SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________ to __________
COMMISSION FILE NUMBER 1-14696
CHINA MOBILE (HONG KONG) LIMITED
(Exact Name of Registrant as Specified in Its Charter)
N/A
(Translation of Registrant's Name into English)
HONG KONG, CHINA
(Jurisdiction of Incorporation or Organization)
60TH FLOOR, THE CENTER
99 QUEEN'S ROAD CENTRAL
HONG KONG, CHINA
(Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Ordinary shares, par value HK$ 0.10 per share New York Stock Exchange, Inc.*
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* Not for trading, but only in connection with the listing on the New York Stock Exchange, Inc. of American depositary shares representing the ordinary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2002, 19,671,653,899 ordinary shares, par value HK$ 0.10 per share, were issued and outstanding.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 [ ] Item 18 [X]
TABLE OF CONTENTS
CHINA MOBILE (HONG KONG) LIMITED
PAGE
PART I
Item 1. Identity of Directors, Senior Management and Advisers............................... 3
Item 2. Offer Statistics and Expected Timetable............................................. 3
Item 3. Key Information..................................................................... 3
Item 4. Information on the Company.......................................................... 15
Item 5. Operating and Financial Review and Prospects........................................ 37
Item 6. Directors, Senior Management and Employees.......................................... 52
Item 7. Shareholders and Related Party Transactions......................................... 59
Item 8. Financial Information............................................................... 66
Item 9. The Offer and Listing............................................................... 67
Item 10. Additional Information.............................................................. 68
Item 11. Quantitative and Qualitative Disclosures about Market Risk.......................... 75
Item 12. Description of Securities Other than Equity Securities.............................. 77
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies..................................... 77
Item 14. Material Modifications to the Right of Security Holders and Use of Proceeds......... 77
Item 15. Controls and Procedures............................................................. 77
Item 16A. Audit Committee Financial Expert.................................................... 77
Item 16B. Code of Ethics...................................................................... 78
Item 16C. Principal Accountant Fees and Services.............................................. 78
PART III
Item 17. Financial Statements................................................................ 78
Item 18. Financial Statements................................................................ 78
Item 19. Exhibits............................................................................ 78
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FORWARD-LOOKING STATEMENTS
This annual report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are, by their nature, subject to significant risks
and uncertainties, and include, without limitation, statements relating to:
- our business strategies;
- network expansion plans and related capital expenditure plans;
- the planned development of new mobile technologies and other technologies and related applications;
- the expected impact of tariff changes on our business, financial condition and results of operations;
- the expected impact of new services on our business, financial condition and results of operations; and
- future developments in the telecommunications industry in Mainland China, including the restructuring of the industry and changes in government policies.
The words "anticipate", "believe", "estimate", "expect", "intend" and similar expressions, as they relate to us, are intended to identify certain of such forward-looking statements. We do not intend to update these forward-looking statements.
These forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors, including, without limitation:
- changes in the regulatory policies of the Ministry of Information Industry of China and other relevant government authorities, which could affect, among other things, the granting of requisite government approvals, licenses and permits, interconnection and transmission line arrangements, tariff policies, capital investment priorities, and spectrum allocation;
- the effect of competition on the demand for and price of our services;
- changes in mobile telephony and related technologies, which could affect the viability and competitiveness of our mobile telecommunications networks; and
- changes in political, economic, legal and social conditions in Mainland China, including, without limitation, the Chinese government's policies with respect to new entrants in the telecommunications industry, the entry of foreign companies into China's telecommunications market and China's economic growth.
In addition, our future network expansion and other capital expenditure and development plans are dependent on numerous factors, including, among others:
- our ability to obtain adequate financing on acceptable terms;
- the adequacy of currently available spectrum or the availability of additional spectrum;
- the availability of transmission lines and equipment, and the availability of the requisite number of sites for locating network equipment, on reasonable commercial terms;
- our ability to develop or obtain new technology and related applications; and
- the availability of qualified management and technical personnel.
SPECIAL NOTE ON OUR FINANCIAL INFORMATION AND
CERTAIN STATISTICAL INFORMATION PRESENTED IN THIS ANNUAL REPORT
As required under generally accepted accounting principles in Hong Kong, or Hong Kong GAAP, we adopted the purchase accounting method to account for our acquisitions of various regional mobile telecommunications companies, as described in "Item 4. Information on the Company -- The History and Development of the Company". Accordingly, our consolidated financial statements and, except as otherwise noted, all other Hong Kong GAAP financial information presented in this annual report, include the results of these companies only from the respective dates of acquisition.
In prior years, positive goodwill arising from acquisitions was eliminated against reserves, and negative goodwill arising from acquisitions was credited to a capital reserve. Effective January 1, 2001, in order to comply with Statement of Standard Accounting Practice, or SSAP, 30 "Business combinations", issued by the Hong Kong Society of Accountants, we adopted a new accounting policy for goodwill. For acquisitions after January 1, 2001, positive goodwill arising from acquisitions is amortized to the consolidated statements of income on a straight-line basis over its estimated useful life, which shall not exceed 20 years. Positive goodwill is stated in the consolidated balance sheet at cost less any accumulated amortization and any impairment losses. Despite a change in accounting policy for goodwill, goodwill arising from acquisitions prior to January, 2001 has not been adjusted as we have taken advantage of the transitional provisions set out in paragraph 88 of SSAP 30 to the effect that the new accounting policy has been adopted prospectively only from January 1, 2001 onwards.
Under generally accepted accounting principles in the United States, or U.S. GAAP, as a result of our being under common control with each of these companies prior to the acquisitions, each of the acquisitions was considered to be a "combination of entities under common control". Under U.S. GAAP, combinations of entities under common control are accounted for under the "as if pooling-of-interests" method, whereby assets and liabilities are accounted for at historical cost and the financial statements of previously separate companies for periods prior to the combination generally are restated on a combined basis. See "Item 5. Operating and Financial Review and Prospects".
The presentation and classification of items in the consolidated cash flow statement have been changed due to the adoption of the requirements of SSAP 15 (revised 2001) "Cash flow statements", issued by the Hong Kong Society of Accountants. As a result, the cash flow items "taxation", "returns on investments" and "servicing of finance" have been reclassified into "operating", "investing" and "financing" activities, respectively, and a detailed breakdown of cash flows from operating activities has been included in the consolidated cash flow statement. Comparative figures for all prior years have been reclassified to comply with the requirements under SSAP 15.
The statistical information set forth in this annual report relating to Mainland China is taken or derived from various publicly available government publications that have not been prepared or independently verified by us. This statistical information may not be consistent with other statistical information from other sources within or outside Mainland China.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.
Not applicable.
ITEM 3. KEY INFORMATION.
SELECTED FINANCIAL DATA
The following tables present selected historical financial data of our company as of and for each of the years in the five-year period ended December 31, 2002. The selected historical income statement data for the years ended December 31, 2000, 2001 and 2002 and the selected historical balance sheet data as of December 31, 2001 and 2002 set forth below are derived from, and should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements, including the related notes, included elsewhere in this annual report. The selected historical Hong Kong GAAP income statement data for the year ended December 31, 1998 and 1999 and the selected historical Hong Kong GAAP balance sheet data as of December 31, 1998, 1999 and 2000 are derived from our audited financial statements that are not included herein.
Our consolidated financial statements are prepared and presented in accordance with Hong Kong GAAP. As required under Hong Kong GAAP, we adopted the purchase accounting method to account for our acquisitions of the various regional mobile telecommunications companies, as described in "Item 4. Information on the Company -- The History and Development of the Company". Accordingly, our consolidated financial statements and, except as otherwise noted, all other Hong Kong GAAP financial information presented in this annual report, include the results of these companies only from the respective dates of acquisition. In contrast, under U.S. GAAP, our acquisitions of these companies are each considered a combination of entities under common control which would be accounted for under the "as if pooling-of-interests" method, whereby assets and liabilities are accounted for at historical cost and the accounts of previously separate companies for periods prior to the combination generally are restated on a combined basis. For a discussion of significant differences between Hong Kong GAAP and U.S. GAAP as they relate to us, and the effects of such differences on net profit for the years ended December 31, 2000, 2001 and 2002 and shareholders' equity as of December 31, 2001 and 2002, see note 33 to our consolidated financial statements. In addition, our condensed consolidated financial statements prepared and presented in accordance with U.S. GAAP for the relevant periods are set forth in note 33 to our consolidated financial statements.
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1999 2000 2001 2002 2002
RMB RMB RMB RMB RMB US$
---------- ---------- ---------- ---------- ---------- ----------
(in millions, except share, per share and per ADS information)
INCOME STATEMENT DATA:
HONG KONG GAAP
Operating revenue................ 26,345 38,623 64,984 100,331 128,561 15,532
Operating expenses............... 18,410 24,983 38,158 59,319 79,765 9,637
Operating profit................. 7,935 13,640 26,826 41,012 48,796 5,895
Write-down and write-off of
analog network equipment..... 282 8,242 1,525 -- -- --
Profit before tax and minority
interests.................... 9,387 6,444 26,393 41,717 48,978 5,917
Income tax....................... 2,486 1,647 8,366 13,703 16,234 1,961
Net profit....................... 6,900 4,797 18,027 28,015 32,742 3,956
Basic net profit per share(1).... 0.59 0.40 1.25 1.51 1.71 0.21
Diluted net profit per share(1).. 0.59 0.40 1.25 1.51 1.71 0.21
Basic net profit per ADS(1)...... 2.93 1.99 6.26 7.53 8.55 1.03
Diluted net profit per ADS(1).... 2.93 1.99 6.26 7.53 8.54 1.03
Shares utilized in basic
calculation (in thousands)... 11,780,788 12,069,108 14,394,313 18,605,371 19,151,322 19,151,322
Shares utilized in diluted
calculation (in thousands)... 11,782,521 12,072,383 14,409,503 18,698,023 19,243,050 19,243,050
U.S. GAAP(2)
Operating revenue................ 65,131 86,300 112,462 127,749 145,331 17,558
Operating expenses............... 46,051 59,659 77,289 78,598 91,040 10,999
Operating profit................. 19,080 26,641 35,173 49,151 54,291 6,559
Profit before tax and minority
interest..................... 20,432 16,088 35,466 50,194 55,418 6,695
Income tax....................... 4,206 3,990 11,328 15,959 18,214 2,200
Net profit....................... 16,225 12,098 24,137 34,236 37,202 4,495
Basic net profit per share(1).... 0.92 0.68 1.31 1.76 1.90 0.23
Diluted net profit per share(1).. 0.92 0.68 1.30 1.76 1.90 0.23
Basic net profit per ADS(1)...... 4.59 3.40 6.53 8.81 9.51 1.15
Diluted net profit per ADS(1).... 4.59 3.40 6.52 8.80 9.50 1.15
Share utilized in basic
calculation (in thousands)... 17,660,905 17,771,326 18,493,862 19,432,886 19,561,679 19,561,679
Share utilized in diluted
calculation (in thousands)... 17,662,638 17,774,601 18,509,052 19,525,538 19,653,406 19,653,406
BALANCE SHEET DATA:
HONG KONG GAAP
Current assets
Cash and cash equivalents.... 17,481 19,349 27,702 21,821 32,575 3,935
Deposits with banks.......... 1,311 8,227 12,204 14,970 11,069 1,337
Accounts receivable.......... 2,482 4,957 7,252 5,728 6,066 733
Fixed assets..................... 33,986 42,699 87,465 105,208 165,409 19,984
Total assets..................... 64,541 87,435 156,438 173,749 284,900 34,419
Total short-term debt(3)......... 5,337 4,419 12,095 5,439 8,200 990
Total long-term debt(4).......... 991 2,332 13,708 6,739 12,676 1,531
Fixed rate notes................. - 4,952 4,953 4,956 4,961 599
Convertible notes................ - - 5,708 5,708 5,711 690
Bonds............................ - - - 5,000 13,000 1,571
Deferred payable(5).............. - - - - 15,176 1,833
Total liabilities(6)............. 18,699 30,343 72,661 61,938 112,507 13,592
Shareholders' equity............. 45,827 57,092 83,760 111,779 172,202 20,804
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AS OF OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1999 2000 2001 2002 2002
RMB RMB RMB RMB RMB US$
------- ------- ------- ------- ------- -------
(in millions, except share, per share and per ADS information)
U.S. GAAP(2)
Fixed assets..................... 82,978 96,658 110,284 141,396 163,232 19,721
Total assets..................... 135,391 172,062 198,418 234,264 249,141 30,100
Total long-term debt(4).......... 18,643 23,992 22,748 9,661 12,676 1,531
Fixed rate notes................. -- 4,952 4,953 4,956 4,961 599
Convertible notes................ -- -- 5,708 5,708 5,711 690
Bonds............................ -- -- -- 5,000 13,000 1,571
Deferred Payable(5).............. -- -- -- -- 15,176 1,833
Shareholders' equity............. 78,812 87,373 95,650 140,300 134,575 16,259
OTHER FINANCIAL DATA:
HONG KONG GAAP
Capital expenditures(7).......... 11,040 11,708 21,964 39,500 41,000 4,954
Net cash from operating
activities(8)................ 11,981 19,184 35,449 50,971 69,422 8,387
Net cash used in investing
activities(8)................ (34,542) (35,183) (91,869) (45,248) (64,117) (7,746)
Net cash from/(used in)
financing activities(8)...... (27) 17,892 64,773 (11,604) 5,449 658
Dividend declared................ -- -- -- -- 6,678 807
U.S. GAAP(2)
Net cash flow from operating
activities................... 25,473 41,529 57,766 60,863 79,445 9,598
Dividend declared................ -- -- -- -- 6,678 807
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The basic net profit per share and per ADS amounts under U.S. GAAP for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 have been computed by dividing net profit by the weighted average number of shares and the weighted average number of ADSs, respectively, as if 1,273,195,021 ordinary shares representing 254,639,004 ADSs issued to China Mobile Hong Kong (BVI) Limited as part of the consideration in the acquisition of Fujian Mobile, Henan Mobile and Hainan Mobile, 3,779,407,375 ordinary shares representing 755,881,475 ADSs issued to China Mobile Hong Kong (BVI) Limited as part of the consideration in the acquisition of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile and 827,514,446 ordinary shares representing 165,502,889 ADSs issued to China Mobile Hong Kong (BVI) Limited as part of the consideration in the acquisition of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile were outstanding during these periods (in addition to shares actually issued during these years). The calculation of diluted net profit per share under U.S. GAAP for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 have been compiled after adjusting for the effects of all dilutive potential ordinary shares, respectively. For the years ended December 31, 1998, 1999, 2000, 2001 and 2002, all dilutive potential ordinary shares resulting from the share options granted to the directors and employees under the share option scheme would decrease profit attributable to shareholders per share. In 2000, since all potential ordinary shares resulting from the convertible notes would increase profit attributable to shareholders per share as a result of savings on interest payable on the convertible notes, the anti-dilutive effects of potential ordinary shares were not taken into account in calculating diluted earnings per share. For the year ended December 31, 2001 and 2002, all dilutive potential ordinary shares resulting from convertible notes would decrease profit attributable to shareholders per share.
(2) The amounts for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 are presented to reflect our acquisitions of the various regional mobile telecommunications companies under the "as if pooling-of-interests" method, as well as the effects of other differences between Hong Kong GAAP and U.S. GAAP.
(3) Includes short-term bank and other loans, current portion of long-term bank and other loans and current portion of obligations under capital leases.
(4) Includes long-term bank and other loans and obligations under capital leases, net of current portion.
(5) Represents the balance of the purchase consideration payable to China Mobile Hong Kong (BVI) Limited for our acquisition of the eight regional mobile telecommunications companies in 2002. See "Item 4. Information on the Company".
(6) Excludes minority interest.
(7) Represents payments made for capital expenditures during the year.
(8) The presentation and classification of items in the consolidated cash flow statement have been changed due to revisions to SSAP 15. Comparative figures for all prior years have been reclassified to comply with the requirements under SSAP 15. Please see note 32 to our consolidated financial statements included elsewhere in this annual report for a discussion of SSAP 15.
EXCHANGE RATE INFORMATION
We publish our consolidated financial statements in Renminbi. Solely for the convenience of the reader, this annual report contains translations of certain Renminbi and Hong Kong dollar amounts into U.S. dollars and vice versa at RMB 8.2772 = US$ 1.00 and HK$ 7.7988 = US$ 1.00, the prevailing rate quoted by the People's Bank of China on December 31, 2002. These translations should not be construed as representations that the Renminbi or Hong Kong dollar amounts could actually be converted into U.S. dollars at such rates or at all.
The noon buying rates in New York City for cable transfers as
certified for customs purposes by the Federal Reserve Bank of New York were RMB
8.2800 = US$ 1.00 and HK$ 7.7988 = US$ 1.00, respectively, on December 31, 2002,
and the noon buying rates in New York City for cable transfers as certified for
customs purposes by the Federal Reserve Bank of New York were RMB 8.2768 = US$
1.00 and HK$ 7.7987 = US$ 1.00, respectively, on May 30, 2003. The following
table sets forth the high and low noon buying rates between Renminbi and U.S.
dollars and between Hong Kong dollars and U.S. dollars for each month during the
previous six months:
NOON BUYING RATE
RMB PER US$ 1.00 HK$ PER US$ 1.00
--------------------- -------------------
HIGH LOW HIGH LOW
---- --- ---- ----
November 2002.............. 8.2774 8.2771 November 2002.............. 7.8000 7.7987
December 2002.............. 8.2800 8.2771 December 2002.............. 7.7992 7.7980
January 2003............... 8.2800 8.2766 January 2003............... 7.8001 7.7988
February 2003.............. 8.2800 8.2768 February 2003.............. 7.8000 7.7989
March 2003................. 8.2776 8.2770 March 2003................. 7.7995 7.7987
April 2003................. 8.2774 8.2769 April 2003................. 7.7998 7.7991
May 2003................... 8.2771 8.2768 May 2003................... 7.7995 7.7985
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The following table sets forth the average noon buying rates between Renminbi and U.S. dollars and between Hong Kong dollars and U.S. dollars for each of 1998, 1999, 2000, 2001 and 2002, calculated by averaging the noon buying rates on the last day of each month during the relevant year.
AVERAGE NOON BUYING RATE
RMB PER US$ 1.00 HK$ PER US$ 1.00
---------------- ----------------
1998.............................. 8.2991 7.7465
1999.............................. 8.2785 7.7599
2000.............................. 8.2784 7.7936
2001.............................. 8.2772 7.7997
2002.............................. 8.2772 7.7996
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RISK FACTORS
EXTENSIVE GOVERNMENT REGULATION MAY LIMIT OUR FLEXIBILITY TO RESPOND TO
MARKET CONDITIONS, COMPETITION OR CHANGES IN OUR COST STRUCTURE.
The Ministry of Information Industry of China regulates, among other things, the following areas of the telecommunications industry under the leadership of the State Council of China:
- formulating and enforcing industry policy, standards and regulations;
- granting telecommunications licenses;
- formulating interconnection and settlement standards for implementation between telecommunications networks;
- together with other relevant regulatory authorities, formulating tariff and service charge standards for certain telecommunications services;
- supervising the operations of telecommunications services providers;
- promoting fair and orderly market competition among operators; and
- allocating and administering public telecommunications resources, such as radio frequencies, number resources, domain names and addresses of telecommunications networks.
