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					Converge Communications and Information Contents
         and Jointly Create a Future of 3G

                       Li Gang
            Vice President, China Unicom
                    Nov. 15, 2006

I. Development Trends of Mobile Communications

II. The Development of China’s Communications Market

III. China Unicom - Facing the Future

           I. Development Trends of Mobile

(A)Development Trends of the Mobile Communications Industry

(B)Development Trends of Mobile Communications Services

      (A)Development Trends of the Mobile
          Communications Industry
1. Overview of the Global Mobile Industry
(1) As of the end of 2005, the world’s total mobile subscribers exceeded 2.16
     billion, an increase of over 400 million from 2004.
(2) 3 G mobile subscribers increased steadily, with WCDMA subscribers
     increasing to 44.6 million and 1XEV-DO subscribers increasing to 21.9

           Market Shares of the World's Mobile Technologies as of the End of 2005

                          3.20%       1.10% 0.20%
                  2.10%                               13.30%


             CDMA      GSM         UMTS     TDMA    PDC     Iden      Analog        3
                       (A)Development Trends of the Mobile
                           Communications Industry

                   2. The industry is undergoing a fundamental change and
                       companies are facing a business transition

                      Integrated voice
                                                       Co-existence and                 信息通信
                                                                                      Convergence of
                                                        variation of multiple
   Change                communications                     technologies                 融合阶段

 Customers &        Homogeneous              customer groups become
                                                                                Complex & segmented customers
Characteristics       customers                    segmented

    Services and                                                                     Integrated information provider,
      service      Network operators and    Fixed-line Mobile voice                          content provider,
                      service providers     voice and and related Broadband
     providers                             value-added     new                   applications provider and virtual operator
                        are integrated       services    services
                   to make networks into
   Networks and        Treasure Trees
     network                                   Operators, content providers            Network operators-telecom,
    operators                                 and mobile terminal vendors                radio & TV, power and
                                              create values and share profits           various optical companies

                                              (A)Development Trends of the Mobile
                                                  Communications Industry

                            (1) The industry chain is continuously expanding and becoming more
                                       complicated, rendering a                                                    Traditional 2G industry chain is much
                                       coexistent ecosystem.                                                        simpler, with operators playing central roles.
                                                                                                                   Currently, we are at the transition stage from
                                                                                                                    2G to 3G, and the industry chain is evolving
Equipment                                                                                                           from 2G to 3G.
vendors                                                 2G operators                                customers
network and                                                                                                        The 3G industry chain is fairly more
                                                                                                                    complicated, because 3G consists of many
                                                                                                                    related industries and supporting industries,
                                                                                   Mobile                           such as content providers, terminal vendors
                                                                                   terminals                        and software developers, etc. These
                                                                                                                    industries have a very complex interactive
                                                                                                                    relationship, such as coexistent, competing,
                                                        Evolution                                                   cooperative and both competing and
                                                                                                                    cooperative relations, etc.
                                                                                                                   3G operators are operating in an industrial
                                                                          SP/CP                                     ecosystem. Whether the company can
                                       Software developer
solution                                                    Equip.
                                       System integrator vendor
                                 Special application                                                                develop smoothly not only depends on how
                                 developer                         Supporting services
                                                                                                                    it will cooperate with the upstream and
Corporate customer

                                              Setting forth requirements              Fee collection
                     Solution                                                                Services
                                solution                                                                            downstream companies of the industry, but
                                                  3G operator                                Payment
                                                                                                                    also depends on synergy between the
                                                                                                                    relevant industries and the supporting
                                  Supporting terminal                          Terminal requirements                industries.                                   5

Note: Value creators may be converged to take the responsibilities of multiple roles.
                   (A)Development Trends of the Mobile
                       Communications Industry

 (2)The value chain evolves into a value network, with new roles,
       new division of labor and new profit distribution patterns.
           Setting up          Mobile phone
                                                   CORE                                                           Purchases          Content
           standards           customization                                                                        from           distributor

