMB millions) (RMB millions)

EBITDA and Net Profit

30

8,384

-2,2271H2010 1H2011

34,35231,089

1H2010 1H2011

30

Cash Flow from OperationsCash Flow from Operations

(1)

(1)

Free Cash FlowFree Cash Flow

10.5%

(2)

+ 10.61 bn

(1) Including IT systems, VAS platforms, fixed-line(2) Cash flow from operations minus CAPEX

19,470 6,320 of which: 3G

3,410 1,608 GSM

2011 Budget1H2011(RMB millions)

73,800 25,968 Total CAPEX

12,690 1,560 IT Systems & Others

19,480 5,537 Infrastructure & Transport Networks

18,750 10,943 Broadband & Data

22,880 7,928 Mobile Network

CAPEXCAPEX

(1)

(RMB millions)

(RMB millions)

Cash Flow and CAPEX

31

Liabilities-to-Assets RatioLiabilities-to-Assets Ratio Interest-bearing Debt & Debt-to-Cap Ratio

Interest-bearing Debt & Debt-to-Cap Ratio

95,90497,042

31.7%32.0%

31 Dec 2010 30 Jun 2011Debt-to-cap ratio

53.0%53.4%

31 Dec 2010 30 June 2011

Balance sheet remained solid, with liabilities-to-assets ratio down 0.4pp in 1H2011

Total interest-bearing debt of RMB 95.9 billion, and debt-to-capitalization ratio down 0.3pp in 1H2011

31

(RMB millions)

Solid Balance Sheet

Thank you！

China Unicom (Hong Kong) Limited

24 August 2011

www.chinaunicom.com.hk

33

2,922 2,652 Net Profit(20,977)(35,051)SG&A and Others

(874)(857)Taxation(11,572)(12,520)Employee Benefit

3,796 3,509 Profit Before Tax(12,759)(14,034)Networks, Operations & Support

408 601 Net Other Income (Expenses)(26,641)(28,351)Depreciation & Amortization

40 120 Interest Income(6,479)(7,763)Interconnection Charges

(864)(893)Finance CostOperating Expenses:

4,212 3,681 Operating Profit:82,640 101,400 Total Operating Revenue

(78,428)(97,719)Total Operating Expenses2,528 11,035 Sales of Telecom Products

(3,102)(14,293)Cost of Products Sold80,112 90,365 Service Revenue

(11,340)(13,596)Including：Selling & MarketingRevenue:

1H2010 1H2011 1H2010 1H2011 (RMB millions)

Appendix I: Income Statement

34

441,453439,913Total Liabilities and Equity441,453439,913Total Assets

205,841206,960Shareholders’ Equity42,20838,904Total Current Assets

235,612232,953Total Liabilities22,49518,042Cash and Cash Equivalent

198,237195,842Total Current Liabilities：5,1154,794Prepayments & Others

28,90632,860Advances from Customers9,28610,435Accounts Receivable, net

36,72734,856Short-term Loans3,7284,089Inventories

23,00024,000Short-term BondsCurrent Assets：

1,4841,593Taxes Payable399,245401,009Total Non-current Assets：

97,65992,650Accounts Payable11,75311,894Other Assets

Current Liabilities：6,2149,989Available-for-sale Financial Assets

37,37537,111Total Non-current Liabilities：4,8405,617Deferred Tax Assets

33,55833,356Bonds & Convertible Bonds7,6077,566Leasing Prepayments

1,4621,449Long-term Bank Loans366,060363,172PPE, net

Non-current Liabilities：Non-current Assets：

31 Dec 201030 Jun 2011 (RMB millions)31 Dec 2010 30 Jun 2011 (RMB millions)

Appendix II: Balance Sheet (selected)

3535

32.028.4of which：Fixed lines

18.112.8PHS

7,56023,945Subscribers (’000)3G Business 133.0117.5ARPU (RMB)

638.5660.7Handset sub MOU (minutes)

1H2011 1H2010

GSM Business

Subscribers (’000) 157,665 149,402

ARPU (RMB)(1)

38.3 39.8

MOU (minutes)(1)

259.5 260.2

Voice revenue per minute (RMB) 0.102 0.108

Fixed-lineLocal Access

Subscribers (’000) 95,458 100,852

of which：Fixed lines 84,986 84,606

PHS 10,472 16,246

ARPU (RMB)(1)

26.4 29.6

Local voice usage (million pulses) (excluding Internet dial-up usage) 65,191 80,747

Long distance usage (million minutes) 11,205 13,730

Fixed-lineBroadband

Subscribers (’000) 52,322 43,759

ARPU (RMB)(1)

57.6 58.5

(1) Average number of subscribers for a period = sum of all monthly average number of subscribers in the period divided by total number of months in the period; average number of subscribers for a given month = (the number of subscribers at the end of previous month + the number of subscribers at the end of the given month) / 2

Appendix III: Key Operating Metrics

36

Certain statements contained in this announcement may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 (as amended). Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. These risks, uncertainties and other factors include: the uncertainties in the development of telecommunication industry and technology in the PRC; future growth of the market demand for telecommunication services; changes in the competitive environment, regulatory environment and the PRC government’s regulatory and/or industry policy, the effects of tariff reduction initiatives; the availability, terms and deployment of capital; changes in assumptions upon which the Company has prepared its projected financial information and capital expenditure plans; the effect of the Company’s proposed adjustment in its business strategies relating to the PHS business; changes in political, economic, legal and social conditions in the PRC; the potential continued slowdown of economic activities at home and abroad, and other factors that will affect the execution of our business plans and strategies as well as our business condition and financial results.

Forward-looking Statements