Other Chinese government authorities also take part in regulating tariff policies and foreign investment in the telecommunications industry. The regulatory framework within which we operate may limit our flexibility to respond to market conditions, competition or changes in our cost structure. Moreover, we cannot predict when or if changes in tariff policies or rates may occur, including, for example, the possible implementation of a calling-party-pays tariff scheme. Although we and other telecommunications services providers have, on a limited basis, offered certain localized or promotional calling packages which incorporate calling-party-pays features, the Chinese government has not yet implemented regulations to adopt the calling-party-pays concept, and we cannot predict whether such regulations may be forthcoming or, if passed, what requirements the new regulations might entail. Future adverse changes in tariff policies and rates could decrease our revenues and reduce our profitability.
We operate our businesses with approvals granted by the State Council and under licenses granted by the Ministry of Information Industry. If these approvals or licenses are revoked or suspended, our business and operations will be materially and adversely affected.
WE MAY BE AFFECTED BY FUTURE REGULATORY CHANGES.
To provide a uniform regulatory framework for the orderly development of the telecommunications industry, the Ministry of Information Industry, under the direction of the State Council, is preparing a draft telecommunications law. If and when the telecommunications law is adopted by the National People's Congress, it is expected to become the fundamental telecommunications statute and the legal basis for telecommunications regulations in Mainland China. The State Council has promulgated a set of new telecommunications regulations. These regulations are substantially consistent with the existing rules and guidelines for the telecommunications industry, and are primarily intended to streamline and clarify the existing rules and guidelines. They apply in the interim period prior to the adoption of the telecommunications law. Although we expect that the telecommunications law will positively affect the overall development of the telecommunications industry in Mainland China, we do not fully know what the nature and scope of the telecommunications law will be. The telecommunications law and other new telecommunications regulations or rules may contain provisions that could materially and adversely affect our business, financial condition and results of operations.
COMPETITION FROM OTHER TELECOMMUNICATIONS SERVICES PROVIDERS MAY AFFECT OUR SUBSCRIBER GROWTH AND PROFITABILITY BY CAUSING THE RATE OF OUR SUBSCRIBER GROWTH TO DECLINE AND BRINGING ABOUT DECREASES IN TARIFF RATES AND INCREASES IN SELLING AND PROMOTIONAL EXPENSES.
We compete with other telecommunications services providers in all of the provinces, municipalities and the autonomous region in which we operate. The Chinese government encourages orderly competition in the telecommunications industry in Mainland China. In particular, the Chinese government has extended favorable regulatory policies to some of our competitors, such as China United Telecommunications Corporation, or China Unicom, in order to help them become more viable competitors. For example, the Chinese government has permitted China Unicom to lower its mobile telecommunications services tariffs by up to 10% below the government standard rates. We believe this policy has helped China Unicom capture a significant number of price-sensitive mobile telecommunications services subscribers. As a result, China Unicom's market share has increased over the past few years.
In addition, China Telecommunications Corporation, or China Telecom, and China Netcom Communications Group Corporation, or China Netcom, provide Xiaolingtong services to their customers. Xiaolingtong is a local area wireless telephone service with limited mobility and limited coverage. Xiaolingtong offers lower-priced services. As a result, Xiaolingtong's services have, to a certain extent, attracted customers principally in the low-end markets. Increased competition from Xiaolingtong or other wireless telecommunications services could materially affect our business and prospects.
Increased competition from other telecommunications services providers, including China Unicom, China Netcom and China Telecom, and any introduction of new competitors through the issuance of additional mobile telecommunications services licenses could adversely affect our business by, among other factors, causing the rate of our subscriber growth to decline and bringing about decreases in tariff rates and increases in selling and promotional expenses. This could in turn have a material adverse effect on our financial condition and results of operations.
NEW ENTRANTS IN THE TELECOMMUNICATIONS INDUSTRY IN CHINA MAY FURTHER
INTENSIFY COMPETITION AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Current Chinese government policy concerning the telecommunications sector is to encourage orderly competition. In November 2001, the State Council formally approved the restructuring of the former China Telecommunications Corporation, China Netcom Corporation Limited and Jitong Network Communications Company Limited. Under the restructuring plan, China Netcom was formed in May 2002 and consists of ten regional telecommunications companies originally owned by the former China Telecommunications Corporation in Beijing, Tianjin and eight provinces, China Netcom Corporation Limited and Jitong Network Communications Company Limited. China Telecom retained the telecommunications companies originally owned by the former China Telecommunications Corporation in the remaining provinces, directly-administered municipalities and autonomous regions. See "Item 4. Information on the Company -- The History and Development of the Company -- Industry Restructuring and Changes in Our Shareholding Structure". We cannot assure you that the State Council will not approve additional telecommunications services providers in the future, including providers of mobile telecommunications services, that may compete against us. Increased competition from new entrants in China's telecommunications industry could adversely affect our financial condition and results of operations as a result of, among others, decreases in the rate of subscriber growth or tariff rates or increases in selling and promotional expenses.
In addition, we may also be subject to competition from new providers of telecommunication services as a result of technological developments and the convergence of various telecommunications services.
CHINA'S ACCESSION INTO THE WORLD TRADE ORGANIZATION WILL EASE CURRENT RESTRICTIONS ON FOREIGN OWNERSHIP IN THE TELECOMMUNICATIONS INDUSTRY AND MAY INCREASE COMPETITION IN THE MOBILE TELECOMMUNICATIONS SERVICES SECTOR.
On December 11, 2001, China officially joined the World Trade Organization, or WTO. On January 1, 2002, the Administration of Foreign-Funded Telecommunications Enterprises Provisions was also adopted, thereby
implementing China's commitments to the WTO. Those commitments include the gradual reduction of foreign ownership restrictions in the telecommunications industry and the opening of the telecommunications market in Mainland China to foreign investors. See "Item 4. Information on the Company -- Business Overview -- Competition". This could lead to increased foreign investment in the telecommunications market in Mainland China, which may in turn increase competition and foreign participation in the mobile telecommunications services sector in Mainland China. Increased competition and foreign participation may have a material adverse effect on our financial conditions and results of operation.
WE ARE CONTROLLED BY CHINA MOBILE COMMUNICATIONS CORPORATION, WHICH MAY
NOT ALWAYS ACT IN OUR BEST INTEREST.
As of May 31, 2003 China Mobile Communications Corporation indirectly owned an aggregate of approximately 75.7% of our shares. Accordingly, China Mobile Communications Corporation is, and will be, able to:
- nominate our entire board of directors and, in turn, indirectly influence the selection of our senior management;
- determine the timing and amount of our dividend payments; and
- otherwise control or influence actions that require the approval of our shareholders.
The interests of China Mobile Communications Corporation as our ultimate controlling person could conflict with the interests of our minority shareholders.
In addition, China Mobile Communications Corporation also provides our operating subsidiaries with services that are necessary for our business activities, including:
- interconnection arrangements with its other subsidiaries' mobile telecommunications networks and roaming arrangements; and
- the coordination of the provision of inter-provincial transmission leased lines from other operators to us.
The interests of China Mobile Communications Corporation as the provider of these services to our operating subsidiaries may conflict with our interests.
THE LIMITED SPECTRUM ALLOCATED TO US MAY CONSTRAIN OUR FUTURE NETWORK
CAPACITY GROWTH.
A mobile telecommunications network's capacity is to a certain extent limited by the amount of frequency spectrum available for its use. Since the Ministry of Information Industry allocates frequency spectrum to mobile telecommunications operators in Mainland China, the capacity of our mobile telecommunications network is limited by the amount of spectrum that the Ministry of Information Industry allocates to us. The Ministry of Information Industry allocated a total of 34 MHz in the 900 MHz frequency band and the 1800 MHz frequency band to our parent company, China Mobile Communications Corporation. Under the existing agreement between China Mobile Communications Corporation and us, we have the exclusive rights to use those frequency spectrum in our service regions.
We believe that our current spectrum allocation is sufficient for anticipated subscriber growth in the near term, but we may need additional spectrum to accommodate future subscriber growth or to develop mobile telecommunications services using new wireless telecommunications technologies. However, the Ministry of Information Industry may determine not to allocate additional spectrum to us. Our network expansion plans may be affected if we are unable to obtain additional spectrum. This could in turn constrain our future network capacity growth and materially and adversely affect our business, financial condition and results of operations.
CHANGES TO OUR INTERCONNECTION AND LEASED LINE ARRANGEMENTS MAY
INCREASE OUR OPERATING EXPENSES AND ADVERSELY AFFECT OUR PROFITABILITY.
Our mobile telecommunications services depend, in large part, upon our interconnection arrangements and access to the fixed line network. Interconnection is necessary in the case of all local calls between our subscribers and subscribers of fixed line or other mobile telecommunications networks. Interconnection and leased line arrangements are also necessary for international and certain domestic calls. We have entered into interconnection and transmission line leasing agreements with other operators, including China Mobile Communications Corporation and its other subsidiaries. We cannot assure you that increasing usage of the fixed line networks would not result in additional strain on its switching capacity, or that the existing quality of the fixed line networks will remain adequate.
The terms of our interconnection arrangements and leased line arrangements have a material effect on our operating revenue and expenses. In addition, our business and operations may be materially and adversely affected if we cannot enter into future interconnection and leased line agreements on commercially acceptable terms or on a timely basis.
WE MAY BE UNABLE TO OBTAIN SUFFICIENT FINANCING TO FUND OUR SUBSTANTIAL CAPITAL REQUIREMENTS, WHICH COULD LIMIT OUR GROWTH POTENTIAL AND FUTURE PROSPECTS.
We estimate that we will require approximately RMB 124 billion (US$ 15 billion) for capital expenditures from 2003 through the end of 2005 for a range of projects.
We believe that cash from operations, together with any necessary borrowings, will provide sufficient financial resources to meet our projected capital and other expenditure requirements. We may require additional funds to the extent we have underestimated our capital requirements or overestimated our future cash flows. In addition, a significant feature of our business strategy is to continue exploring opportunities for strategic investments in the telecommunications industry in Mainland China, which may require additional capital resources. The cost of implementing new technologies, upgrading our networks or expanding capacity may also be significant. In particular, in order for us to effectively respond to technological changes, we may be required to make substantial capital expenditures in the near future.
Financing may not be available to us on acceptable terms. In addition, any future issuance of equity securities, including securities convertible or exchangeable into or that represent the right to receive equity securities, will require approval from the relevant government authorities. If adequate capital is not available, our growth potential and future prospects could be adversely affected.
CHANGES IN TECHNOLOGY MAY RENDER OUR CURRENT TECHNOLOGIES OBSOLETE AND
THUS AFFECT OUR BUSINESS AND MARKET POSITION.
The telecommunications industry is dependent upon rapidly changing and increasingly complex technologies. Accordingly, although we strive to keep our technologies up to international standards, the mobile telecommunications technologies that we currently employ may become obsolete or subject to competition from new technologies in the future, including new wireless telecommunications technologies. In addition, the development and application of new technologies involves time, substantial costs and risks, and the new technologies we implement, such as wireless data applications, may not generate an acceptable rate of return.
FAILURE TO CAPITALIZE ON NEW BUSINESS OPPORTUNITIES MAY HAVE AN ADVERSE
EFFECT ON OUR GROWTH POTENTIAL.
We intend to pursue a number of new growth opportunities in the broader telecommunications industry, including wireless data. Our success will depend in large part on our ability to offer services that address the market demand arising from these opportunities. In addition, our ability to deploy and deliver these services depends, in many instances, on new and unproven technologies. Our wireless telecommunications technologies may not perform as expected. We may not be able to successfully develop or obtain new technologies to effectively and economically deliver these services. Furthermore, we may not be able to compete successfully in the delivery of telecommunications services based on new technologies. Any failure to capitalize on new business opportunities may
adversely affect our competitive position and future profitability.
ACTUAL OR PERCEIVED HEALTH RISKS ASSOCIATED WITH THE USE OF MOBILE DEVICES COULD IMPAIR OUR ABILITY TO RETAIN AND ATTRACT CUSTOMERS, REDUCE WIRELESS TELECOMMUNICATIONS USAGE OR RESULT IN LITIGATION.
There has been public speculation about possible health risks to individuals from exposure to electromagnetic fields from base stations and from the use of wireless telephone handsets. While a substantial amount of scientific research conducted to date by various independent research bodies has shown that radio signals, at levels within the limits prescribed by public health authority safety standards and recommendations, present no adverse effect to human health, we cannot be certain that future studies, irrespective of their relative reliability or trustworthiness, will not impute a link between electromagnetic fields and adverse health effects. Research into these issues is ongoing by government agencies, international health organizations and other scientific bodies in order to develop a better scientific understanding and public awareness of these issues. In addition, several wireless industry participants have become the targets of lawsuits alleging various health consequences as a result of wireless phone usage or seeking protective measures. While we are not aware of any scientific studies or objective evidence which substantiates such alleged health risks, we cannot assure you that the actual, or perceived, risks associated with radiowave transmission will not impair our ability to retain customers and attract new customers, reduce wireless telecommunications usage or result in litigation.
WE CANNOT ASSURE YOU THAT THE HISTORICAL RATE OF GROWTH IN MAINLAND CHINA WILL CONTINUE IN THE FUTURE AND THAT AN ECONOMIC SLOWDOWN IN MAINLAND CHINA WILL NOT MATERIALLY AND ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS, AS WELL AS OUR FUTURE PROSPECTS.
We conduct most of our business and generate substantially all our revenues in Mainland China. As a result, economic conditions in Mainland China have a significant effect on our financial condition and results of operations, as well as our future prospects. In the past twenty years or so, the People's Republic of China has been one of the world's fastest growing economies in terms of GDP growth. We cannot assure you, however, that such growth will be sustained in the future. Moreover, the slowdown in the economies of the United States, the European Union and certain Asian countries in recent years may adversely affect economic growth in Mainland China. We cannot assure you that our financial condition and results of operations, as well as our future prospects, will not be materially and adversely affected by an economic downturn in Mainland China.
WE CANNOT ASSURE YOU THAT THE RECENT OUTBREAK OF SEVERE ACUTE RESPIRATORY SYNDROME, OR SARS, IN VARIOUS PARTS OF MAINLAND CHINA WILL NOT MATERIALLY AND ADVERSELY AFFECT THE CHINESE ECONOMY, AND THAT OUR BUSINESS AND OPERATIONS, AS WELL AS OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL NOT BE MATERIALLY AND ADVERSELY AFFECTED.
Since early 2003, Mainland China, Hong Kong, Taiwan, Singapore, Canada and certain other countries and regions have been experiencing an outbreak of a new and highly contagious form of atypical pneumonia now known as SARS. According to the World Health Organization, over 8,360 cases of SARS and more than 760 deaths had been reported worldwide as of May 31, 2003. Although this outbreak occurred in early 2003, and, since April 2003, has particularly impacted the regions where we operate, many aspects of SARS, including its cause, means of transmission and ability to survive in different environments, are still not well understood by the international medical community. Consequently, we cannot predict at this time the effect this outbreak could have on the Chinese economy and our company. In particular, this outbreak may significantly disrupt our ability to adequately staff our business, and may generally disrupt our operations. Furthermore, this outbreak may severely restrict the level of economic activity in affected areas, which may in turn adversely affect our business and prospects. As a result, we cannot assure you that the recent outbreak of SARS would not have a material adverse effect on our financial condition and results of operations.
ADVERSE CHANGES IN THE ECONOMIC POLICIES OF THE CHINESE GOVERNMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON THE OVERALL ECONOMIC GROWTH OF MAINLAND CHINA, WHICH COULD REDUCE THE DEMAND FOR OUR SERVICES AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Since the late 1970s, the Chinese government has been reforming the Chinese economic system. These reforms have resulted in significant economic growth and social progress. Although we believe that economic reform and macroeconomic policies and measures adopted by the Chinese government will continue to have a positive effect on the economic development of Mainland China and that we will continue to benefit from such policies and measures, these policies and measures may from time to time be modified or revised. Adverse changes in economic and social conditions in Mainland China, in the policies of the Chinese government or in the laws and regulations in Mainland China, if any, could have a material adverse effect on the overall economic growth of Mainland China and investment in the telecommunications industry in Mainland China. These developments could adversely affect our business, such as reducing the demand for our services, as well as our financial condition and results of operations.
THE RENMINBI IS NOT A FREELY CONVERTIBLE CURRENCY, WHICH COULD LIMIT THE ABILITY OF OUR SUBSIDIARIES IN MAINLAND CHINA TO OBTAIN SUFFICIENT FOREIGN CURRENCY TO SATISFY THEIR FOREIGN CURRENCY REQUIREMENTS OR PAY DIVIDENDS TO US.
Substantially all of our revenues and operating expenses are denominated in Renminbi, while a portion of our capital expenditures and indebtedness is denominated in U.S. dollars and other foreign currencies. The Renminbi is currently freely convertible under the "current account", which includes dividends, trade and service-related foreign currency transactions, but not under the "capital account", which includes foreign direct investment, unless the prior approval of the State Administration for Foreign Exchange is obtained.
Our operating subsidiaries are foreign invested enterprises. Currently, they may purchase foreign currency without the approval of the State Administration for Foreign Exchange for settlement of "current account transactions", including payment of dividends, by providing commercial documents evidencing these transactions. They may also retain foreign exchange in their current accounts (subject to a cap approved by the State Administration for Foreign Exchange) to satisfy foreign currency liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Also, our subsidiaries incorporated in Mainland China may not be able to obtain sufficient foreign currency to satisfy their foreign currency requirements or pay dividends to us for our use in making any future dividend payments or to satisfy other foreign currency payment requirements. Foreign currency transactions under the capital account are still subject to limitations and require approvals from the State Administration for Foreign Exchange. This could affect our subsidiaries' ability to obtain foreign currency through debt or equity financing, including by means of loans or capital contributions from us.
FLUCTUATIONS IN EXCHANGE RATES COULD ADVERSELY AFFECT OUR FINANCIAL
RESULTS.
Substantially all of our operating revenue is denominated in Renminbi, while a portion of our capital expenditures and some of our financing expenses are denominated in foreign currencies, such as U.S. dollars and Hong Kong dollars. Future devaluations or movements in the exchange rate of Renminbi and other currencies could have an adverse effect on our financial condition and results of operations.
THE CHINESE LEGAL SYSTEM EMBODIES UNCERTAINTIES WHICH COULD LIMIT THE
LEGAL PROTECTIONS AVAILABLE TO OUR SHAREHOLDERS.
The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Legislation over the past 20 years has significantly enhanced the protection afforded to foreign investment in Mainland China. Our existing subsidiaries are "wholly foreign-owned enterprises" which are enterprises incorporated in Mainland China and wholly-owned by Hong Kong, Macau, Taiwan or foreign investors, and subject to the laws and regulations applicable to foreign investment in Mainland China. However, the interpretation and enforcement of some of these laws, regulations and other legal requirements involve uncertainties that could limit the legal protection available to
our shareholders. Moreover, China's entry into the WTO has resulted and may in the future result in the abolition or substantial amendment of the existing laws, regulations and other legal requirements. See "Item 4. Information on the Company -- Business Overview -- World Trade Organization".
OUR SHARE PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE IN RESPONSE TO CONDITIONS IN THE GLOBAL SECURITIES MARKETS GENERALLY AND IN THE TELECOMMUNICATIONS AND TECHNOLOGY SECTORS IN PARTICULAR.