                                          call                                                                              Full-content
                   Sells to                                       Distribution              Distribution                      provision
                                        charges                                    Value-                              Purchases              Provides
    Mobile phone                                        Mobile                      added                   Service       from
    manufacturer                                       operator                   service                  provider                 Traditional
                                 user                                            operator
                   Purchases            Sending                    Purchases                  Purchases                                medias
                     from                                            from                       from                  Selective
                                                                       Purchases                                               Purchases      Provides
                                               Purchases                  from                                                   from
                                                 from            Sales                         Sales         Professional          Professional
                                                              maintenance                   maintenance      information            information
                                                                upgrade                       upgrade                                  source

                                                           Integrated system provider
                            Income flow
                   supports or channels
                                               Purchases              Purchases
                                                 from            Sales   from              Sales
                                                              maintenance               maintenance
                                                                upgrade                   upgrade

                                           Equipment vendor                            Technology vendor

The  network and services of 2G are bonded together, with simpler value generation models. Network
construction, issuing numbers and fee collection form the major operational activities.
The 3G value mode: from the value chain to the value network.
 With the value network, the role of a telecom operator depends on its strategic positioning and its
capability in controlling the value network. If the telecom operator is capable to take a key position on the
value network and play a key role, then it can play the leading role.
 Content provision will develop into a huge and growth market segment. Operators should learn from
  the experiences and lessons of the Internet business models to prevent their central roles from being    6
  weakened or marginalized.
                  (A)Development Trends of the Mobile
                      Communications Industry

(3) Competition is seen within the whole ecosystem
           With 3G, competition is no longer competition between separate companies, it is more of
            competition between value chains and between the ecosystems of companies. The various
            sectors of the ecosystem will strive to create the strongest competitiveness and gain
            maximum benefits through coexistence and cooperation.
           Mobile operators’ capabilities of integration and cooperation in the ecosystem will become
            critical for their success.

                 Traditional media           Content Distributor    Industry information resources

C              Coexistence                         SP/CP

             Terminal vendor                                                      Technology provider
                                             Mobile Operator

                               Cooperation     Equipment provider                                                         7
                 (A)Development Trends of the Mobile
                     Communications Industry
       (4)Fundamental changes in the business management model

    The Operation Mode of 2G                                        The Operation Mode of 3G
                                                                   3G is a huge platform that can support multiple and
   Frankly speaking, the 2G network is a voice carrier.
                                                                    diversified services. Network operation and services
    Telecom operator=network operator
                                                                    provision can be separated and run by different
   The network is the “treasure tree”, with value-added
                                                                    business entities.
    services just being variations of the voice services. And
                                                                   3G provides integrate services. Service is no longer
    the so-called service is just an extension of voice
                                                                    an extension of voice service or a single product,
                                                                    instead it is a combination of multiple services and
   Terminals: They are mainly tools for making calls.
    Voice services —— they are homogeneous.
                                                                   Terminals: They are no longer of a mobile phone
   Market and customers: standard products and
                                                                    concept, instead they have evolved into integrated
    homogeneous customers.There is no need to segment
                                                                    and intelligent information terminals.
    the market, with price wars and service wars being the
                                                                   Market and Customers: Customized products and
    major means for competition.
                                                                    customer segmentation. Marketing strategies and
   Competitive strength mainly comes from the network,
                                                                    execution become critical.
    customers and government PR capabilities.
                                                                   Competitive strength not only comes from its own
   Cooperation: simple trade relations
   Management: self-management of the company.                     strength, but also from its capability in integrating
                                                                    outside resources. Integration capability is key to
                                                                    gain competitiveness.
                                                                   Management: The scope of corporate management
                                                                    has extended to partner relations management.

          (A)Development Trends of the Mobile
              Communications Industry

    More challenges than opportunities, more opportunities than challenges
    Risks: cost of broadband, competitors, virtual operations, accelerated
     technological evolvement…
    Opportunities: more products, a broader market, more value growth
    Challenges: The biggest challenge is how to play a central role in the
     ecosystem and how to play a key role in the value network
     environment. The industry is going to have thousands of players, and
     he who controls the most critical sectors will control the entire value
     network and get the most benefits.