Our share price has been subject to significant volatility, in part due to highly volatile securities markets generally, particularly for telecommunications companies' shares, as well as developments in our sales and operating profit. Factors other than our results of operations that may affect our share price include, among other things, overall market conditions and performance, market expectations of our performance, projected growth in the mobile telecommunications market in Mainland China and adverse changes in our brand value. In addition, our share price may be affected by factors such as the level of business activity or perceived growth (or the lack thereof) in the telecommunications market in general, the performance of other telecommunications companies, announcements by or the results of operations of our competitors, customers and suppliers, the success of third generation mobile networks and new technologies, products and services, as well as general market volatility. See "Item 9. Offer and Listing Details" for information regarding the trading price history of our ordinary shares and ADSs.
ITEM 4. INFORMATION ON THE COMPANY.
We provide a full range of mobile telecommunications services in 21 service regions in Mainland China, consisting of sixteen provinces (Guangdong, Zhejiang, Jiangsu, Fujian, Henan, Hainan, Hebei, Liaoning, Shandong, Anhui, Jiangxi, Sichuan, Hubei, Hunan, Shaanxi and Shanxi), four municipalities (Beijing, Shanghai, Tianjin and Chongqing) and one autonomous region (Guangxi Zhuang Autonomous Region). Our service regions cover many of the economically more advanced provinces, municipalities and autonomous region in Mainland China. The total population residing within our service area exceeds one billion. Based on publicly available information, we are the leading provider of mobile telecommunications services in each of these regions and the largest provider of mobile telecommunications services in the world as measured by total number of subscribers as of December 31, 2002. As of December 31, 2002, our total number of subscribers was approximately 117.7 million, representing approximately 67% of all mobile telecommunications services subscribers in our service regions. In addition, based on information compiled by the Ministry of Information Industry, our total number of subscribers represented approximately 57% of all mobile telecommunications services subscribers in Mainland China as of December 31, 2002. As of April 30, 2003, our total number of subscribers reached 125.5 million.
THE HISTORY AND DEVELOPMENT OF THE COMPANY
We were incorporated under the laws of Hong Kong on September 3, 1997 as a limited liability company under the name "China Telecom (Hong Kong) Limited". We changed our name to "China Mobile (Hong Kong) Limited" on June 28, 2000 after obtaining the approval of our shareholders.
We completed our initial public offering in October 1997. Our ordinary shares are listed on the Hong Kong Stock Exchange, and our American Depositary Shares, or ADSs, each currently representing the right to receive five ordinary shares, are listed on the New York Stock Exchange. Our agent for service of process in the United States is CT Corporation System, and their address is 111 Eighth Avenue, 13th Floor, New York, NY 10011.
EXPANSION THROUGH ACQUISITIONS
Our initial mobile telecommunications operations included those in Guangdong province conducted by Guangdong Mobile Communication Company Limited, or Guangdong Mobile, and in Zhejiang province conducted by Zhejiang Mobile Communication Company Limited, or Zhejiang Mobile. As part of the restructuring in preparation for our initial public offering in 1997, the former Ministry of Posts and Telecommunications transferred to us a 100% equity interest in Guangdong Mobile and a 99.63% equity interest in Zhejiang Mobile. Since then, we have significantly expanded the geographical coverage of our operations through a series of acquisitions from China Mobile Communications Corporation, our indirect controlling shareholder, of mobile telecommunications operations conducted by its regional subsidiaries. In particular:
- We acquired the entire equity interest in Jiangsu Mobile Communication Company Limited, or Jiangsu Mobile, on June 4, 1998 for a cash consideration of HK$ 22.5 billion.
- We acquired the entire equity interest in each of Fujian Mobile Communication Company Limited, or Fujian Mobile, Henan Mobile Communication Company Limited, or Henan Mobile, and Hainan Mobile Communication Company Limited, or Hainan Mobile, on November 12, 1999 for a total purchase price of HK$ 49.7 billion, consisting of HK$ 19.0 billion in cash and the remaining HK$ 30.7 billion in the form of 1,273,195,021 new shares. In addition, we acquired the remaining 0.37% equity interest in Zhejiang Mobile in June 1999.
- We acquired the entire equity interest in each of Beijing Mobile Communication Company Limited, or Beijing Mobile, Shanghai Mobile Communication Company Limited, or Shanghai Mobile, Tianjin Mobile Communication Company Limited, or Tianjin Mobile, Hebei Mobile Communication Company Limited, or Hebei Mobile, Liaoning Mobile Communication Company Limited, or Liaoning Mobile, Shandong Mobile Communication Company Limited, or Shandong Mobile, and Guangxi Mobile Communication Company Limited, or Guangxi Mobile, on November 13, 2000 for a total purchase
price of HK$ 256.0 billion, consisting of HK$ 74.6 billion in cash and the remaining HK$ 181.4 billion in the form of 3,779,407,375 new shares.
- We acquired the entire equity interest in each of Anhui Mobile Communication Company Limited, or Anhui Mobile, Jiangxi Mobile Communication Company Limited, or Jiangxi Mobile, Chongqing Mobile Communication Company Limited, or Chongqing Mobile, Sichuan Mobile Communication Company Limited, or Sichuan Mobile, Hubei Mobile Communication Company Limited, or Hubei Mobile, Hunan Mobile Communication Company Limited, or Hunan Mobile, Shaanxi Mobile Communication Company Limited, or Shaanxi Mobile, and Shanxi Mobile Communication Company Limited, or Shanxi Mobile, on July 1, 2002 for a total purchase price of US$ 8,573 million, consisting of an initial consideration of US$ 5,773 million and a deferred consideration of US$ 2,800 million. The initial consideration of US$ 5,773 million consists of a cash payment of US$ 3,150 million and the issuance of new shares for the remaining US$ 2,623 million to China Mobile Hong Kong (BVI) Limited on the completion of acquisition. We financed the cash portion of the initial consideration by applying a portion of our existing internal cash resources, in the amount of US$ 2,400 million, combined with proceeds from the issuance of new shares in the amount of HK$ 5.85 billion (equivalent to approximately US$ 750 million) to Vodafone Holdings (Jersey) Limited, or Vodafone Jersey, a wholly owned subsidiary of Vodafone Group Plc, or Vodafone. After the share placement, Vodafone's share holding in us increased from 2.18% to approximately 3.27%. The deferred consideration of US$ 2,800 million is payable by the fifteenth anniversary of the date of the completion of acquisition, and we may make an early payment of all or part of the deferred consideration at any time. We used the entire proceeds from the RMB 3 billion guaranteed bonds due 2007 and RMB 5 billion guaranteed bonds due 2017, both issued on October 28, 2002 by Guangdong Mobile, our wholly-owned subsidiary, to satisfy part of the US$ 2,800 million deferred consideration.
These acquisitions have significantly enlarged our subscriber base, expanded the geographical coverage of our business and enhanced the economy of scale of our operations. In addition, the integration of these acquired operations has enabled us to realize certain synergies and economies of scale. A discussion of the financial impact of these acquisitions is set forth in "Item 5. Operating and Financial Review and Prospects".
INDUSTRY RESTRUCTURING AND CHANGES IN OUR SHAREHOLDING STRUCTURE
Prior to 1993, all public telecommunications networks and services in Mainland China were controlled and operated by the former Ministry of Posts and Telecommunications through the former Directorate General of Telecommunications, provincial telecommunications administrations and their city and county level bureaus.
As part of the Chinese government's restructuring of the telecommunications industry, the Ministry of Information Industry was formed in March 1998 to assume, among others, the responsibilities of the former Ministry of Posts and Telecommunications. One of the principal objectives of the restructuring was to separate the government's regulatory function from its business management functions in respect of state-owned enterprises. In the first half of 2000, the Chinese government substantially completed the industry restructuring. As a result, the Ministry of Information Industry ceased to have an indirect controlling interest in us, and no longer exercises control over telecommunications operations, but continues in its capacity as industry regulator providing industry policy guidance as well as exercising regulatory authority over all telecommunications services providers in Mainland China.
In addition, as part of the restructuring, the telecommunications operations previously controlled by the former Ministry of Posts and Telecommunications were separated along four business lines: fixed line telecommunications, mobile telecommunications, paging and satellite telecommunications. China Mobile Communications Corporation was established in July 1999 as a state-owned company to hold and operate the mobile telecommunications business nationwide resulting from the separation. As part of this separation, in July 1999 China Mobile Communications Corporation obtained the approximately 57% holding of voting shares and economic interest in China Mobile (Hong Kong) Group Limited, our indirect controlling shareholder, previously held by Telpo Communications (Group) Limited, an entity 100% controlled by the former Ministry of Posts and Telecommunications. In addition, in May 2000, the remaining 43% interest in China Mobile (Hong Kong) Group Limited previously held by the Directorate General of Telecommunications was transferred to China Mobile Communications Corporation. As a result, China Mobile Communications Corporation has become the owner of all
voting shares and economic interest in China Mobile (Hong Kong) Group Limited and thus all of the Chinese government's interest in us. As of May 31, 2003, China Mobile Communications Corporation indirectly owned approximately 75.7% of all our outstanding shares, including shares represented by ADSs.
As a state-owned company, the former China Telecommunications Corporation owns and operates fixed line telephone and data telecommunications networks. In November 2001, the State Council formally approved the restructuring of the former China Telecommunications Corporation, China Netcom Corporation Limited and Jitong Network Communications Company Limited. Under the restructuring plan, China Netcom was formed in May 2002 and consists of ten regional telecommunications companies originally owned by the former China Telecommunications Corporation in Beijing, Tianjin and eight provinces, China Netcom Corporation Limited and Jitong Network Communications Company Limited. China Telecom retained the telecommunications companies originally owned by the former China Telecommunications Corporation in the remaining provinces, directly-administered municipalities and autonomous regions. As a result, apart from China Mobile Communications Corporation, principal participants in the telecommunications industry in Mainland China also include China Telecom, China Netcom, China Unicom, China Satellite Communications Corporation and China Railcom. Among those six participants, China Mobile Communications Corporation (including us) and China Unicom are the two operators that provide mobile telecommunications services in Mainland China.
ORGANIZATIONAL STRUCTURE
As of May 31, 2003, China Mobile Communications Corporation, a company incorporated in China, owned 75.7% equity interest in us through intermediate holding companies. As of May 31, 2003, we owned 100% equity interest in Guangdong Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile, Guangxi Mobile, Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile through intermediate holding companies, and 66.4% equity interest in Aspire Holdings Limited, a company incorporated in the Cayman Islands.
In addition to its shareholding interest in us, China Mobile Communications Corporation operates the leading mobile telecommunications businesses in Mainland China outside our 21 service regions.
GENERAL INFORMATION
Our principal executive offices are located at 60th Floor, The Center, 99 Queen's Road Central, Hong Kong, China; telephone: 852-3121-8888. We also maintain a regional headquarters in each of the 21 regions in Mainland China where we operate. Our web site address is www.chinamobilehk.com. The information on our web site is not a part of this annual report.
BUSINESS OVERVIEW
We offer mobile telecommunications services principally using the Global System for Mobile Communications, or GSM, standard. GSM is a pan-European mobile telephone system based on digital transmission and mobile telecommunications network architecture with roaming capabilities. Our GSM networks reach all cities and counties and major roads and highways within our service regions.
OUR STRATEGY
As a pioneer and the market leader in the world's largest mobile telecommunications market, we intend to leverage our extensive and high quality mobile telecommunications network and our subscriber base and maintain our position as the only operator in Mainland China exclusively specialized in mobile telecommunications.
We believe the mobile telecommunications market in Mainland China will continue to expand rapidly, and we have designed our business strategy accordingly to include the following key elements:
- continue to actively grow our core mobile telecommunications services by:
- maintaining focus on developing a high-quality subscriber base;
- broadening our subscriber base and increasing market penetration;
- adopting rational and effective strategies to maintain our competitiveness;
- addressing different needs of brand-conscious customers, "technophiles" and value-conscious customers;
- enhancing customer satisfaction and loyalty;
- enhancing brand value;
- providing personalized and high-quality services;
- developing new products; and
- nurturing our human capital; and
- take advantage of our current leadership position and increase our operational efficiency by:
- realizing economies of scale in procuring equipment and services, including leased lines and network infrastructure equipment;
- centralizing our research and development efforts;
- exploring new technologies; and
- maintaining and utilizing the "CHINA MOBILE" brand name to promote our products and services.
SUBSCRIBERS AND USAGE
Our subscriber base has grown substantially from 6.5 million at the end of 1998 to 117.7 million at the end of 2002. As of December 31, 2002, we had a market share of approximately 67% in our 21 service regions. Our acquisition of a total of 19 regional mobile telecommunications companies between June 1998 and July 2002 has substantially expanded our subscriber base. As of April 30, 2003, our total number of subscribers reached approximately 125.5 million. In addition to our acquisitions, our subscriber growth is also attributable to a number of other factors, including:
- significant economic growth in our markets;
- our network expansion and development;
- our increased marketing and sales efforts and improved distribution channels;
- decreased cost of initiating services due to a decline in handset prices as well as the gradual decrease and final elimination of the connection fees and the adjustments in other tariffs for our services; and
- our new service initiatives, enhanced roaming capabilities and value added services.
The following table sets forth selected historical information about our subscriber base and subscriber usage for the periods indicated.
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
2000 2001 2002
----- ----- -----
Subscribers (in millions)
Contract subscribers....................... 32.4 34.0 49.0
Prepaid subscribers........................ 12.7 35.6 68.7
----- ----- -----
Total................................ 45.1 69.6 117.7
===== ===== =====
Minutes of Usage (in billions) (1)
Contract subscribers....................... 118.2 130.8 192.6
Prepaid subscribers........................ 6.9 30.5 67.5
----- ----- -----
Total................................ 125.1 161.3 260.1
===== ===== =====
Average Minutes of Usage Per Subscriber
Per Month (2)
Contract subscribers....................... 326 329 334
Prepaid subscribers........................ 125 103 99
Blended.............................. 299 233 207
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AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 2001 2002
----- ----- -----
Average Revenue Per Subscriber Per
Month (RMB) (3)
Contract subscribers....................... 241 199 176
Prepaid subscribers........................ 87 72 63
Blended.............................. 221 145 115
Average Monthly Churn Rate (%) (4)............. 0.45 0.55 0.69
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(2) Calculated by (A) dividing the total minutes of usage (calculated in the manner as set forth in note (1) above) during the relevant year by the average number of subscribers during the year (calculated as the average of the numbers of subscribers at the end of each of the thirteen calendar months from the end of the previous year to the end of the current year) and (B) dividing the result by 12.
(3) Calculated by (A) dividing the operating revenue during the relevant year by the average number of subscribers during the year (calculated in the same manner as in note (2) above) and (B) dividing the result by 12. For purposes of this note (3) only, for 2000 and 2002, both operating revenue and average number of subscribers take into account the full year effect of the regional mobile telecommunications companies we acquired for each year as if the respective acquisition occurred at the beginning of that year.
(4) Measures the monthly rate of subscriber disconnections from mobile
telecommunications services, determined by dividing: (A) the result
obtained by dividing (i) the sum of voluntary and involuntary terminations
from our network (excluding internal transfer) during the relevant year by
(ii) the average number of subscribers during the year, calculated as the
average of the numbers of subscribers at the end of each of the thirteen
calendar months from the end of the previous year to the end of the current
year by (B) 12. On this basis, our calculated average monthly churn rate
will be affected by the number of voluntary and involuntary terminations
and the significant growth in our subscriber base.
The average monthly churn rate for each of 2000 and 2002 is calculated based on the full year information pertaining to the relevant newly-acquired regional mobile telecommunications companies as if the respective acquisition occurred at the beginning of that year and is presented for ease of comparison.
The size and composition of our subscriber base and subscribers' usage patterns have changed over the last few years. The cost of initiating services has decreased due to a decline in handset prices, the connection fees have been reduced and ultimately eliminated, other tariffs for our services have been adjusted, and mobile telecommunications technologies have improved over time. As a result, mobile telecommunications services have become increasingly popular for both business and social uses. In general, the highest usage subscribers with the greatest telecommunications needs have tended to be the early subscribers of mobile services. As penetration increases, newer subscribers on average incur lower monthly usage, and are generally more price-sensitive. Accordingly, as is typical in many countries with developing mobile telecommunications markets, the average usage and revenue per subscriber have declined over the last few years as our mobile penetration has increased. However, total minutes of usage of our subscribers continued to grow significantly in 2000, 2001 and 2002.
PREPAID SERVICES
Beginning in the second half of 1999, we introduced prepaid services. We market a substantial portion of our prepaid services under the "Shenzhouxing" brand. We also market other types of prepaid services to our subscribers. Our prepaid subscribers can make and receive local and domestic and international long distance calls, and most of those subscribers also enjoy nationwide domestic roaming services.
Our prepaid services complement our traditional contract services and are an important means of expanding our subscriber base. In addition, continued economic growth, the benefits of mobility and current low mobile penetration rates in Mainland China compared to demographically and culturally similar markets are among the important factors that will further drive mobile telecommunications services subscriber growth towards eventual mass popularization. Furthermore, prepaid services represent an effective tool for capturing additional subscribers and driving penetration in developing markets, such as Mainland China, while keeping credit quality in check.
Prepaid services also help introduce the enhanced benefit of mobility to non-mobile users.
Our prepaid services experienced rapid and significant growth in 2002. As of December 31, 2002, we had an aggregate of approximately 68.7 million subscribers for our prepaid service, representing an increase of 92.7% from December 31, 2001. This increase was also partially due to our acquisition of the eight regional mobile telecommunications companies in 2002. Our prepaid subscribers represented 58.3% of our total subscriber base as of December 31, 2002, and our net additional prepaid subscribers represented 68.7% of our net additional subscribers in 2002.
TARIFFS
The tariffs payable by our subscribers include primarily usage charges, monthly fees and service fees for value added services. Usage charges for both our contract and prepaid subscribers include base usage charges plus, where applicable, an additional component reflecting domestic and international long distance tariffs. When using roaming services, subscribers incur a roaming charge instead of the base usage charges, plus applicable domestic and international long distance charges.
We have flexible long distance tariff plans distinguishing between day time and night time, and offer tailored service plans based upon customer requirements as well as our network resources.
Our tariffs are subject to regulation by various government authorities, including the Ministry of Information Industry, the State Development and Reform Commission (the successor to the former State Development and Planning Commission) and the relevant price regulatory authorities in our service regions. The actual price range in each service region is proposed by a network operator in that service region and must be approved by the relevant price regulatory authorities in that service region. In general, base usage charges, monthly fees, domestic roaming charges and applicable long distance tariffs (other than tariffs for Internet Protocol phone calls) are also determined by the Ministry of Information Industry in consultation with the State Development and Reform Commission.
Connection fees in all our service regions were eliminated on July 1, 2001. While the elimination of connection fees may have adversely affected our revenue growth in the short term, we believe that such elimination will help to further expand our subscriber base and increase total subscriber usage of our mobile telecommunications services, thereby contributing to our revenue growth in the long term.
TARIFF ADJUSTMENTS. As part of the efforts to further rationalize the tariff structure of telecommunications services, the Chinese government announced a wide range of tariff adjustments, which took effect at various dates in the first half of 2001. The tariff adjustments that affect our mobile telecommunications services include the shortening of a billing unit from one minute to six seconds for long distance call rates (other than rates for Internet Protocol phone calls), the general reduction in domestic and international long distance call rates, the elimination of various surcharges and a general reduction in leased line tariffs. In particular, domestic long distance call rates have been adjusted from the range of RMB 0.50 to RMB 1.00 per minute to the uniform rate of RMB 0.07 per six-second billing unit. Although the adjustments in long distance call rates and the elimination of surcharges may reduce our revenue in the short term, we expect that they are likely to stimulate increased subscriber usage and contribute to our overall revenue growth in the long run. In addition, we will be able to achieve savings in leased line expenses as a result of the reduction in leased line tariffs.
INTERCONNECTION
Interconnection refers to various arrangements that permit the connection of our networks to other networks such as the fixed line networks.
INTERCONNECTION WITH OTHER OPERATORS (FOR LOCAL AND LONG DISTANCE CALLS). Our networks interconnect with the public fixed line networks of fixed line operators, allowing our subscribers to communicate with fixed line subscribers and to make and receive local, domestic and international long distance calls. Each of our operating subsidiaries has interconnection agreements with fixed line operators in its service region. The economic
terms of these agreements are standardized from province to province.
On March 21, 2001, we began paying fixed line operators RMB 0.03 per minute of the base usage charge for all calls from our subscribers to China Unicom's subscribers connected through their networks. Prior to March 21, 2001, we paid these fixed line operators RMB 0.05 per minute of the base usage charge for calls connected through their networks when our subscriber was the calling party.
INTERCONNECTION WITH CHINA MOBILE COMMUNICATIONS CORPORATION (FOR LONG DISTANCE CALLS AND ROAMING CALLS). We also have an inter-provincial interconnection and roaming agreement with China Mobile Communications Corporation, under which the other subsidiaries of China Mobile Communications Corporation and us provide each other with domestic inter-provincial network interconnection services and domestic and international roaming services.
INTERCONNECTION REVENUE SHARING AND SETTLEMENT. Where calls involve interconnection with the network of the fixed line operators or China Mobile Communications Corporation's network, our interconnection arrangement with the fixed line operators or China Mobile Communications Corporation provides for the sharing and settlement of revenues from the base usage charge and, if applicable, roaming charges and domestic and international long distance charges.
A number of the settlement rates have been adjusted effective March 21, 2001. The following table summarizes the terms of our interconnection arrangement with fixed line operators for non-roaming local calls, including the rates after adjustment and, in parenthesis, the rates prior to adjustment.
REVENUE SHARING AND SETTLEMENT OF
BASE USAGE CHARGES FOR NON-ROAMING LOCAL CALLS
ORIGINATING SUBSCRIBER TERMINATING SUBSCRIBER SETTLEMENT ARRANGEMENTS
---------------------- ---------------------- ------------------------
Our subscriber Subscriber of fixed line We pay RMB 0.06 (previously RMB 0.05)
operators per minute to fixed line operators
Subscriber of fixed line operators Our subscriber No revenue sharing or settlement
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Where applicable, we collect domestic long distance charges in addition to the base usage charges. The following table summarizes the terms of our interconnection arrangement with fixed line operators and China Mobile Communications Corporation for domestic long distance calls.
REVENUE SHARING AND SETTLEMENT OF DOMESTIC LONG DISTANCE CALLS
ORIGINATING SUBSCRIBER TERMINATING SUBSCRIBER SETTLEMENT ARRANGEMENTS
---------------------- ---------------------- ------------------------
Our subscriber Subscriber of fixed line If the call is routed through the transmission lines
operators of the fixed line operators, we keep RMB 0.06
(previously RMB 0.14) per minute of the domestic
long distance calling charges(1) and pay the
remaining portion to the fixed line operators. If
the call is routed through our network, we pay the
fixed line operators RMB 0.06 (previously RMB
0.05) per minute and keep the remaining portion.
Subscriber of fixed line Our subscriber or China If the call is routed through our transmission lines,
operators in our service Mobile Communications the fixed line operators keep RMB 0.06 (previously
regions Corporation's subscriber RMB 0.14) per minute of the domestic long distance
charges(1) and pay the remaining portion to us.
Our subscriber China Mobile Communications We collect the domestic long distance charge of
Corporation's subscriber RMB 0.07 per six seconds (previously RMB 0.50-1.00
per minute), and there is no revenue sharing or
settlement.(2)
China Mobile Communications Our subscriber China Mobile Communications Corporation collects the
Corporation's subscriber domestic long distance charge of RMB 0.07 per six
seconds (previously RMB 0.50-1.00 per minute), and
there is no revenue sharing or settlement.(2)
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(2) Except for roaming calls. See table under "-- Roaming" for revenue sharing and settlement for roaming calls.
Where applicable, we collect international long distance charges in addition to base usage charges. The following table summarizes the terms of our interconnection arrangement with international gateway operators for international long distance calls, including the rates after adjustment and, in parenthesis, the rates before adjustment.
REVENUE SHARING AND SETTLEMENT OF INTERNATIONAL LONG DISTANCE CHARGES
TYPE OF CALL SETTLEMENT ARRANGEMENTS
------------ -----------------------
Outgoing calls from our We keep RMB 0.54 (previously RMB 0.20) per
subscriber minute(1) (if the call is routed through
our domestic long distance transmission
lines) or RMB 0.06 (previously RMB 0.20)
per minute(1) (if the call is not routed
through our domestic long distance
transmission lines) of the international
long distance charge and pay the remaining
portion to international gateway
operators.
Incoming calls to our We receive from the international
subscriber telecommunications operator of the calling
party RMB 0.54 (previously RMB 0.63) per
minute (if the call is routed through our
domestic long distance transmission lines)
or RMB 0.06
(previously RMB 0.07) per minute of the
calling charge (if the call is not routed
through our domestic long distance
transmission lines).
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ROAMING
We provide roaming services to our subscribers, which allow them to access our telecommunications services while they are physically outside of their registered service area and are in other parts of our service regions or in the coverage areas of other mobile telecommunications networks with which we have roaming arrangement.
Under our domestic roaming arrangement with China Mobile Communications Corporation, our subscribers can make and receive calls while they are located in the coverage areas of China Mobile Communications Corporation in the rest of Mainland China outside our service regions. Conversely, we offer roaming services to China Mobile Communications Corporation's subscribers while they are in our service regions. As of December 31, 2002, we offered roaming capabilities in 116 countries and regions around the world under our roaming arrangements with relevant local operators.
A mobile telecommunications services subscriber using roaming services is charged at our per-minute roaming charge (instead of the base usage charge) for both incoming and outgoing calls, plus applicable long distance charges. The following table sets forth our revenue sharing and settlement arrangement with China Mobile Communications Corporation for base roaming charges. We currently do not have a roaming arrangement with China Unicom.
REVENUE SHARING AND SETTLEMENT OF THE BASE ROAMING CHARGES
TYPE OF ROAMING SETTLEMENT AGREEMENTS
-------------- ---------------------
Our subscriber roaming into the mobile We pay China Mobile Communications
network China Mobile Communications Corporation 80% of the base of roaming
Corporation charge payable by our subscribers.
Subscriber of China Mobile China Mobile Communications Corporation
Communications Corporation roaming into pays us 80% of the base roaming charge
our network charged to its subscribers.
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REVENUE SHARING AND SETTLEMENT OF LONG DISTANCE CHARGE WHEN ROAMING. In addition to the base roaming charge, long distance charges may be assessed when a subscriber is roaming. Where a mobile telecommunications services subscriber makes a call while roaming, the home network operator collects all long distance charges incurred and pays all such charges to the operator of the visited network. The visited network operator then settles those long distance charges, if settlement applies, in accordance with the long distance revenue sharing and settlement arrangements described above. Where a mobile telecommunications services subscriber receives a call while roaming, the home network operator receives and keeps all long distance charges incurred by that subscriber.
NEW SERVICES
In addition to basic mobile telecommunications services, we offer a number of new services such as wireless data and voice functions.
VOICE FUNCTIONS. We offer a variety of basic value added services with voice functions, including call forwarding, call waiting, conference calling, call limitation, voice mail and "Chinese Secretary", a live answering service.
WIRELESS DATA AND MOBILE INTERNET SERVICES. We believe that wireless data will be one of the fastest growing segments of the telecommunications market in Mainland China over the next several years. We intend to further expand our wireless data services. As of December 31, 2002, our wireless data services subscribers reached 57.7 million, which represented a 171% increase compared to 21.3 million subscribers as of December 31, 2001, and accounted for 49.1% of our total subscribers.
In 1999, we began using our short message service platform to develop new value added services in
selected cities in our service areas, including stock price quotations, sports news, weather forecasts and online payments. The short message usage volume has grown rapidly since then and has reached 40.4 billion in 2002 from 6.1 billion in 2001. We plan to continue utilizing our GSM network to provide data services based on the current short message service platform where consumer demands can be more economically served by short message service. These data services include, for example, the transmission of short messages to facsimile and e-mail addresses.
In the last quarter of 2000, we introduced our "Monternet" mobile data businesses based on the mobile information service platform, making us the first mobile service provider in Mainland China to combine mobile data businesses with mobile telecommunications services. For our "Monternet" service, we collect 100% of the communication fees, and between 9% to 15% of the messaging service fees from the service providers. In 2001, we began to provide extensive "Monternet" applications and services. In addition, by providing corporate subscribers with an integrated, unified mobile voice-data solution, including through the utilization of a combination of technologies such as the virtual private mobile network, or VPMN, and group short messaging services, we believe "Monternet" will stimulate the further development of our wireless data businesses, make our services more appealing to customers and help us attract and keep corporate subscribers.
In 2001, we completed the construction of an Internet Protocol backbone network, known as CMNet, and launched Internet Protocol-based, or IP-based, long distance call services over CMNet. We expect that CMNet will also serve as an important component of our wireless data and mobile Internet services.
We commercially launched General Packet Radio Services, or GPRS, in the first half of the year 2002. GPRS technology enables operators to provide end-to-end packet-switched data transmission on the existing GSM network, which improves wireless network utilization and enhances the wireless access rate for a variety of data applications.
We also provide other mobile data services to our customers, such as e-Freedom, Multimedia Messaging Service, or MMS, mobile Internet, M-commerce, GPRS applications-based and intelligent network-based value-added services and corporate applications. We provide e-Freedom services to customers so that they can enjoy the freedom of wireless access to the Internet or intranet by inserting a network card (including GPRS card or Wireless Local Area Network, or WLAN, card) and an exclusive data subscriber identity module card, or SIM card, into a notebook computer or personal digital assistant, or PDA, without the need of other external devices. Customers use our MMS to deliver messages with animated color pictures, sounds, text and motion pictures. As of December 31, 2002, over 500 service providers provided mobile Internet content and services for Monternet through our mobile telecommunications channels and mobile information service platform.
ISP SERVICES. We began providing Internet service provider, or ISP, services in 2000. ISP services enable both mobile and fixed line subscribers to access the Internet via our networks by dialing the prefix "172XX". We are planning to provide integrated voice, data and video access to both mobile telecommunications services subscribers and non-mobile telecommunications services subscribers through such services in the near future.
RESEARCH AND DEVELOPMENT
Our research and development efforts focus on:
- developing advanced data application solutions suitable for the particulars of the consumer markets in Mainland China; and
- monitoring technological trends, including advancement in third generation mobile telecommunications technology, that may have an impact on the development of our current business and the implementation of our wireless data strategy.
In light of the increasingly competitive and rapidly evolving telecommunications market in Mainland China, we expect to continue to devote resources to the research and development of new products, services and technology applications.
To focus our mobile data activities and consolidate related research and development efforts, we formed Aspire Holdings Limited, or Aspire, as a majority-owned subsidiary with operations based in Shenzhen, China, in June 2000. The principal business focuses of Aspire include systems integration, product development, and technical support for mobile data systems and related applications in Mainland China. Aspire also operates our mobile data research and development center in Shenzhen, China.
In January 2001, Aspire formed a business alliance with Hewlett-Packard Company to develop wireless data and Internet and related applications. Hewlett-Packard assists with the design, implementation and support of Aspire's services in China, and has been designated as the preferred provider of hardware and related services to Aspire if these products and services are of at least the same quality and pricing terms as other competing products and services. Conversely, Hewlett-Packard has designated Aspire as its preferred customer, which entitles Aspire to the best customer price and financing options available for Hewlett-Packard's products and services under Hewlett-Packard's preferred partner programs prevailing in Mainland China. As part of the business alliance, Hanover Asia-Pacific Investments Limited, an indirectly wholly-owned subsidiary of Hewlett-Packard, agreed to make an equity investment of up to 7% in Aspire. In January 2002, Vodafone Jersey, a wholly-owned subsidiary of Vodafone invested US$ 34.965 million in Aspire, and as a result, Hanover invested an additional US$ 16 million in Aspire to maintain its equity holding in Aspire at 7%.
Also in January 2001, Aspire entered into a master agreement with each of us and China Mobile Communications Corporation for the development of our mobile information service center platform and that of China Mobile Communications Corporation. Under each of the master agreements, Aspire will provide system and gateway integration services, hardware, software and system development, technical support and major overhaul services of data centers to us and China Mobile Communications Corporation.
As part of our strategic alliance with Vodafone, Vodafone Americas Asia Inc., a subsidiary of Vodafone, entered into a business alliance agreement with Aspire. Under the business alliance agreement between Aspire and Vodafone Americas, Aspire will engage Vodafone Global Platform and Internet Services, a unit of Vodafone Americas, as a preferred provider of wireless data application software in relation to the Aspire Mobile Information Service Center Platform, provided that the software supplied to Aspire has at least equivalent technical specifications on the same or better commercial terms. Aspire and Vodafone Global Platform and Internet Services also agreed to use their reasonable efforts to coordinate the development of their respective wireless data platforms with the intention of providing seamless delivery of services to their respective roaming customers on their wireless data platforms and enabling content and application providers to use a single application programming interface.
In addition to developing, constructing and marketing the Platform, Aspire also conducts research and development activities related to new data services and products. Aspire is an important part of our overall strategy to capture the fast growing wireless data sector in Mainland China.
CUSTOMER SERVICE, BILLING AND CREDIT CONTROL
We provide a full range of services that emphasize customer care from the point of sale onward. At the point of sale, after all application procedures have been completed, we are generally able to immediately activate new subscriber connections for our GSM services. Our after-sales customer support services include a general customer service hotline for all of our 21 service regions, which offers an interactive voice response system as well as live operator assistance.
We consider high-usage corporate and individual subscribers to be our most valuable customers. To better serve these valuable customers, we introduced a corporate client account relationship manager system, whereby account managers provide personalized products and services to our corporate customers and high-value customers. In addition, we established designated service centers, service and complaint hotlines to serve these customers.
We also issue VIP cards to our high-value subscribers so that they may enjoy privileges in other industries. In addition, we provide complimentary training on the use of new services to our high-value subscribers, as well as preferential trial use of new services. Furthermore, for certain corporate customers, we provide virtual private mobile network services.
In 2002, we began to implement a "Customer Point Reward Program", which is a bonus point based scheme that rewards customers according to their service consumption, loyalty and payment history. Based on customers' annual point accumulations, high-value customers are further classified into four categories: "GoTone Diamond", "GoTone Gold", "GoTone Silver" and "GoTone VIP" cardholders. Customers in these four classifications are eligible to receive targeted rewards, including some of our own products and services, as well as those of our business partners.
While contract subscribers are not required to deposit funds before the initiation of local service, these subscribers may choose to make deposits, and may implement direct debit instructions with their banks to make such deposits for the purpose of facilitating account payments. Our prepaid subscribers may also choose to authorize the automatic adding of value to their stored value cards through direct debit arrangements. Despite the lack of widely available consumer credit information services in Mainland China, we have implemented certain subscriber registration procedures, such as identity checks and background checks for corporate customers, to enhance credit control.
Generally, we have the same settlement policy for all of our subscribers. This policy requires our subscribers to settle their individual accounts on a monthly basis. Subscribers may make payments through various means, including:
- through direct debit accounts established at certain banks and certain post offices;
- in person at numerous retail outlets and authorized dealers;
- by using top-off cards; or
- by prepayment.
Detailed statements are provided to subscribers upon request.
We impose a late payment fee on each subscriber whose account is not paid by the monthly due date. Our current policy is to deactivate the subscriber's services if the subscriber's account remains overdue after one month. Subscribers whose services have been involuntarily deactivated must pay all overdue amounts, including applicable late payment fees, to reactivate services.
We make provision for doubtful accounts based on our assessment of the recoverability of accounts receivable on maturity. In particular, we make full provision for accounts receivable older than three months. The total amount of the provision for doubtful accounts for each of 2000, 2001 and 2002 was RMB 1,346 million, RMB 1,737 million and RMB 1,749 million, respectively, or 2.1%, 1.7% and 1.4% of total operating revenue, respectively.
INFORMATION SYSTEMS
Our information systems primarily consist of a business operation support system, a management information system, a network management system and our internal communications network. The business operation support system provides day-to-day operational support to each business unit, and is a unified and comprehensive system that enables the sharing of information resources. This system standardizes and integrates each of our sales, billing, settlement, customer service and network failure handling databases in a centralized and orderly manner. The management information system collects and processes our management information and provides support to our management personnel. In addition, this system has computerized and automated our management in finance, inventory, procurement and projects. The network management system collects and processes the operating data from each network and manages, supervises and controls our networks for safe and efficient operation. Our internal communications network consists of our internal computer network, video conference system, telephone system and others, the combination of which supports our internal communications.
We have upgraded and integrated our information systems several times to keep up with our operational
and management needs. Our investment in information systems was increased in 2002, and is expected to be further increased in the near future. In particular, we have been successfully operating our management information system since 2000 in our regional companies in Guangdong, Jiangsu and Zhejiang. During 2001, we began to extend this system to ten other regional mobile telecommunications companies and have achieved good results, and we are in the process of extending this system to the remaining regional mobile telecommunications companies.
SALES NETWORK AND MARKETING
Since early 1997, we have significantly expanded our marketing and distribution efforts to attract an increasingly diverse base of new subscribers. We have focused on expanding our distribution channels while emphasizing our brand name, superior network and service quality.
Our sales network was restructured in 2002 to form the following sales and service channels:
- proprietary or co-operative sales outlets, franchise stores and designated specialty stores, which serve as our main sales and services network;
- general sales agency outlets, which provide the principal sales force; and
- online and hotline services.
In addition, we also set up concept stores in major cities within our service regions to showcase our services and products, particularly our mobile data services, and to facilitate certain sales and marketing activities.
At December 31, 2002, we had a sales network consisting of over 61,000 outlets, representing an increase of 76.8% over 2001, mainly due to our acquisition of the eight regional mobile telecommunications companies in 2002. Among these outlets, approximately 3,700 were our proprietary sales outlets.
BRAND NAME
As a pioneer and the market leader in our markets, we believe we are well positioned to further develop our brand name. We market our services under the "CHINA MOBILE" brand name, which is a registered trademark in Mainland China owned by China Mobile Communications Corporation and the marketing name used by it throughout Mainland China. As a result of promotional and marketing initiatives by us and China Mobile Communications Corporation's other operating subsidiaries, the brand has attained wide recognition and is closely identified with us by consumers. In addition, China Mobile Communications Corporation has filed applications in Hong Kong to register the "CHINA MOBILE" name and logo as a trademark for certain classes of goods and services. As of December 31, 2002, the " CHINA MOBILE" name has been registered as a trademark for a majority of such classes of goods and services. Furthermore, China Mobile Communications Corporation has filed applications to register the "CHINA MOBILE" name and logo as a trademark in Bangladesh, Canada, India, Indonesia, Macau, Malaysia, Philippines, South Korea, Taiwan, Thailand and the United States, and the "CHINA MOBILE" name has been registered as a trademark in Cambodia and New Zealand.