       I. Development Trends of Mobile Communications

(A)Development Trends of the Mobile Communications Industry

(B)Development Trends of Mobile Communications Services

                             (B)Development Trends of Mobile
                                Communications Services

               1.Overall integration of information contents and the network

                              provider          provider                            TV broadcasting     network:
                                                                                     film and TV programs
                                                                                    Internet:    plenty     services
                                                                                     including information, data and
                                                                                     streaming media, etc.
                                                           Telecom operator
        Multiplex                             INTERNET                              The telecom network: voice,
        Operator                                                                     information, data and image,
                                                                                     various services based on
                              Service                                                streaming media, broadcasting
                              platform                                               services based on mobile
                                                             3GPP BMS                broadcasting technology
DVB-H TV broadcasting
                                              Telecom        3GPP2 BCMCS
T-DMB    network
S-DMB, etc.

                    TV broadcasting              Two-way           Mobile broadcasting
                         service                  service                   service

                        Receiving terminals                                                                    11
                    (B)Development Trends of Mobile
                       Communications Services
2. Increased derivative services on the communications network
      The internet is ahead of other networks in service development. The operation modes
       of different network information contents will just influence one another.
      Product transplantation trend is growingly apparent, but with competitions. For
       example, MSN and mobile IM, e-mails and mobile e-mails, etc.

                            TV broadcasting network
    Social information                                                             SMS/MMS
                                                         Films                         IVR
                                                                                 Location service
                                                       TV Games
           Music                                                                  Mobile games

                                                                                  Mobile music
           Film & TV
                                                                                   Mobile video
                                                Telecom network
          Reading                                                                Mobile commerce
               materials                                                         Mobile Internet
                                                      Info. browsing    IPTV
         Media info.                                  E-mails           blogs          IM
                                                      PC games
         Industry information                         MSN、QQ                     Services featuring 12
                     (B)Development Trends of Mobile
                        Communications Services

             3. Classification of 3G services

                        Voice Services          Voice Services        VOIP    Value-added Voice

                     Basic Data Services         MVPN
                                                     Internet Services        Mobile Browsing

                                                   Messaging Services          SMS/EMS            UMS

                                                                              MMS           SMSCB        IM
3G                                                         LBS
     ces                                              Mobile Games            Game              Online

                                                      Mobile Music               CRBT
                     Value-added     Data                                    Online Music      Music
                          Services                  Mobile Commerce                            Download

                                                       Mobile Video          Videoconference
 A service may be developed into an industry.                                                   Video on
                                                                             Video Phone
                                                        Corporate                                   13
        (B)Development Trends of Mobile
           Communications Services

4. Two development orientations of 3G services
   Entertainment Services
    Mobile entertainment is becoming a major orientation in the development of
    new mobile services. Mobile video, mobile music, mobile novel, mobile

   Industry Services
    Weather forecast, public traffic, emergency response, education, healthcare…


I. Development Trends of Mobile Communications

II. The Development of China’s Communications Market

III. China Unicom - Facing the Future

  II. The Development of China’s Communications Market

(A)China’s Communications Market Pattern

(B)The Development of China’s Communications Industry

(C)The Development of Telecom Value-added Services in China

                     (A)China’s Communications Market Pattern

      A competition pattern of multi-services and multi-operators
     has come into shape
                                                              The value-added telecom market
   The basic telecom market
                                                                   18,400 value-added service operators
       A market pattern with six major telecom                     form a fully competitive market pattern in
        operators in 2005                                           the value-added services areas such as
                                                                    ISP and information services.
        Shares of Busienss Revenue of Chiina's Major           Distribution of value-added service operators in 2005
        Basic Telecom Operators in 2005
                                   2.00%                                   0.80%
                                   0.00%                               3.80%
     China Telecom
                          17.00%                                   0.50%
     China Netcom
     China Mobile
     China Unicom
     China Satcom
     China Railcom

                         36.00%                   16.00%
                                                                Info. Services   IDC   Call Centers     Wireless Paging   Others

  II. The Development of China’s Communications Market

(A)China’s Communications Market Pattern

(B)The Development of China’s Communications Industry

(C)The Development of Telecom Value-added Services in China

          (B)The Development of China’s
             Communications Industry

1. High growth rate of business
   Total communications business volume increased from RMB 314.52 billion at the end of
    the 9th Five-Year-Plan period to RMB1219.89 billion at the end of the 10th Five-Year-
    Plan period, realizing a quadrupling increase.
   In 2005, increased value of telecom services accounted for 2.10% of China’s total GDP,
    and the average growth rate of communications services during the 10th Five-Year-Plan
    period was 7.2%.