In July 2002, we entered into a new non-exclusive licensing agreement with China Mobile Communications Corporation for the use of the "CHINA MOBILE" name and logo by us and our operating subsidiaries. Under this agreement, no license fee is payable by us for the first five years from the effective date of the trademark registration in China and any fees payable after that will be no less favorable than fees paid by other affiliates of China Mobile Communications Corporation.
We market our wireless data services under the "MONTERNET" brand name throughout Mainland China. We have filed applications in Mainland China, Hong Kong, Canada, the European Union and the United States to register the "MONTERNET" name and logo as a trademark for certain classes of goods and services.
MOBILE TELECOMMUNICATIONS NETWORKS
We offer mobile telecommunications services using the GSM standard. Each of our GSM networks consists of:
- base stations or base transceiver stations, which are transmitters and receivers that serve as a bridge between all mobile users in a cell and connect mobile calls to the mobile switching center;
- base station controllers, which connect to, and monitor and control, the base transceiver station within each cell, performing the functions of message exchange and frequency administration;
- mobile switching centers, which are central switching points to which each call is connected, and which control the base station controllers and the routing of calls;
- transmission lines, which link the mobile switching centers, base station controllers, base transceiver stations and other telecommunications networks; and
- software applications that drive the mobile telecommunications infrastructure.
The following table sets forth certain selected information regarding our GSM networks as of December 31, 2000, 2001 and 2002:
2000 2001 2002
---- ---- ----
Subscribers (in thousands)...................... 43,185 69,643 117,676
Voice channels (in thousands)................... 1,860 2,787 4,712
Mobile switching centers........................ 470 599 1,020
Base station controllers........................ 1,162 1,480 2,493
Base transceiver stations....................... 31,593 43,223 84,824
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GSM NETWORK CAPACITY EXPANSION PLANS. As of January 1, 2002, all of our subscribers use digital GSM services. We intend to continue our network expansion and improvement with an emphasis on increasing the coverage and capacity and improving the operating efficiency of our GSM networks. Our network expansion plans depend to a large extent upon the availability of sufficient spectrum. In addition, in order to improve the capacity of our mobile telecommunications networks in certain major urban centers, we introduced the GSM-compatible 1800 MHz Digital Cellular System.
MIGRATION FROM ANALOG TO DIGITAL NETWORK. Recent advances in GSM technologies have substantially increased network capacity and service quality. The economic life cycle of our analog network equipment was also much more limited than that of our digital networks. We terminated our analog services on December 31, 2001 in order to utilize our spectrum resources more efficiently and accelerate the enhancement of our network. As of December 31, 2001, substantially all of our analog service subscribers migrated to our GSM network.
SPECTRUM. A mobile telecommunications network's capacity is to a certain extent limited by the amount of frequency spectrum available. The Ministry of Information Industry allocated a total of 34 MHz in the 900 MHz frequency band and the 1800 MHz frequency band to our parent company, China Mobile Communications Corporation. Under the existing agreement between China Mobile Communications Corporation and us, we have the exclusive right to use such frequency spectrum in our service regions.
TRANSMISSION INFRASTRUCTURE. The physical infrastructure linking our base transceiver stations, base station controllers and mobile switching centers and interconnecting our networks to the fixed line network consists of transmissions lines, which provide the backbone infrastructure by which mobile call traffic is carried.
INTRA-PROVINCIAL TRANSMISSION LINES. We currently lease intra-provincial and local transmission lines principally from fixed line operators in our 21 service regions and pay them fees based on tariff schedules stipulated by the relevant regulatory authorities after adjusting for the discounts that we have negotiated.
We have also built our own infrastructure in certain areas where the fixed line network operators do not currently have any transmission lines in place or where the leasing of existing lines is not economical. As part of our network operation strategy, we have allocated funds, and have planned certain capital expenditures, for the construction of our own transmission lines where economically advantageous, such as in high call traffic areas. In areas where the leasing of transmission lines makes more economic sense, we intend to continue to leverage our group buying capacity to negotiate preferential leasing rates.
INTER-PROVINCIAL TRANSMISSION LINES. In May 2000, we entered into an inter-provincial leased line agreement with China Mobile Communications Corporation, which was supplemented in September 2000, extending the application of this agreement to the seven regional mobile telecommunications companies we acquired in 2000 effective upon our acquisition. We entered into a further supplemental agreement in April 2002, which extended the application of this agreement to the eight regional mobile telecommunications companies we acquired in 2002. The leased inter-provincial transmission lines link our mobile switching centers with each other and with China Mobile Communications Corporation's other mobile switching centers.
Prior to these arrangements, we leased intra-provincial transmission lines to link our network to the fixed line network, but did not lease any inter-provincial transmission lines. Instead, we paid China Mobile Communications Corporation an inter-provincial interconnection fee. The leasing charge payable by us is determined based on the standard leasing fee stipulated by the relevant regulatory authorities after adjusting for the discounts that we have negotiated, and the mobile telecommunications network operators at both ends of the transmission lines will share the leasing fees equally.
NETWORK OPERATIONS AND MAINTENANCE. We believe that we have considerable network operation and maintenance experience and technical expertise. Day-to-day traffic management, troubleshooting, system maintenance and network optimization are conducted by our experienced team of engineers and technicians. Technical staff are available for emergency repair work 24 hours a day and we employ specialist teams for central maintenance of the networks. We continue to seek to attract and retain qualified technical staff. Currently, most technical difficulties relating to the networks are resolved by our staff, although our equipment suppliers also provide back-up maintenance and technical support.
BASE STATION SITES. In urban areas, our base transceiver station sites are located mostly on existing structures, typically at the top of tall buildings. In rural areas, masts are often constructed for locating base transceiver stations. Typically, base station sites are of limited size, as base transceiver station equipment does not generally require significant space. Generally, depending on the length of time required for negotiation with respect to use of the land or buildings, construction of a base transceiver station takes approximately one to three months in an urban area and approximately three to six months in a rural area. We anticipate that we will need a significant number of new sites in connection with the expansion of our mobile telecommunications networks. There can be no assurance that we will be able to obtain the requisite number of sites on reasonable commercial terms.
EQUIPMENT SUPPLIERS. We select our principal suppliers from among leading international and domestic manufacturers of mobile telecommunications equipment and in accordance with technical standards set by the Ministry of Information Industry. Our GSM networks use equipment primarily supplied by Ericsson, Nokia, Huawei Technologies, Motorola and Siemens.
STRATEGIC ALLIANCE WITH VODAFONE
On October 4, 2000, we entered into a non-binding memorandum of understanding with Vodafone, which sets forth the principal terms of alliance and cooperation between the two parties. In connection with the alliance, Vodafone purchased US$ 2.5 billion of our ordinary shares as part of our share offering in November 2000, representing approximately 2.18% of our issued and outstanding share capital following the offering.
On February 27, 2001, we entered into a binding strategic alliance agreement with Vodafone. The agreement has formalized a number of cooperation arrangements set forth in the memorandum of understanding, including:
- the exchange and sharing of corporate management, technical and operational expertise and resources;
- joint research and development;
- the introduction of global products and services for the mobile community; and
- the development and implementation of standards and protocols relevant to mobile telecommunications.
Under the agreement, we have agreed to make Vodafone our preferred partner in the above mentioned areas, and Vodafone has agreed to make us its sole strategic partner in China for all areas of potential cooperation within the scope of the strategic alliance. As part of the alliance, Sir Christopher Gent, Chief Executive of Vodafone, joined our board of directors as an independent non-executive director in February 2001. See "Item 6. Directors, Senior Management and Employees". In addition, Vodafone paid us US$ 750 million in July 2002 for the purchase of our ordinary shares through its wholly-owned subsidiary, Vodafone Jersey, in connection with our acquisition of the eight regional mobile telecommunications companies from our immediate parent company, China Mobile Hong Kong (BVI) Limited. As a result, Vodafone's share holding in us increased from 2.18% to approximately 3.27%. See "-- The History and Development of Company -- Expansion of Business Coverage Through Acquisitions".
We believe that the strategic alliance with Vodafone has enhanced our strengths in the telecommunications market in Mainland China and will better position us to pursue further expansion opportunities globally. In particular, this alliance has enabled us to have frequent and broad exchanges of expertise and market information. Moreover, this strategic alliance will enable Vodafone and us to share information and establish benchmarks to better assess and enhance each other's performance, thereby better positioning both parties in the global telecommunications market. See " -- Research and Development".
COMPETITION
We compete with other telecommunications services providers. In all of the provinces, municipalities and the autonomous region in which we operate, we are one of the two licensed mobile services providers. The Chinese government encourages orderly and fair competition in the telecommunications industry in Mainland China. In particular, the Chinese government has extended favorable regulatory policies to some of our competitors, such as China Unicom, in order to help them become more viable competitors to us and China Mobile Communications Corporation. For example, the Chinese government has permitted China Unicom to apply mobile service tariffs as much as 10% below the governmental standard rates. We believe this policy has helped China Unicom's market share by capturing a significant number of price-sensitive mobile telecommunications services subscribers.
In accordance with the Chinese government policy of encouraging competition in the telecommunications industry, the government has previously authorized new entrants to offer IP-based long distance call services, data and Internet services. In 2001, the State Council formally approved the restructuring of the former China Telecommunications Corporation, China Netcom Corporation Limited and Jitong Network Communications Company Limited, which created two large telecommunications companies, China Telecom and China Netcom. Increased competition from new entrants in China's telecommunications industry could adversely affect our financial condition and results of operations. See "Item 3. Key Information -- Risk Factors -- New entrants in the telecommunications industry in China may further intensify competition and adversely affect our results of operations".
We compete on the basis of our network coverage and quality, the pricing of our services, the range of services we offer and our service quality. We believe that we have significant competitive advantages due to:
- our superior mobile telecommunications networks;
- our widely-recognized brand name and logo that are closely identified with us by consumers;
- our broad distribution networks and our focus on customer services;
- our extensive range of value added services;
- our experienced management team and high quality employees; and
- our financial resources.
We believe these advantages have contributed to our superior subscriber quality compared to that of our competitors, as measured by average usage levels, average revenues per subscriber and doubtful accounts levels.
The State Council and the Ministry of Information Industry may approve additional mobile service providers in the future that may compete with us. We may also be subject to competition from providers of new telecommunications services based on new or existing technologies. Nonetheless, given the relatively low mobile penetration rates in our markets and in Mainland China in general, we believe there is substantial growth potential for our mobile telecommunications business. We believe that the restructuring of the telecommunications industry in Mainland China has helped to create a fair, orderly, transparent and healthy telecommunications market.
We also face indirect competition from other telecommunications services, such as Xiaolingtong, a local area wireless telephone service with limited mobility and limited coverage operated by China Telecom and China Netcom. Xiaolingtong offers lower priced services. As a result Xiaolingtong's services are targeted at lower usage customers who tend to spend smaller amounts on mobile telecommunications. Xiaolingtong may become more competitive in the low-end market as such services are becoming available in more large and medium-sized cities, including Beijing, in Mainland China.
In addition, China Unicom currently operates an 800 MHz Code Division Multiple Access, or CDMA, network, and has recently announced that certain of its subsidiaries will commence commercial trials of CDMA prepaid services within their respective service regions. China Unicom's CDMA services have generally increased the level of competition in the markets where we operate.
WORLD TRADE ORGANIZATION
On December 11, 2001, China officially joined the WTO. Under the Protocol on the Accession of the People's Republic of China, dated as of November 11, 2001, China agreed to gradually open the various segments and regions of its telecommunications market to foreign investment. Pursuant to this accession protocol, both the percentage of ownership of Sino-foreign joint ventures offering telecommunication services in China and the regions where those joint ventures are permitted to offer telecommunications services will be gradually expanded over a period of six years. Under the accession protocol, the telecommunication market is divided into fixed line services, mobile voice and data services, paging services and value added services. Value added services include electronic mail, voice mail and online information and database retrieval. By December 11, 2004, foreign investors will be permitted to own up to 49% of joint ventures that offer mobile voice and data services in 17 cities in China. By December 11, 2006, such joint ventures will be permitted to offer mobile voice and data services in China without any geographic restrictions.
The table below summarizes the foreign ownership restrictions for telecommunications joint ventures in China as well as applicable geographic restrictions:
FOREIGN OWNERSHIP PERCENTAGE AND GEOGRAPHIC RESTRICTIONS
FOR FOREIGN-FUNDED TELECOMMUNICATIONS ENTERPRISES
AS OF DECEMBER 31,
-------------------------------------------------------------------------------------------------------------------------------
SECTOR 2001 2002 2003 2004 2005 2006 2007
------ ---- ---- ---- ---- ---- ---- ----
Mobile.............. 25% 35% 49% 49%
(3 cities)(1) (17 cities)(2) (17 cities)(2) (nationwide)
Fixed-line.......... N/A N/A N/A 25% 35% 49%
(3 cities)(1) (17 cities)(2) (nationwide)
Value-added......... 30% 49% 50%
(3 cities)(1) (17 Cities)(2) (nationwide)
Paging.............. 30% 49% 50%
(3 cities)(1) (17 Cities)(2) (nationwide)
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(2) The 17 cities include Beijing, Chengdu, Chongqing, Dalian, Fuzhou, Guangzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shanghai, Shenzhen, Xiamen, Xi'an, Taiyuan and Wuhan.
REGULATION
The mobile telecommunications industry in Mainland China is subject to a high degree of regulation by the Chinese government. Regulations issued or implemented by the State Council, the Ministry of Information Industry and other relevant government authorities including the State Development and Reform Commission and the Ministry of Commerce, which consolidated the functions of the former Ministry of Foreign Trade and Economic Cooperation, encompass all key aspects of mobile telecommunications network operations, including entry into the telecommunications industry, scope of permissible business, interconnection and transmission line arrangements, technology and equipment standards, tariff standards, capital investment priorities, foreign investment policies and spectrum and number resources allocation.
The Ministry of Information Industry, under the leadership of the State Council, is responsible for, among other things:
- formulating and enforcing industry policy, standards and regulations;
- granting telecommunications licenses;
- formulating interconnection and settlement standards for implementation between telecommunications networks;
- together with other relevant regulatory authorities, formulating tariff and service charge standards for telecommunications services;
- supervising the operations of telecommunications services providers;
- promoting fair and orderly market competition among operators; and
- allocating and administering public telecommunications resources, such as radio frequencies, number resources, domain names and addresses of telecommunications networks.
In order to provide a uniform regulatory framework to encourage the orderly development of the telecommunications industry, the Ministry of Information Industry, under the direction of the State Council, is currently preparing a draft telecommunications law. We expect that, if and when the telecommunications law is adopted by the National People's Congress, it will become the basic telecommunications statute and the legal source of telecommunications regulations in Mainland China. In addition, the State Council promulgated a set of new telecommunications regulations on September 25, 2000. These regulations are substantially consistent with the existing rules and guidelines for the telecommunications industry, and are primarily intended to streamline and clarify the existing rules and guidelines. They apply in the interim period prior to the adoption of the telecommunications law. Although we expect that the telecommunications law will have a positive effect on the overall development of the telecommunications industry in Mainland China, we do not know what the nature and scope of the telecommunications law will be.
ENTRY INTO THE INDUSTRY. The new telecommunications regulations adopt the existing regulatory distinction between basic and value added telecommunications services and provide a classification of those services. Operators of mobile telecommunications networks, providers of other basic telecommunications services such as local and long distance fixed line telephone services, and value added service providers whose telecommunications services cover two or more provinces, municipalities or autonomous regions in China must apply for specific permits from the Ministry of Information Industry in order to provide such services. Granting of permits for providing basic telecommunications services will be through a tendering process. Currently, in addition to us and other entities controlled by China Mobile Communications Corporation which operate in Mainland China outside of our markets, China Unicom is also authorized to provide mobile services in all provinces, municipalities and autonomous regions in China.
On December 11, 2001, China officially joined the WTO. To implement China's commitments under the WTO, the Administration of Foreign-Funded Telecommunications Enterprises Provisions became effective on January 1, 2002, permitting foreign investment in joint ventures that provide telecommunications services in China. However, such investments will presumably bear no direct relation to the issuance of licenses to providers of telecommunications services in Mainland China, as the issuance of new licenses by the relevant authority is governed by a separate set of rules and regulations. Pursuant to the Administration of Foreign-Funded Telecommunications Enterprises Provisions, foreign ownership in a telecommunications enterprise may be gradually increased to 49% if such enterprise provides basic telecommunication services and 50% if such enterprise provides value added telecommunications services (including radio paging services).
SPECTRUM USAGE. In coordination with the relevant provincial authorities, the Ministry of Information Industry regulates the allocation of radio frequency. The frequency assigned to an entity is not allowed to be leased or, without approval of the Ministry of Information Industry, transferred by the entity to any other third party. In accordance with a joint circular from the State Development and Reform Commission and the Ministry of Finance, China Mobile Communications Corporation entered into an agreement with us that specifies the amount of fees to be paid to the Ministry of Information Industry for spectrum usage by each mobile telecommunications network operator under the Ministry of Information Industry's control based on the bandwidth of the frequency used and the number of base transceiver stations within the relevant operator's networks.
On May 2, 2002, the relevant regulatory authorities in China informed us that the standard spectrum usage fees for GSM networks will be adjusted progressively over a period of three years, and that the adjustments will be effective for a period of five years from July 1, 2002. For the first year, spectrum usage fees for GSM networks will be charged at the annual rate of RMB 7.5 million per MHz frequency. For the second year, the annual fee will be RMB 11.25 million per MHz frequency and beginning in the third year and thereafter, the annual fee will be RMB 15 million per MHz frequency. All adjusted annual fees are charged on the basis that upward and downward frequencies are separately charged. The allocation of spectrum usage fees between China Mobile Communications Group and us remains the same under our existing agreement. The adjustments will increase our expenses on an after-tax basis by approximately RMB 224 million, RMB 343 million and RMB 462 million, respectively, for the first, second, and third years after the effectiveness of these new rates.
NUMBER RESOURCES. The Ministry of Information Industry is responsible for the administration of the telecommunications number resources within Mainland China, including the mobile telecommunications network number and subscriber numbers. The use of number resources by any telecommunications operator is subject to the
approval by the Ministry of Information Industry. In January 2003, the Ministry of Information Industry issued "Measures on Administration of Telecommunications Network Number Resources". In accordance with these new measures, the telecommunications network number resources are owned by the state, and the user of number resources is required to pay a usage fee to the state starting March 1, 2003. However, the standard for the usage fee has not yet been determined. It is also not clear when the standard for the usage fee will be determined and when we will be required to pay such fee. The new measures also provide for procedures for application for the use, upgrade and adjustment of number resources by telecommunications operators.
TARIFF SETTING. The levels and categories of our current tariffs are subject to regulation by various government authorities, including the Ministry of Information Industry, the State Development and Reform Commission and, at the local level, the relevant provincial price regulatory authorities. Under the new telecommunications regulations, telecommunications tariffs are categorized into market based tariffs, government guidance tariffs and government standard tariffs. In general, base usage charges, monthly fees, domestic roaming usage charges and tariffs for all domestic long distance calls (other than Internet Protocol phone calls) and international calls are fixed jointly by the Ministry of Information Industry and the State Development and Reform Commission. Our international roaming charges are set in accordance with agreements between China Mobile Communications Corporation and the relevant foreign mobile operators. Under the new telecommunications regulations, tariffs for those telecommunications businesses that are considered fully competitive may be set by the service providers as market based tariffs.
INTERCONNECTION ARRANGEMENTS AND LEASE LINE ARRANGEMENTS. Under the new telecommunications regulations, parties seeking interconnection must enter into an interconnection agreement and file such interconnection agreement with the Ministry of Information Industry. Major telecommunications services providers that have control over essential telecommunications infrastructure and possess significant market share must allow interconnection to their networks by other operators. They must establish interconnection rules and procedures based on the principles of non-discrimination and transparency and submit such rules and procedures to the Ministry of Information Industry for approval. Such rules and procedures will be binding upon those major telecommunications services providers. The termination of any interconnection arrangements will require prior approval by the Ministry of Information Industry.
The applicable regulations provide that interconnection related equipment must conform with the technical standards approved by the Ministry of Information Industry. See "--Technical Standards" below. The Ministry of Information Industry also determines the standard lease tariffs to be paid by telecommunications operators with respect to the leasing of transmission lines that facilitate interconnection between telecommunications networks. The relevant provincial operating subsidiaries of China Telecom, China Netcom and China Mobile Communications Corporation are responsible for the maintenance of the transmission lines and related equipment in their respective localities.
TECHNICAL STANDARDS. Certain regulatory authorities in Mainland China, including the Ministry of Information Industry, set technical standards and control the type and quality of mobile telecommunications equipment used in or connected to public networks, all radio telecommunications equipment and all interconnection related equipment.
The establishment of base transceiver stations requires the approval of the relevant provincial regulatory authorities. A number of these approvals with respect to the base stations of our operating subsidiaries are currently pending. We have not experienced and do not expect to experience material difficulty in obtaining permission to establish additional sites.
CAPITAL INVESTMENT. Some of our major investment projects, including mobile telecommunications network development projects, may be required to obtain approvals from relevant regulatory authorities in Mainland China.
EMPLOYEES
The total number of our employees increased from 38,343 as of December 31, 2000 to 59,633 as of December 31, 2002, mainly as a result of our acquisitions of eight regional mobile telecommunications companies in
China in 2002. Substantially all of our employees are located in Mainland China. The employees are classified in the following table. Approximately 56% of our permanent employees have college or graduate degrees.
Management......................................... 11,480
Technical and engineering.......................... 19,950
Sales and marketing................................ 25,341
Financial and accounting........................... 2,862
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Total....................................... 59,633
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We provide benefits to certain employees, including housing, retirement benefits and hospital, maternity, disability and dependent medical care benefits. Most of our employees are members of a labor association. We have not experienced any strikes, slowdowns or labor disputes that have interfered with our operations to date, and we believe that our relations with our employees are good.
PROPERTY, PLANTS AND EQUIPMENT
We own, lease or have usage rights in various properties which consist of land and buildings for offices, administrative centers, staff quarters, retail outlets and technical facilities. We have obtained land use right certificates and property title certificates for all but five of these properties. In 2001, we obtained real estate ownership certificates for four properties located in Guangdong Province and we are currently in the process of obtaining certificates for the remaining five properties, all of which are also located in Guangdong Province. We believe that our use of these properties is not affected by the fact that we have not yet obtained the relevant land use right certificates and property title certificates. China Mobile (Hong Kong) Group Limited, our indirect controlling shareholder, has agreed to indemnify us against any loss or damage caused by or arising from any challenge of, or interference with, our right to use any of the properties we had or used in our business as of May 31, 1997, the date of asset revaluation in preparation for our initial public offering. We believe that all of our owned and leased properties are well maintained and are suitable and adequate for their present use.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
You should read the following discussion and analysis in conjunction with our consolidated financial statements, together with the related notes, included elsewhere in this annual report. The consolidated financial statements have been prepared in accordance with Hong Kong GAAP, which differ in certain significant respects from U.S. GAAP. Note 33 to our consolidated financial statements summarizes the significant differences between Hong Kong GAAP and U.S. GAAP as they relate to us and provides a reconciliation to U.S. GAAP of net profit and shareholders' equity. In addition, note 33 to our consolidated financial statements includes our condensed consolidated financial statements prepared and presented in accordance with U.S. GAAP for the relevant periods. The consolidated financial statements present, and the discussion and analysis in this section pertain to, our consolidated financial position and results of operations as of and for the years ended December 31, 2000, 2001 and 2002. Our consolidated financial statements reflect the results of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile from November 13, 2000 and Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile from July 1, 2002, the respective dates of the acquisitions.
OVERVIEW OF OUR OPERATIONS
During 2000, 2001 and 2002, our network capacity, subscriber base and usage and operations experienced significant growth. We believe that with the market-oriented restructuring of the telecommunications industry, as well as the development of the economy and increase in per capita income in Mainland China, the telecommunications industry will continue to grow rapidly. Given the relatively low penetration rates in our markets, we believe that there is potential for future subscriber growth.
Our results of operations, like those of other mobile telecommunications network operators, are substantially dependent on a number of factors, including:
- the number and quality of subscribers;
- the level of subscriber usage;
- the level and structure of tariffs; and
- interconnection, roaming and transmission line arrangements with other telecommunications operators.
We operate in an extensively regulated environment and our operations and financial performance are significantly affected by the Chinese government's regulation of the telecommunications industry. These regulations and policies may affect, among other things, our interconnection and transmission line leasing arrangements, technology and equipment standards and capital investment, as described in more detail under "Item 3. Key Information -- Risk Factors -- Adverse changes in the economic policies of the Chinese government could have a material adverse effect on the overall economic growth of Mainland China, which could reduce the demand for our services and adversely affect our business, financial condition and results of operations" and "Item 4. Information on the Company -- Business Overview -- Regulation". Our financial performance is also subject to the economic and social conditions in Mainland China and foreign currency exchange rate fluctuations.
OUR ACQUISITIONS OF REGIONAL MOBILE TELECOMMUNICATIONS COMPANIES IN THE
PAST FIVE YEARS HAVE MATERIALLY IMPACTED OUR FINANCIAL RESULTS
We acquired Jiangsu Mobile on June 4, 1998, Fujian Mobile, Henan Mobile and Hainan Mobile on November 12, 1999, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile on November 13, 2000 and Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile on July 1, 2002. We have adopted the purchase accounting method to account for these acquisitions under Hong Kong GAAP. Accordingly, the consolidated financial statements include the results of these companies from the respective dates of the acquisitions. Under U.S. GAAP, our acquisitions of these companies are considered a combination of entities under common
control which would be accounted for under the "as if pooling-of-interests" method, whereby assets and liabilities are accounted for at historical cost and the accounts of previously separate companies for periods prior to the combination generally are restated on a combined basis.
These acquisitions have had a material impact on our overall results of operations. In particular, our financial results in 2002 were significantly affected by the inclusion of the results of operations for the eight regional mobile telecommunications companies we acquired in July 2002. By comparison, our financial results in 2001 did not include the results of operations of these companies. See "-- Results of Operations -- Year Ended December 31, 2002 Compared to Year Ended December 31, 2001". These acquisitions have, among other things, significantly expanded the size of the mobile telecommunications markets we serve and increased the number of our subscribers and usage of our services. As a result, our operating revenue and operating expenses have also increased significantly.
OPERATING ARRANGEMENTS WE ENTERED INTO OVER THE LAST SEVERAL YEARS HAVE
MATERIALLY IMPACTED OUR FINANCIAL RESULTS
Our current organizational structure was established pursuant to the restructuring completed in September 1997 in preparation for our initial public offering and our acquisitions of the 19 regional mobile telecommunications companies in Mainland China in 1998, 1999, 2000 and 2002. In connection with these transactions, we entered into various operating arrangements to facilitate the transfer of the operations to us, to integrate these operations within our operating structure and to improve our overall operational efficiency. These arrangements included:
- interconnection revenue sharing and settlement arrangements with other operators, including China Mobile Communications Corporation;
- intra-provincial transmission line leasing agreements with other operators;
- service agreements with China Mobile Communications Corporation and certain other operators with respect to various telecommunications services and support;
- a change in the tax treatment of connection fees and certain surcharge revenue for our services;
- the revaluation of fixed assets of the companies we acquired as of the respective dates set forth in the financial statements included in this annual report; and
- an agreement with China Mobile Communications Corporation for inter-provincial interconnection and domestic and international roaming.
The original terms of our agreements relating to interconnection, leased lines and roaming have been revised as a result of tariff adjustments by the government and/or commercial negotiation with the relevant parties. See "Item 4. Information on the Company -- Business Overview -- Interconnection" and "-- Roaming" as well as the notes to our consolidated financial statements for a description of these arrangements as amended to date.
Our financial results reflect the impact of the above arrangements as of the dates they became effective. These arrangements and changes have had a material impact on our overall results of operations. In each of 1999 and 2000, depreciation expense increased as a result of the revaluation of fixed assets, while our effective income tax rates increased as a result of connection fees and certain surcharges becoming fully taxable after the acquired companies had registered as wholly foreign owned enterprises following the acquisitions.
OUR OPERATING ARRANGEMENTS WITH CHINA MOBILE COMMUNICATIONS CORPORATION
HAVE AFFECTED AND MAY CONTINUE TO AFFECT OUR FINANCIAL RESULTS
In May 2000, we entered into two agreements with China Mobile Communications Corporation for:
- inter-provincial interconnection and domestic and international roaming services; and
- sharing of inter-provincial leased line fees.
We entered into a supplemental agreement in September 2000, extending the application of those agreements to the seven regional mobile telecommunications companies we acquired in 2000 effective upon our acquisition. We entered into a further supplemental agreement in April 2002, which extended the application of these agreements to the eight regional mobile telecommunications companies we acquired in 2002.
Prior to these arrangements, we leased intra-provincial transmission lines to link our network to the fixed line network, but did not lease any inter-provincial transmission lines. Instead, we paid China Mobile Communications Corporation an inter-provincial interconnection fee. Under the inter-provincial transmission line leasing agreement with China Mobile Communications Corporation, the leasing fee payable by us is determined based on the standard leasing fee stipulated by the relevant regulatory authorities after adjusting for the volume discount to which we are entitled, and on the basis that the mobile network operators at both ends of the transmission lines will share the leasing fees equally. As a result, these arrangements led to an increase in our transmission line leasing expenses, but a reduction in our inter-provincial interconnection and roaming settlement expenses, resulting in net savings in our operating expenses in 2000. We have reflected the financial impact of these arrangements in 1999 as a one-time gain in our accounts for 2000.
TARIFF ADJUSTMENTS
As part of the efforts to further rationalize the tariff structure of telecommunications services, the government introduced a wide range of tariff adjustments effective from early 2001. The tariff adjustments that affect our mobile telecommunications services include the shortening of the billing unit for long distance charges (other than for IP-based long distance call services), from one minute to six seconds, the general reduction in domestic and international long distance call rates, the elimination of various surcharges and a general reduction in leased line tariffs. In particular, effective from early 2001, domestic long distance call rates have been adjusted from the range of RMB 0.50 to RMB 1.00 per minute to the uniform rate of RMB 0.07 per six seconds. In addition, connection fees charged to new contract subscribers were eliminated as of July 1, 2001.
AMENDMENT TO REVENUE SHARING ARRANGEMENT FOR PREPAID SERVICES
We offer prepaid services in each of our 21 service regions. Some of our prepaid services allow subscribers to add value to their SIM cards in any of our service regions or in the service regions of other subsidiaries of China Mobile Communications Corporation. In May 2001, we entered into an agreement with China Mobile Communications Corporation to amend the then-existing revenue sharing arrangements with respect to prepaid services, with retroactive effect from April 21, 2001, which was amended in April 2002 to extend those arrangements to the eight regional mobile telecommunications companies we acquired in 2002. The new agreement amended the prior arrangement by allowing the network operator in the location that sells the top-off prepaid card to charge 5% of the face value of the card as a handling charge, and remit the other 95% (as compared to 85% prior to the amendment) to the subscriber's home network operator.
RENMINBI BOND OFFERING
Following the approval by the relevant Chinese regulatory authorities, on October 28, 2002 Guangdong Mobile, our wholly-owned subsidiary, issued RMB 3 billion guaranteed bonds due 2007 and RMB 5 billion guaranteed bonds due 2017. These bonds commenced trading on the Shanghai Stock Exchange on January 22, 2003. The RMB 3 billion guaranteed bonds and RMB 5 billion guaranteed bonds bear fixed interest of 3.5% and 4.5%, respectively, payable annually.
We have issued a joint and irrevocable guarantee for the performance of these bonds, and China Mobile Communications Corporation has issued a further guarantee in relation to the performance by us of our guarantee obligation. These bonds have received a consolidated credit rating of "AAA" by China Chengxin International Credit Rating Company Limited, an affiliate of Fitch International Limited, and a consolidated credit rating of "AAA" by Dagong Global Credit Rating Co. Ltd.
The entire net proceeds from the offering were applied solely to satisfy part of the US$ 2,800 million deferred consideration for the acquisition by the Company of the entire interest in Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile in 2002.
ANALOG-TO-DIGITAL MIGRATION
Due to the rapid development of mobile telecommunications technologies and the potentially limited economic life cycle of our analog network equipment, we migrated our analog subscribers to our GSM network. See "Item 4. Information on the Company -- Business Overview -- Migration from Analog to Digital Network". In 2000, we wrote down and wrote off the entire RMB 1,525 million in remaining net book value of our analog network equipment. We discontinued our analog service on December 31, 2001.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with Hong Kong GAAP. The preparation of financial statements in conformity with Hong Kong GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the years reported. Actual results could differ from those estimates. Estimates are used when accounting for certain items such as unbilled usage fees, allowance for doubtful accounts, depreciation and amortization period, and impairment of long lived assets including fixed assets and goodwill arising from acquisitions (including that taken initially to reserves). Actual results may differ from those estimates under different assumptions or conditions.
We believe that the following critical accounting policies have a more significant impact on our consolidated financial statements, either because of the significance of the financial statement elements to which they relate, or because they require judgment and estimation.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We maintain allowances for doubtful accounts based upon evaluation of the recoverability of the accounts receivables and other receivables at each balance sheet date. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries. If the financial condition of our customers were to deteriorate, additional allowances may be required.
IMPAIRMENT OF FIXED ASSETS
Our fixed assets, consisting primarily of telecommunication transceivers, switching centers and other network equipment, comprise a significant portion of our total assets. Changes in technology or industry conditions may cause the estimated period of use or the value of these assets to change. We perform periodic reviews to confirm the appropriateness of estimated economic useful lives for each class of fixed assets. For the three years ended December 31, 2002, no changes of assets useful lives have occurred. In addition, long-lived assets including fixed assets and goodwill arising on acquisition (including that initially taken to reserve) are reviewed for impairment whenever events or changes in circumstances have indicated that their carrying amounts may not be recoverable. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other
assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e., a cash-generating unit). Estimates and assumptions used in setting depreciable lives and testing for recoverability require both judgment and estimation. Our policies regarding accounting for these assets and assessing their recoverability are included in note 2(f) and note 2(h) to our consolidated financial statements.
RESULTS OF OPERATIONS
As a result of our acquisitions and the material changes made to our operating arrangements, our results of operations are not directly comparable with those in prior years.
The following table sets forth selected income statement data, expressed as percentages of operating revenue, for the periods indicated:
YEAR ENDED DECEMBER 31,
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2000 2001 2002
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Operating revenue: 100.0% 100.0% 100.0%
Usage fees............................................... 71.2 73.2 72.6
Monthly fees............................................. 14.8 14.1 13.1
Connection fees.......................................... 3.4 0.7 0.0
Others................................................... 10.6 12.0 14.3
Operating expenses:
Leased lines............................................. 8.5 5.0 4.1
Interconnection.......................................... 12.8 13.0 10.1
Depreciation............................................. 15.0 17.6 20.9
Personnel................................................ 6.1 5.3 5.2
Other operating expenses 16.3 18.2 21.7
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Total operating expenses......................... 58.7 59.1 62.0
Operating profit 41.3 40.9 38.0
Write-down and write-off of analog network equipment..... (2.3) - -
Amortization of goodwill................................. - - (0.7)
Other net income......................................... 1.4 1.6 1.3
Finance costs............................................ (1.3) (1.7) (1.4)
Interest income.......................................... 1.5 0.8 0.5
Non-operating net income................................. 0.0 0.0 0.4
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Profit before tax and minority interests................. 40.6 41.6 38.1
Income tax............................................... (12.9) (13.7) (12.6)
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Profit before minority interest.......................... 27.7 27.9 25.5
Minority interest........................................ - 0.0 0.0
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Net Profit..................................................... 27.7% 27.9% 25.5%
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YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001
Our results of operations in 2002 were materially affected by our acquisition of eight regional mobile telecommunications companies in July 2002. In particular, our operating revenue and operating expenses increased significantly in 2002. This was primarily due to the inclusion of the results of operations of these companies. By comparison, our results in 2001 did not include the results of operations of these companies. See "-- Overview of Our Operations -- Our Acquisitions of Regional Mobile Telecommunications Companies in the Past Five Years Have Materially Impacted Our Financial Results". See "Item 4. Information on the Company -- The History and Development of the Company -- Expansion of Business Coverage Through Acquisitions".
OPERATING REVENUE. We derive operating revenue principally from usage fees and monthly fees. Usage fees include standard local usage fees for airtime and applicable domestic and international long distance charges receivable from subscribers for the use of our mobile telecommunications networks and facilities, and fees in respect of roaming out calls made by our subscribers outside their registered service areas. Other operating revenue includes
charges for wireless data and value added services, interconnection revenue and roaming in fees. As a result of the introduction and development of new businesses, including wireless data services, we expect that revenue from new businesses will constitute an increasing portion of our operating revenue in 2003.
Operating revenue increased 28.1% from RMB 100,331 million in 2001 to RMB 128,561 million (US$ 15,532 million) in 2002. This increase was primarily due to the expansion in subscriber base and the continued growth in usage volume, as well as the inclusion of revenue of the eight regional mobile telecommunications companies we acquired in July 2002. Our total number of subscribers was approximately 117.7 million at December 31, 2002, compared to approximately 69.6 million at December 31, 2001.
Revenue from usage fees increased 27.0% from RMB 73,458 million in 2001 to RMB 93,272 million (US$ 11,269 million) in 2002. This increase was principally a result of the increase in total subscriber numbers, both as a result of organic subscriber growth and as a result of our acquisition of the eight regional mobile telecommunications companies in July 2002, and the growth in usage volume. As a percentage of operating revenue, usage fees decreased from 73.2% in 2001 to 72.6% in 2002.
Revenue from monthly fees increased 20.0% from RMB 14,085 million in 2001 to RMB 16,901 million (US$ 2,042 million) in 2002. This increase was mainly due to the increase in total contract subscriber numbers, both as a result of subscriber growth and as a result of our acquisition of the eight regional mobile telecommunications companies in July 2002. As a percentage of operating revenue, monthly fees decreased from 14.1% in 2001 to 13.1% in 2002. This decrease was primarily due to the continued growth in our prepaid subscriber base, which led to an increase in the proportion of prepaid subscribers in our total subscriber base.
There were no revenues from connection fees in 2002 due to the elimination of connection fees charged to new contract subscribers since July 2001.
Other operating revenue increased 52.3% from RMB 12,077 million in 2001 to RMB 18,388 million (US$ 2,221 million) in 2002. This increase resulted principally from increased revenue from wireless data and value added services, as well as the effect of our acquisition of the eight regional mobile telecommunications companies in July 2002.