         14000                                                         2.72%             3.00%
         12000                   2.28%                                                   2.50%
                         2.12%                                                 2.10%
         10000   1.85%                                                                   2.00%
          6000                                                                 12198.9
                                                                       9225              1.00%
                                              5052                                       0.50%
          2000           3145     3953
             0                                                                           0.00%
                 1999    2000     2001        2002         2003        2004     2005
                                 Total telecom services
                                 Increased value of telecom services in GDP                      19
                        (B)The Development of China’s
                           Communications Industry

            2. Steady increase of communications revenue, with increased proportion
                of data services
                Total communications revenue was RMB 637.37 billion in 2005, up 11.3% year-on-year.
                Annual growth rate of data communications revenue was 36.3%, with its proportion in
                 total communications services being increased from 2.8% in 2000 to 6.84% in 2005, of
                 which revenue from information content services account for 12.9% of all data services.

                A comparison of the compositions of communications revenues in 2004 and 2005

                6.23%                                                                             0.06%
                                0.06%                               17.84%
                                                       43%                                                               45%

         31.24%                                                           30.03%
Mobile            Fixed-line local calls   Long-distance calls   Mobile            Fixed-line local calls   Long-distance calls
Data              Wireless paging          Satellite             Data              Wireless paging          Satellite
                              (B) The Development of China’s
                                   Communications Industry

               3.    Rapid increase of telecom service subscribers and continuous increase of the
                     penetration rate
                    As of the end of August this year, the total number of phone subscribers in China broke
                     800 million, with 368 million fixed-line subscribers and 437 mobile subscribers, topping the
                     whole world.
                    As of the end of 2005, the number of Internet users exceeded 100 million, ranking the 2
                     place in the world, while the penetration rate of fixed-line and mobile phones reached 27%
                     and 30.3%, respectively.

                                                                                                              393 mil.
Unit: 10,000

                                                                                                              350 mil.
                30000                                                                                         30.3%
                25000                                                                                         27%
                15000                                                                                         111 mil.
                              1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
                    Fixed-line penetration        Mobile penetration             Number of fixed-line users              21
                    Number of mobile users        Internet users
              (B) The Development of China’s
                   Communications Industry
4.     Breakthroughs in rural communications
      The Village Access Project: The project was implemented in January 2004. As of the end
       of 2005, the ratio of voice service increased to 97% from 89% before implementation of
       the project. Under the direction of the government, China Telecom, China Netcom, China
       Mobile and China Unicom took responsibilities for most jobs of the project.
      Rural communications are developing towards informatization. China Unicom’s “New
       Horizon for Agriculture” and “Tianfu Agriculture Information Network” are good examples.

     800000                                                                                                       120.00%

     700000                                                                                            97.10%
     600000                                                                                   90.90%
                                         78.33%                                                                   80.00%
     400000                                                                                                       60.00%


          0                                                                                                       0.00%
              1998         1999         2000        2001          2002          2003      2004           2005

               Villages with telephone service    Villages without telephone service   Service penetration rate
   II. The Development of China’s Communications Market

(A)China’s Communications Market Pattern

(B)The Development of China’s Communications Industry

(C)The Development of Telecom Value-added Services in China

    (C)The Development of Telecom Value-added
                 Services in China

1. Distribution of revenues from value-added services
    All value-added services combined realized an aggregate revenue of RMB 86 billion in 2005, up
    43% from 2004.


                      21%                                                        60%

                              Basic telecom operators
                              Transregional value-added service providers
                              In-province value-added service providers

    Note: Revenue generated from point-to-point SMS services of basic telecom operators was not

          (C)The Development of Telecom Value-added
                       Services in China
          2. Revenue composition of value-added services
                 Total revenue from information services was RMB 43 billion in 2005, accounting for
                 approx. 50% of the total revenue from value-added services.

Composition of revenue generated from value-adde
                                                                Composition of revenmue generated from
                 services in 2005
                                                                     information services in 2005
                    1.10%    2.00%                                        2.50%


Information services   ISP             IDC               Mobile information service       Internet information service
Call centers           VSAT            Wireless paging
                                                         Fixed-line information service

             (C)The Development of Telecom Value-added
                          Services in China
       3. Value-added services are concentrated in the information service area
             As of the end of 2005, China had about 16,130 information service providers,
             accounting for 86% of all China’s value-added service providers. This figure includes
             some 6,100 mobile information service providers who are mainly engaged in SMS,
             WAP, MMS, IVR, CRBT, as well as other mobile value-added services.