OPERATING EXPENSES. Operating expenses include leased line expenses, interconnection expenses, depreciation expenses relating to our mobile telecommunications network and other fixed assets, personnel expenses and other operating expenses. Other operating expenses primarily consist of selling and promotion expenses, bad debts and administrative expenses.
Operating expenses increased 34.5% from RMB 59,319 million in 2001 to RMB 79,765 million (US$ 9,637 million) in 2002. This increase was primarily due to the expansion of our operations, the inclusion of expenses attributable to the eight regional mobile telecommunications companies we acquired in July 2002 and increasing competition for customers.
Total leased line payments increased 5.6% from RMB 5,005 million in 2001 to RMB 5,287 million (US$ 639 million) in 2002. This increase was largely a result of the inclusion of leased line payments for transmission lines made by the eight regional mobile telecommunications companies we acquired in July 2002 and our network expansion into new coverage areas. This increase was partially offset by the reduction in leased line expenses due to the improvement in the utilization of our network and the termination of certain transmission line leases as a result of the increased construction of our own transmission lines. As a percentage of operating expenses, total leased line payments decreased from 8.4% in 2001 to 6.6% in 2002.
Interconnection expenses decreased 0.6% from RMB 13,055 million in 2001 to RMB 12,975 million (US$ 1,568 million) in 2002. This decrease was mainly due to the growing intra-network traffic as a result of our expansion of network and subscribers base, as well as the optimization of our network structure and traffic routing, partially offset by the inclusion of the interconnection expenses of the eight regional mobile telecommunications companies we acquired in July 2002. Interconnection expenses as a percentage of operating expenses decreased from 22.0% in 2001 to 16.3% in 2002.
Depreciation expense increased 51.9% from RMB 17,664 million in 2001 to RMB 26,827 million (US$ 3,241 million) in 2002. This increase was mainly due to the expansion of our network capacity in high traffic areas and the inclusion of depreciation expenses attributable to the eight regional mobile telecommunications companies we acquired in July 2002, as well as the increased investment in transmission facilities, new businesses and support systems. As a percentage of operating expenses, depreciation expense increased from 29.8% in 2001 to 33.6% in 2002.
Personnel expenses increased 26.9% from RMB 5,325 million in 2001 to RMB 6,757 million (US$ 816 million) in 2002. This increase was primarily due to the inclusion of personnel expenses of the eight regional mobile telecommunications companies we acquired in July 2002, as well as an increase in performance-based incentive compensation as a result of our further improved operating results. As a percentage of operating expenses, personnel expenses decreased from 9.0% in 2001 to 8.5% in 2002.
Other operating expenses increased 52.8% from RMB 18,270 million in 2001 to RMB 27,919 million (US$ 3,373 million) in 2002. This increase was primarily due to the increase in selling and promotion expenses. The increase in selling and promotion expenses was due to the conduct of differentiated promotional campaigns to maintain customer loyalty and the effect of our acquisition of the eight regional mobile telecommunications companies in July 2002. As a percentage of operating expenses, other operating expenses increased from 30.8% in 2001 to 35.0% in 2002.
OPERATING PROFIT. As a result of the foregoing, operating profit increased 19.0% from RMB 41,012 million in 2001 to RMB 48,796 million (US$ 5,895 million) in 2002, and operating margin (operating profit as a percentage of operating revenue) decreased from 40.9% in 2001 to 38.0% in 2002.
OTHER NET INCOME. Other net income represents primarily gross profit from sales of SIM cards, handsets and accessories. Other net income increased 5.8% from RMB 1,594 million in 2001 to RMB 1,686 million (US$ 204 million) in 2002. This increase was principally due to the effect of our acquisition of the eight regional mobile telecommunications companies in July 2002. We expect the gross margin from sales of SIM cards decrease as a result of the increasing market competition.
FINANCE COSTS. Finance costs increased from RMB 1,740 million in 2001 to RMB 1,852 million (US$ 224 million) in 2002. This increase was primarily due to the deferred consideration for the acquisition of eight regional mobile telecommunications companies, and the inclusion of finance costs attributable to those companies. In 2002, the average interest rate that we paid on our outstanding borrowings was approximately 4%.
INTEREST INCOME. Interest income decreased 16.8% from RMB 857 million in 2001 to RMB 713 million (US$ 86 million) in 2002. The lower interest income in 2002 was primarily due to lower market interest rates prevailing during this period.
NON-OPERATING NET INCOME/(EXPENSES). Non-operating net expenses of RMB 6 million in 2001 turned into non-operating net income of RMB 571 million (US$ 69 million) in 2002. This was primarily due to a gain of RMB 255 million recognized on a deemed disposal of our shareholding in Aspire.
PROFIT BEFORE TAX AND MINORITY INTERESTS. As a result of the foregoing, profit before tax and minority interests increased 17.4% from RMB 41,717 million in 2001 to RMB 48,978 million (US$ 5,917 million) in 2002.
TAXATION. Our income tax expense increased 18.5% from RMB 13,703 million in 2001 to RMB 16,234 million (US$ 1,961 million) in 2002. This increase was primarily due to an increase in our profit. Our effective tax rate was 32.8% in 2001 to 33.1% in 2002, respectively.
NET PROFIT. As a result of the foregoing and after taking into account minority interests, net profit increased 16.9% from RMB 28,015 million in 2001 to RMB 32,742 million (US$ 3,956 million) in 2002. Net profit margin (net profit as a percentage of operating revenue) decreased from 27.9% in 2001 to 25.5% in 2002.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
OPERATING REVENUE. Operating revenue increased 54.4% from RMB 64,984 million in 2000 to RMB 100,331 million in 2001. This increase was primarily due to an increase in usage fees as a result of subscriber growth as well as the full year effect of including usage fees from subscribers of the seven companies we acquired in November 2000. This increase was partially offset by certain tariff adjustments implemented in early 2001. The tariff adjustments included the cancellation of various surcharges and the adjustment of long distance call tariffs during the first quarter of 2001. In addition, connection fees were eliminated as of July 1, 2001. Our total number of subscribers was approximately 69.6 million at December 31, 2001, compared to approximately 45.1 million at December 31, 2000. Excluding connection fees, operating revenue increased from RMB 62,771 million in 2000 to RMB 99,620 million in 2001.
Revenue from usage fees increased 58.7% from RMB 46,287 million in 2000 to RMB 73,458 million in 2001. This increase was primarily a result of the increase in total subscriber numbers and the growth in usage volume, as well as the full year effect of our acquisition of the seven regional mobile telecommunications companies in November 2000. As a percentage of operating revenue, usage fees increased from 71.2% in 2000 to 73.2% in 2001.
Revenue from monthly fees increased 46.4% from RMB 9,623 million in 2000 to RMB 14,085 million in 2001. This increase was mainly due to the increase in total contract subscriber numbers, as well as the full year effect of including monthly fees from subscribers of the seven companies we acquired in November 2000. As a percentage of operating revenue, monthly fees decreased from 14.8% in 2000 to 14.1% in 2001.
Revenue from connection fees decreased 67.9% from RMB 2,213 million in 2000 to RMB 711 million in 2001. This decrease was primarily due to the gradual decrease and eventual elimination of connection fees charged to new contract subscribers. As a percentage of operating revenue, connection fees decreased from 3.4% in 2000 to 0.7% in 2001.
Other operating revenue increased 76.0% from RMB 6,861 million in 2000 to RMB 12,077 million in 2001. This increase resulted principally from increased revenue from wireless data and value added services, incoming roaming revenue and interconnection revenue, as well as the full year effect of our acquisition of the seven companies in November 2000.
OPERATING EXPENSES. Operating expenses increased 55.5% from RMB 38,158 million in 2000 to RMB 59,319 million in 2001. This increase primarily reflected the full year effect of including expenses attributable to the seven companies we acquired in 2000, our overall expanded network coverage and service scope and our larger subscriber base.
Total leased line payments decreased 9.0% from RMB 5,501 million in 2000 to RMB 5,005 million in 2001. This decrease was primarily due to a reduction of leased line tariffs in 2001 and the construction of our own transmission lines in high traffic areas as well as our termination of the Total Access Communications System, or TACS, network. This decrease was partially offset by the full year effect of including leased line payments for transmission lines made by the seven companies we acquired in November 2000 and our network expansion into new coverage areas. As a percentage of operating expenses, total leased line payments decreased from 14.4% in 2000 to 8.4% in 2001.
Interconnection expenses increased 56.7% from RMB 8,329 million in 2000 to RMB 13,055 million in 2001. This increase was mainly due to the full year effect of including interconnection expenses attributable to the seven companies we acquired in November 2000, as well as the increased traffic volume. This increase was partially offset by the cost savings achieved by realizing the economies of scale of increased traffic volume transmitted over our expanded network. Interconnection expenses as a percentage of operating expenses increased from 21.8% in 2000 to 22.0% in 2001.
Depreciation expense increased 81.0% from RMB 9,759 million in 2000 to RMB 17,664 million in 2001. This increase was mainly due to the full year impact of the inclusion of the depreciation expenses of the seven companies we acquired in November 2000, as well as the increase in our network capacity, the additional investment we made in our GSM networks and the additional strategic investments
we made in certain transmission networks and stations. As a percentage of operating expenses, depreciation expense increased from 25.6% in 2000 to 29.8% in 2001.
Personnel expenses increased 33.4% from RMB 3,991 million in 2000 to RMB 5,325 million in 2001. This increase was primarily due to the full year effect of including personnel expenses of the seven companies we acquired in November 2000, as well as an increase in performance-based incentive compensation as a result of our further improved operating results. We believe that implementation of our performance-based compensation system has helped us to retain and attract talented staff and enhance employee productivity. As a percentage of operating expenses, personnel expenses decreased from 10.5% in 2000 to 9.0% in 2001.
Other operating expenses increased 72.7% from RMB 10,578 million in 2000 to RMB 18,270 million in 2001. This increase was primarily due to the increase in selling and promotion expenses and the one-off costs associated with the migration of subscribers to our GSM networks from our analog service. The increase in selling and promotion expenses primarily reflects our larger subscriber base and the full year effect of our acquisition of the seven regional mobile telecommunications companies we acquired in November 2000. As a percentage of operating expenses, other operating expenses increased from 27.7% in 2000 to 30.8% in 2001.
OPERATING PROFIT. As a result of the foregoing, operating profit increased 52.9% from RMB 26,826 million in 2000 to RMB 41,012 million in 2001, and operating margin (operating profit as a percentage of operating revenue) decreased slightly from 41.3% in 2000 to 40.9% in 2001.
OTHER NET INCOME. Other net income represents primarily gross profit from sales of SIM cards, handsets and accessories. Other net income increased 74.2% from RMB 915 million in 2000 to RMB 1,594 million in 2001. This increase was principally due to the full year effect of our acquisition of the seven regional mobile telecommunications companies in November 2000, as well as increased sales of SIM cards due to our subscriber growth.
FINANCE COSTS. Finance costs increased from RMB 824 million in 2000 to RMB 1,740 million in 2001. This increase was primarily due to the full year effect of including finance costs attributable to the seven companies we acquired in November 2000. This increase was also partly due to the full year impact of the interest on the US$ 690 million convertible notes issued in November 2000. In 2001, the average interest rate that we paid on our outstanding borrowings was approximately 5%.
INTEREST INCOME. Interest income decreased 14.8% from RMB 1,006 million in 2000 to RMB 857 million in 2001. The higher interest income in 2000 was primarily due to our larger cash balances resulting from our capital raising and financing activities in 2000.
NON-OPERATING NET INCOME/(EXPENSES). Non-operating net expenses increased 20.0% from RMB 5 million in 2000 to RMB 6 million in 2001. This increase was primarily due to the full year effect of our acquisition of the seven companies in November 2000.
PROFIT BEFORE TAX AND MINORITY INTERESTS. As a result of the foregoing, profit before tax and minority interests increased 58.1% from RMB 26,393 million in 2000 to RMB 41,717 million in 2001.
TAXATION. Our income tax expense increased 63.8% from RMB 8,366 million in 2000 to RMB 13,703 million in 2001. This increase was primarily due to an increase in our profit. Our effective tax rate increased from 31.7% in 2000 to 32.8% in 2001. The increase was largely a result of our acquisition of the seven companies in November 2000. The connection fee revenue and certain surcharge revenue from those seven companies were not subject to taxation in 2000 prior to their completion of the registration as wholly foreign-owned enterprises. The full year effect of interest expenses on the US$ 690 million convertible notes we issued in 2000 and the additional interest expenses on the RMB 5 billion bonds we issued in 2001, both of which are not tax deductible, also contributed to the higher effective tax rate.
NET PROFIT. As a result of the foregoing and after taking into account minority interests, net profit
increased 55.4% from RMB 18,027 million in 2000 to RMB 28,015 million in 2001. Net profit margin (net profit as a percentage of operating revenue) increased from 27.7% in 2000 to 27.9% in 2001.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Our principal source of liquidity is cash generated from our operations. As a result, our liquidity would be adversely affected to the extent there is a significant decrease in demand for our services and products. As of December 31, 2002, we had negative working capital (current assets minus current liabilities) of RMB 896 million (US$ 108 million) compared to working capital of RMB 9,458 million and RMB 5,847 as of December 31, 2001 and 2000, respectively. The decrease in working capital in 2002 was principally due to the inclusion of the outstanding debt of the eight regional mobile telecommunications companies we acquired in July of that year. As of December 31, 2000, 2001 and 2002, accounts receivable totaled RMB 7,252 million, RMB 5,728 million and RMB 6,066 million (US$ 733 million), respectively. The substantial decrease in accounts receivable in 2001 and 2002 was principally due to the fact that approximately 93.5% and 68.7% of the net additional subscribers in 2001 and 2002, respectively, were customers for prepaid services. Ongoing improvements in our internal credit control and billing systems also contributed to the decrease in our accounts receivable both in 2001 and 2002. Short-term bank and other loans and the current portion of obligations under capital leases totaled RMB 12,095 million, RMB 5,439 million and RMB 8,200 million (US$ 990 million) as at December 31, 2000, 2001 and 2002, respectively.
The following table summarizes certain cash flow information for the periods indicated.
YEAR ENDED DECEMBER 31,
---------------------------------
2000 2001 2002
---- ---- ----
(in millions of RMB)
Net cash from operating activities....................... 35,449 50,971 69,422
Net cash used in investing activities.................... (91,869) (45,248) (64,117)
Net cash from/(used in) financing activities............. 64,773 (11,604) 5,449
------- ------- -------
Net Increase/(decrease) in cash and cash equivalents..... 8,353 (5,881) 10,754
======= ======= =======
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Net cash from operating activities increased from 2000 to 2001, reflecting the growth in operating revenue due to the full effect of the inclusion of the results of operations of the seven regional mobile telecommunications companies we acquired in November 2000 and the increase in our subscriber base through internal growth. Net cash from operating activities increased from 2001 to 2002, generally reflecting the growth in operating revenue due to the increase in our subscriber base through internal growth and the acquisition of the eight regional mobile telecommunications companies in July 2002.
Net cash used in investing activities decreased from 2000 to 2001. This decrease was primarily due to the fact that we did not conduct any significant acquisitions during 2001. Net cash used in investing activities increased significantly from 2001 to 2002. This increase was principally a result of the payment of the consideration for our acquisition of the eight regional mobile telecommunications companies in July 2002.
Net cash from financing activities decreased significantly from 2000 to 2001. This decrease was principally due to the fact that we significantly reduced our capital raising and financing activities during 2001, except for the RMB 5 billion floating rate bonds issued by Guangdong Mobile in June 2001. The proceeds from these bonds were applied solely to repay part of the RMB 12.5 billion syndicated loans. Net cash from financing activities increased significantly from 2001 to 2002. This increase was principally due to the issuance of new shares by the Company in June 2002 and the issuance of RMB 3 billion five-year guaranteed bonds and RMB 5 billion fifteen-year guaranteed bonds by Guangdong Mobile in October 2002. The proceeds from these shares and bonds were applied solely to pay part of the consideration for the acquisition of the eight regional mobile telecommunications companies in July 2002. See "-- Contractual Obligations and Commitments -- Indebtedness" below for more information regarding the offerings.
CAPITAL EXPENDITURES
Capital expenditures incurred during 2000, 2001 and 2002 were RMB 20,729 million, RMB 42,417 million and RMB 40,083 million (US$ 4,843 million), respectively. We incurred capital expenditures principally for the construction of our GSM networks, support systems, transmission facilities, infrastructure buildings and the development of new technologies and new businesses.
We estimate that we will spend approximately US$ 5.6 billion in 2003, US$ 4.9 billion in 2004 and US$ 4.5 billion in 2005 in capital expenditures. We expect to incur these expenditures primarily for the purpose of:
- further expanding our GSM network capacity and coverage;
- increasing our efforts in improving our support systems;
- building our own transmission facilities where economically advantageous;
- constructing infrastructure buildings where economically advantageous; and
- developing and providing new technologies and new businesses.
Minimal capital expenditure is currently budgeted annually for third generation mobile networks monitoring and experimentation.
Following our initial public offering, we have funded our capital requirements primarily with cash generated from operations, proceeds from equity and debt offerings and, to the extent necessary, short- term and long-term borrowings. We believe our available cash and cash generated from future operations will be sufficient to fund most of the capital expenditures and working capital necessary for the planned network expansion and continued growth of our mobile telecommunications operations through the end of 2004.
We may seek to obtain additional sources of financing to fund our network expansion and possible future acquisitions, to the extent necessary.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
INDEBTEDNESS
As of December 31, 2000, 2001 and 2002, our aggregate long-term bank and other loans and obligation under capital leases (excluding current portions) totaled RMB 13,708 million, RMB 6,739 million and RMB 12,676 million (US$ 1,531 million), respectively, and our short-term bank and other loans (including the current portion of long-term loans) and current portion of obligation under capital leases totaled RMB 12,095 million, RMB 5,439 million and RMB 8,200 million (US$ 990 million), respectively. Our short term loans and long term loans decreased in 2001 due to the repayment of a portion of the RMB 12.5 billion syndicated loans we entered into in October 2000. Our short term loans and long term loans increased in 2002 mainly due to the inclusion of the outstanding debt of the eight regional mobile telecommunications companies in 2002. Capital lease obligations totaled RMB 68 million (US$ 8 million) at December 31, 2002, all of which will be repayable in 2003. We currently plan to repay loan amounts due using cash in hand and cash from our operating activities.
On November 2, 1999, we issued unsecured fixed rate notes with a principal amount of US$ 600 million due on November 2, 2004. The notes bear interest at the rate of 7.875% per annum and such interest is payable semi-annually on May 2 and November 2 of each year, commencing May 2, 2000.
On November 3, 2000, we issued unsecured convertible notes with a principal amount of US$ 690 million due on November 3, 2005. The notes bear interest at the rate of 2.25% per annum and such interest is payable semi-annually on May 3 and November 3 of each year, commencing May 3, 2001.