100%                                                                                        80

                                                                           (RMB 100 mil)
 60%                                                                                        50
 50%                                                                                        40
 40%                                                                                        30
 30%                                  59%
                        54%                          50%                                    20
 20%      38%
  0%                                                                                        0
          SMS            WAP           MMS           IVR           彩铃                             SMS     MMS      CRBT     WAP      IVR

  Aggregate revenue market shares of top ten trans-regional operators in                     Revenue from the major information services of   26
          terms of revenue in 2005                                                                 mobile information services in 2005
 (C)The Development of Telecom Value-added
              Services in China
4. Capital composition of value-added services
    As of the end of 2005, of all value-added service providers in China, the proportion of
    privately owned or joint stock companies exceeded 87.6%, up 3% from 2004; the state-
    owned companies accounted for 11.9%, down 3.3% from 2004; value-added service
    providers with foreign investment now only account for a small portion with only five such

                                          0.50%          11.90%


                            State-owned    Private   Foreign investment

 Comparison of the capital compositions of trans-regional value-added service operators     27

I. Development Trends of Mobile Communications

II. The Development of China’s Communications Market

III. China Unicom - Facing the Future

  III. China Unicom - Facing the Future

(A) 3G Opportunities

(B)China Unicom in the Face of 3G

      (A) 3G Opportunities

    1. Rapid development of the national economy, society and culture.
                                           GDP and growth rate in the 10th Five-Year Plan period

    GDP reached RMB 18.2321                200000                                                     182321       15
                                            180000                                     159878                       14
     trillion by the end of 2005, up        160000
                                            140000                 120333                                           12
     9.9% over 2004.                        120000    109655
                                                                               10               10.1                11
                                            100000                     9.1                                          10
    Total retail sales of consumer          80000           8.3                                              9.9   9
                                             60000                                                                  8
     goods reached RMB 6.7177                40000                                                                  7
                                             20000                                                                  6
     billion by the end of 2005, up              0                                                                  5
                                                       2001         2002      2003      2004           2005
     12.9% over 2004. Deducting the
                                                     GDP(in RMB 100 mil.)      Growth rate year-on-year(%)
     price-rise factor, actual increase
     was 12.0%.                               Total retail sales of consumer goods and growth rate
                                                          in the 10th Five-Year Plan period
    Total population was 1.30765
     billion by the end of 2005, up 7.68    80000                                                                   25
     million over 2004.                     70000                                       59501                       20
                                            60000                            52516
    The 2008 Beijing Olympics will be      50000     43055                                                         15
                                            40000                                          13.3            12.9
     a “High-tech Olympics, People’s        30000         10.1
                                                                                9.1                                 10

     Olympics and Green Olympics”.          20000

                                                0                                                                   0
                                                      2001         2002      2003       2004           2005

                                                     Total retail sales of consumer goods(in RMB 100 mil.)               30
                                                     Growth rate year-on-year(%)
     (A) 3G Opportunities

    2. Rapid growth of the company’s strength

   China United Telecommunications Corporation
    was incorporated on July 19, 1994. Currently, it
    is the only telecom operator in China which has
    been publicly listed in three cities (NY, HK and
    Shanghai) in China.                                        The number of Chian Unicom's subsribers (in 10,000)

   As of the end of 2005, China Unicom had a          12000
    total asset of RMB 226.1 billion, a net asset of
    RMB 90.3 billion and over 140,000 employees.       10000                                                          9588
                                                        8000                                         8507
   Revenue from the company’s main business                                          7313
    was RMB 77.7 billion in 2005, some 486 times        6000           6101
    of the RMB160 million earned in 1995 at its
    inception year.                                                                                  2831             3347
                                                        2000                          1906
   As of the end of 2005, the company’s revenue                       716
    took up 13.5% of China’s total telecom market          0
    share.                                                         2002           2003           2004            2005
   As of the end of 2005, the total number of                                         GSM      CDMA
    China Unicom’s subscribers was 130 million.
   The company has established strategic
    partnership with international telecom operators
    such as SKT.
(A) 3G Opportunities

 3. It is very probable that the government will issue licenses for 3G services
    Wang Xudong, Minister of the Ministry of Information said on May 18, 2005,
     “we are committed to providing 3G technology in 2008.”
    TD-SCDMA industrialization has seen breakthroughs.
    TD-SCDMA, WCDMA and CDMA2000 are the three 3G technology
     standards considered by the Chinese government.

  III. China Unicom - Facing the Future

(A) 3G Opportunities

(B)China Unicom in the Face of 3G

 (B)China Unicom in the Face of 3G

1. Bring the corporate transition forward
(1)The direction for transition——a modernized, integrated
    communications and information provider

   Voice service will still play a dominate role over a long time in the 3G era, but
  the proportion of revenue from information services will gradually increase .

   Corporate                                Modernized, integrated
   transition                        communications and information provider

 transition of the                                Economy of scale
  Growth model

Communications services—— Connecting anytime, anywhere
Information services—— Providing rich and colorful contents
         (B)China Unicom in the Face of 3G

(2)Adjustment of the company logo to present a new Unicom with a fresh new image
    China Unicom adjusted its company logo on March 28, 2006.

                                           Vigor, innovation and fashion

     (B)China Unicom in the Face of 3G

     (3)Precedence will be given to the development value-added services

                        2002        2003           2004           2005

Revenue grow rate      827.1%      375.7%         73.8%          69.2%

Percentage of value-
     added services
    in main business
                       1.54%       5.31%          8.39%         12.92%
Percentage of newly
    increased value-
    added service in   4.3%        15.3%          38.7%          58.8%
     main business

      (B)China Unicom in the Face of 3G

(4)Improve existing value-added services functions focusing on the development
   of 3G applications
                              2.5G/2.75G     improve, optimize and expand   3G
                                                                      Internet Services

                                                                      Messaging Services
       Value-added services



                               U-Magic                                 Mobile Game

                                                                       Mobile Music
                              Music Street

                                U-Web                                  Mobile Video

                               Push Mail                                                   37
                                                                     Mobile Commerce
             (B)China Unicom in the Face of 3G

            (5)Committed to openness, innovation, cooperation and win-win, we can
               jointly create an era of “TIME”.
                 Contents access is fully open to partners to jointly create an era of “TIME” (Telecom+
                Information+ Media+Entertainment).

                                                Marketing & promotion

                                                                                                 Film & TV
Set customization standards
                                                         SP                   media                Music


                                                         CP              Content


                  Provide service                                        Industry info.
                  Demand feedback                                                               Industry Info.

                                Equipment      Software and technology                                    38
                                     vendor         provider
(B)China Unicom in the Face of 3G

2. Fully promote brand marketing strategies

(1) Guidelines for brand marketing:
    Focusing on target customers’ needs
    Based on available service offerings of the company
    Aimed at integrating the various marketing resources and capabilities to
     provide customers with integrated communications and information services
    Realize the transition from the “technology-oriented and service-centric”
     marketing model to the “market-oriented and customer-centric” marketing

         (B)China Unicom in the Face of 3G

       (2)Our brand portfolio
  Company                                China Unicom


   Target          The Mid- and     The Youth    The Mass   Corporate
   markets        high-end market    market       Market    Customers

 Portal brand

    brand                                                               40
    (B)China Unicom in the Face of 3G

3. Strengthen network infrastructure construction and be prepared for
    upgrading to 3G
   Both the existing networks can be upgraded to 3G networks with a capacity of
    200 million subscribers. By the end of 2005, GSM network has commenced
    roaming services with 248 operators from 118 countries while the CDMA
    network has commenced roaming service with 18 operators from 15 countries.
   The CDMA is currently the world’s largest and has adopted world leading CDMA
    1X technology with a capacity to hold 80 million subscribers. The network can
    migrate to 3G smoothly.
   Upgrading GPRS of the GSM network is underway and it is planned to
    commence service in over 60 major cities in China by the end of the year.
   AS of the end of 2005, China Unicom has a total optical lines is 750,000km.
   On Oct. 24, 2006, China Unicom obtained an operating license for its
    CDMA20001XEV-DO services in Macao. This was the first time a Chinese
    telecom operator had been issued a 3G license.



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