Pursuant to agreements entered into on October 7, 2000 between our wholly-owned subsidiary, China Mobile (Shenzhen) Limited, and a syndicate of international and domestic Chinese commercial banks, we borrowed an aggregate of RMB 12.5 billion in bank loans, including (1) an RMB 5.0 billion loan for a six-month term with a fixed interest rate of 5.022% per annum and (2) an RMB 7.5 billion loan for a three-year term with an interest rate of 5.346% per annum for the first year, to be adjusted annually on each anniversary of the first drawdown date of the loan to equal the rate that is 10% below the three-year base lending rate for financial institutions prevailing on such anniversary date as announced by the People's Bank of China. The loans are guaranteed jointly and severally by six of our operating subsidiaries. We repaid in full the RMB 5.0 billion loan and RMB 5.0 billion of the RMB 7.5 billion loan with proceeds from the Renminbi bond offering described above under " -- Overview of Our Operations -- Renminbi Bond Offering". As of December 31, 2002, RMB 2.5 billion of the loans had been drawn down and remained outstanding. During 2002, the average interest rate of these loans was approximately 5%.
On June 18, 2001, Guangdong Mobile, one of our wholly-owned subsidiaries, issued bonds with a principal amount RMB 5 billion at a floating rate due June 18, 2011. Guangdong Mobile's payment obligations under the bonds are guaranteed in full by us, and our guarantee is further guaranteed by China Mobile Communications Corporation.
The deferred consideration of US$ 2,800 million for our
acquisition of the eight regional mobile telecommunications companies in 2002 is
subordinated to other senior debt owed by us from time to time, including but
not limited to, the US$ 600 million fixed rate notes and US$ 690 million
convertible notes issued in 1999 and 2000, respectively. In addition, this
deferred consideration is payable by the fifteenth anniversary of the date of
the completion of acquisition, and we may make an early payment of all or part
of the deferred consideration at any time without penalty. We are required to
pay interest semi-annually on the actual amount of deferred consideration unpaid
from the date of completion of the acquisition. Interest is calculated at the
two-year US dollar London Inter-Bank Offered Rate ("LIBOR") swap rate at 11:00
a.m. (New York City time) on the second business day next preceding the date of
the acquisition agreement for the first two years after completion of the
acquisition. Thereafter, the interest rate will be adjusted every two years to
equal the two-year US dollar LIBOR swap rate prevailing at 11:00 a.m. (New York
City time) on the relevant interest determination date. The payment of the
deferred consideration and the interest payments can be made in Hong Kong
dollars, RMB or US dollars (or other agreed currencies). Any payment made in
currencies other than US dollars will be accounted for based on the exchange
rates between US dollars and such currencies prevailing at 12:00 noon (New York
City time) on the day which is two business days next preceding the date of the
acquisition agreement. We used the entire proceeds from the RMB 3 billion
guaranteed bonds due 2007 and RMB 5 billion guaranteed bonds due 2017, both
issued on October 28, 2002 by Guangdong Mobile, our wholly-owned subsidiary, to
pay a portion of the US$ 2,800 million deferred consideration.
On October 28, 2002, Guangdong Mobile, one of our wholly-owned subsidiaries, issued RMB 3 billion five-year guaranteed bonds and RMB 5 billion fifteen-year guaranteed bonds. Guangdong Mobile's payment obligations under these two bonds are guaranteed in full by us, and our guarantee obligation is further guaranteed by China Mobile Communications Corporation.
We currently enjoy a rating of Baa2 from Moody's and BBB from Standard & Poor's, which is equivalent to China's sovereign rating. Any downgrade in our credit rating will not trigger any events on our outstanding bonds or loans or our existing credit facilities. In addition, Moody's recently upgraded our international credit rating outlook from "stable" to "positive", and our management currently believes that a downgrade below Baa2 or BBB is not likely. However, under the terms of our US$ 690 million convertible notes and our US$ 600 million fixed rate notes, we are obligated to ensure that the aggregate debt of our subsidiaries does not exceed 120% of our consolidated adjusted earnings before interest, tax, depreciation and amortization and write-down and write-off of fixed assets, or EBITDA, for the most recently completed twelve-month period. We have complied with this covenant in the most recently completed twelve-month period. In addition, we currently do not foresee any event that would cause us to violate any of these covenants.
For a discussion of our interest rate risk, please see "Item 11. Quantitative and Qualitative Disclosures about Market Risk".
OTHER CONTRACTUAL OBLIGATIONS AND COMMITMENTS
As of December 31, 2002, we had various contractual obligations and commitments which are more fully disclosed in the notes to our consolidated financial statements. The principal components of these obligations and commitments include:
- our short-term and long-term debts (in addition to the bonds and notes described under " -- Indebtedness" above), which includes capital leases;
- operating leases; and
- capital commitments.
In the ordinary course of our business, we routinely enter into commercial commitments for various aspects of our operations, such as repair and maintenance. However, we believe that those commitments will not have a material effect on our financial condition, results of operations or cash flows.
For further disclosure regarding leases and other commitments, please see note 21 to our consolidated financial statements included elsewhere in this annual report.
The following table sets forth certain information regarding our contractual obligations to make future payments as of December 31, 2002:
PAYMENTS DUE BY PERIOD
--------------------------------------------------------------
OVER OVER
1 YEAR BUT 3 YEARS BUT
LESS THAN LESS THAN LESS THAN AFTER
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 3 YEARS 5 YEARS 5 YEARS
----------------------- ----- ------ ------- ------- -------
(in millions of RMB)
SHORT-TERM DEBT............................... 3,689 3,689 - - -
BILLS PAYABLE................................. 1,256 1,256 - - -
DEFERRED PAYABLE.............................. 15,176 - - - 15,176
LONG-TERM DEBT (1)............................ 40,791 4,443 23,238 3,080 10,030
CAPITAL LEASE OBLIGATIONS..................... 68 68 - - -
TRADE PAYABLE................................. 19,251 19,251 - - -
------ ------ ------ ----- ------
TOTAL CONTRACTUAL CASH OBLIGATIONS............ 80,231 28,707 23,238 3,080 25,206
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The following table sets forth certain information regarding our other commercial commitments as of December 31, 2002:
AMOUNT OF COMMITMENT
EXPIRATION PER PERIOD
-------------------------------------------------------------------
TOTAL OVER 1 YEAR OVER 3 YEARS
AMOUNTS LESS THAN BUT LESS THAN BUT LESS THAN OVER
OTHER COMMERCIAL COMMITMENTS COMMITTED 1 YEAR 3 YEARS 5 YEARS 5 YEARS
---------------------------- --------- ------ ------- ------- --------
(in millions of RMB)
OPERATING LEASES COMMITMENTS.................. 14,718 6,088 4,678 1,950 2,002
CAPITAL COMMITMENTS........................... 6,437 6,437 - - -
------ ------ ----- ----- -----
TOTAL COMMERCIAL COMMITMENTS.................. 21,155 12,525 4,678 1,950 2,002
====== ====== ===== ===== =====
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As of December 31, 2002, we did not have any off-balance sheet arrangements or any written options on non-financial assets.
FOREIGN EXCHANGE
We maintain our accounts in Renminbi and substantially all of our revenue and expenses are denominated in Renminbi. Our capital expenditures totaled the equivalent of RMB 20,729 million, RMB 42,417 million and RMB 40,083 million (US$ 4,843 million) for 2000, 2001 and 2002, respectively. For 2000, a substantial portion of our capital expenditures was denominated in U.S. dollars and incurred in connection with our purchase of imported equipment. In addition, we also incur interest expense on foreign currency (mainly U.S. dollar) denominated borrowings. U.S. dollar denominated debt totaled the equivalent of RMB 11,855 million and RMB 26,353 million (US$ 3,184 million) at December 31, 2001 and 2002, respectively, constituting 40.5% and 43.2% of our total debt as of those dates, respectively.
All of our current operating subsidiaries are incorporated in Mainland China. Under the current foreign exchange system in Mainland China, our subsidiaries may not be able to hedge effectively against currency risk, including any possible future Renminbi devaluation. See "Item 3. Key Information -- Risk Factors -- Fluctuations in exchange rates could adversely affect our financial results" and "Item 10. Additional Information -- Exchange Controls".
Each of our operating subsidiaries is able to purchase foreign exchange for settlement of current account transactions, as defined in applicable regulations, in order to satisfy its foreign exchange requirements.
U.S. GAAP RECONCILIATION
Our consolidated financial statements are prepared in accordance with Hong Kong GAAP, which differ in certain significant respects from U.S. GAAP. The following table sets forth a comparison of our net profit and shareholders' equity in accordance with Hong Kong GAAP and U.S. GAAP.
AS OF OR FOR THE YEAR ENDED DECEMBER 31
--------------------------------------------------------------
2000 2001 2002 2002
---- ---- ---- ----
(in millions)
Net profit in accordance with:
Hong Kong GAAP........................... RMB 18,027 RMB 28,015 RMB 32,742 US$ 3,956
U.S. GAAP................................ RMB 24,137 RMB 34,236 RMB 37,202 US$ 4,495
Shareholders' equity in accordance with:
Hong Kong GAAP........................... RMB 83,760 RMB 111,779 RMB 172,202 US$ 20,804
U.S. GAAP................................ RMB 95,650 RMB 140,300 RMB 134,575 US$ 16,259
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Under Hong Kong GAAP, we adopted the purchase accounting method to account for our acquisitions of the seven regional mobile telecommunications companies in November 2000 and the eight regional mobile telecommunications companies in July 2002. Under the purchase accounting method, the acquired results of these companies were included in the results of operations from the respective dates of acquisition. Goodwill is the excess of the cost over the fair value of our share of the identifiable assets and liabilities acquired. Goodwill arising on the
acquisition date of our acquisition of seven regional mobile telecommunications companies in November 2000 was eliminated against reserves immediately on acquisition. Due to the adoption of SSAP 30, which took effect in 2001, goodwill arising on the acquisition date of our acquisition of eight regional mobile telecommunications companies in July 2002 is amortized to the consolidated statements of income on a straight line of twenty years. See "Special Note on our Financial Information and Certain Statistical Information in this Annual Report".
For U.S. GAAP, because we and the acquired companies were deemed to be under common control prior to the acquisitions, the acquisitions were considered a "combination of entities under common control". Under U.S. GAAP, combinations of entities under common control are accounted for under the "as if pooling-of-interests" method, whereby assets and liabilities are accounted for at historical cost and the financial statements of previously separate companies for periods prior to the combination are restated on a combined basis. The consideration we paid or payable in each acquisition was treated as an equity transaction in the respective years of each acquisition, and goodwill amortization recognized under Hong Kong GAAP in 2002 was reversed for U.S. GAAP purposes.
In addition, there are other differences between Hong Kong GAAP and U.S. GAAP for the periods presented, which relate primarily to:
- the computation of capitalized interest;
- the revaluation of fixed assets of the acquired companies under Hong Kong GAAP;
- the recognition of deferred income taxes;
- the non-recognition under Hong Kong GAAP of certain of our employee housing scheme costs;
- the treatment of share options we grant to directors and employees;
- the recognition as revenue of connection fees and telephone number selection fees; and
- the net savings arising from interconnection, roaming and leased line agreements.
Historically, connection fee revenue was recognized as received for both Hong Kong GAAP and U.S. GAAP for all periods presented to June 30, 1999. Beginning July 1, 1999, we adopted a new accounting policy under U.S. GAAP to defer connection fees received in excess of direct costs and recognize such deferred amount over the estimated customer usage period for the related service. Effective January 1, 2000, under U.S. GAAP, we have adopted the provisions of Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". Under this Staff Accounting Bulletin, connection fees and telephone number selection fees received and incremental direct costs up to but not exceeding such fees are deferred and amortized over the estimated customer usage period for the related service. These changes in accounting policy for U.S. GAAP have significantly impacted the timing of connection fee revenue recognized. Connection fees were, however, eliminated as of July 1, 2001.
Disclosure relating to these differences can be found in note 33 to our consolidated financial statements. In addition, our condensed consolidated balance sheets as of December 31, 2001 and 2002 and our condensed consolidated statements of income, total shareholders' equity and cash flows for the years ended December 31, 2000, 2001 and 2002 prepared and presented under U.S. GAAP have been included in notes 33 and 34 to our consolidated financial statements to reflect the impact of the significant differences between Hong Kong GAAP and U.S. GAAP.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth certain information concerning our directors and senior management as of May 31, 2003.
NAME AGE POSITION
---- --- --------
Mr. WANG Xiaochu........ 45 Chairman; Chief Executive Officer
Mr. LI Yue.............. 44 Executive Director; Vice President
Mr. LU Xiangdong........ 43 Executive Director; Vice President
Mr. XUE Taohai.......... 47 Executive Director; Vice President
and Chief Financial Officer
Mr. HE Ning............. 41 Executive Director; Vice President
Mr. LI Gang............. 46 Executive Director
Mr. XU Long............. 46 Executive Director
Sir Christopher GENT.... 54 Independent Non-Executive Director
Dr. LO Ka Shui.......... 56 Independent Non-Executive Director
Mr. Frank K. S. WONG.... 54 Independent Non-Executive Director
Mr. Moses M. C. CHENG... 52 Independent Non-Executive Director
Mr. ZHANG Ligui......... 60 Non-Executive Director
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Mr. Wang Xiaochu has served as our Chairman and Chief Executive Officer since March 1999. Mr. Wang is in charge of our overall management. He is also Vice President of China Mobile Communications Corporation, the ultimate controlling shareholder of the Company. Prior to joining us, Mr. Wang served as the Director General of the Tianjin Posts and Telecommunications Administration. He also served as Director and Deputy Director of the Hangzhou Telecommunications Bureau in Zhejiang Province. He was responsible for the development of China Telecom's telephone network management systems and various other information technology projects, and, as a result, received the Class Three National Science and Technology Advancement Award and the former Ministry of Posts and Telecommunications Class One Science and Technology Advancement Award. Mr. Wang graduated from Beijing University of Posts and Telecommunications in 1980 and has over 22 years of management experience in the telecommunications industry.
Mr. Li Yue has served as our Executive Director and Vice President since March 2003. Mr. Li assists the Chief Executive Officer in relation to the network and planning activities of the Company. He has been serving as Vice President of China Mobile Communications Corporation since April 2000. Mr. Li previously served as the Deputy Director General of the Tianjin Posts and Telecommunications Administration and the President of Tianjin Mobile Communications Company. Mr. Li graduated from Tianjin University with a Master's Degree and has over 27 years of management experience in the telecommunications industry.
Mr. Lu Xiangdong has served as our Executive Director and Vice President since March 2003. Mr. Lu assists the Chief Executive Officer mainly in marketing, wireless data services, billing and settlement and corporate co-operation of the Company. He has been serving as Vice President of China Mobile Communications Corporation since April 2000. He previously served as the Director General of Fujian Wireless Telecommunications Bureau and the Deputy Director General of the Mobile Telecommunications Bureau of the Ministry of Posts and Telecommunications. Mr. Lu graduated from the Academy of Posts and Telecommunications of the Ministry of Posts and Telecommunications with a Master's Degree and has nearly 21 years of management experience in the telecommunications industry.
Mr. Xue Taohai has served as our Executive Director, Vice President and Chief Financial Officer since July 2002. Mr. Xue assists the Chief Executive Officer in relation to the corporate financial management of the Company. Mr. Xue is also the Vice President of China Mobile Communications Corporation. Mr. Xue previously served as the Deputy Director General of the Finance Department of the former Ministry of Posts and Telecommunications, Deputy Director General of the Department of Financial Adjustment and Clearance of the
Ministry of Information Industry and Deputy Director General of the former Directorate General of Telecommunications. He graduated from Henan University and has over 23 years of experience in the telecommunications industry and financial management.
Mr. He Ning has served as our Executive Director since August 1998. Mr. He is also a Vice President of the Company, assisting the Chief Executive Officer in the general administration and investor and media relations of the Company. He previously served as the Deputy Director General of the Zhenjiang Posts and Telecommunications Bureau, the Director and Deputy Director of the Jiangsu Mobile Communications Bureau, Deputy Director General of the Posts and Telecommunications Administration in Jiangsu Province and the Chairman and President of Jiangsu Mobile. He graduated from Nanjing University of Posts and Telecommunications and received a Master's Degree from Maastricht School of Management of the Netherlands. He has 19 years of management experience in the telecommunications industry.
Mr. Li Gang has served as our Executive Director since August 1999. He is the Chairman and President of Guangdong Mobile, responsible for the mobile telecommunications operations in Guangdong Province. He previously served as Director of the Network Maintenance Division and a Deputy Director of the Telecommunications Division of the Posts and Telecommunications Administration in Guangdong Province and the Vice Chairman and President of Guangdong Mobile. He graduated from Beijing University of Posts and Telecommunications in 1985, and has 29 years of experience in the telecommunications industry.
Mr. Xu Long has served as our Executive Director since August 1999. He is the Chairman and President of Zhejiang Mobile, responsible for the mobile telecommunications operations in Zhejiang Province. He previously served as Deputy Director of Shaoxing Posts and Telecommunications Bureau, the President of Zhejiang Nantian Posts and Telecommunications Group Company and Director of the General Office and Deputy Director General of Posts and Telecommunications Administration in Zhejiang Province. He graduated from Zhejiang Radio and Television University in 1985, and has 25 years of experience in the telecommunications industry.
Sir Christopher Gent has served as our independent Non-Executive Director since February 2001. Sir Christopher is the Chief Executive of Vodafone Group Plc., one of the world's largest mobile telecommunications companies. Sir Christopher joined the Vodafone Group as Managing Director of Vodafone Limited in 1985 when Vodafone launched its first mobile phone service in the UK, and held the position until December 1996, when he became Group Chief Executive. He also represents Vodafone on the board of directors of the largest mobile telecommunications company in the United States, Verizon Wireless. Sir Christopher has many years of management experience in the telecommunications industry worldwide.
Dr. Lo Ka Shui has served as our independent Non-Executive Director since April 2001. Dr. Lo is the Deputy Chairman and Managing Director of Great Eagle Holdings Limited. He is also a non-executive Director of The Hong Kong and Shanghai Banking Corporation Limited, Shanghai Industrial Holdings Limited and Phoenix Satellite Television Holdings Limited. He is also a director of Hong Kong Exchanges and Clearing Limited, a Vice Chairman of the Real Estate Developers Association of Hong Kong, a Trustee of the Hong Kong Centre for Economic Research, and a member of the Council of Advisors on Innovation and Technology. Dr. Lo graduated with a bachelor of science degree from McGill University in Canada and a doctorate degree in medicine from Cornell University in the United States. He is certified in cardiology. Dr. Lo has more than 23 years of experience in property and hotel development and investment both in Hong Kong and overseas.
Mr. Frank K. S. Wong has served as our independent Non-Executive Director since August 2002. Mr. Wong is Vice Chairman of DBS Bank and Chairman of Dao Heng Bank. He previously served as the Designated Chief Executive for National Westminster Bank's Hong Kong branch and Chairman of the Hong Kong Futures Exchange. He also held various senior positions in JP Morgan's Hong Kong and London operations, and in Citibank-North Asia region. Mr. Wong has many years of finance and commercial management experience.
Mr. Moses M. C. Cheng has served as our independent Non-Executive Director since March 2003. Mr. Cheng is a practicing solicitor and a senior partner of Messrs. P. C. Woo & Co. He is also Chairman of the Hong Kong Institute of Directors, Chairman of the Committee on the Promotion of Civic Education of Hong Kong and the Deputy Chairman of the Listing Committee of both the Main Board and Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. He previously served as an appointed member of the Legislative Council of Hong Kong from
1991 to 1995.
Mr. Zhang Ligui has served as our Non-Executive Director since March 2003. Mr. Zhang has been serving as the President of China Mobile Communications Corporation since April 2000 and is in charge of the overall management of China Mobile Communications Corporation. Mr. Zhang previously served as the Director General of the Gansu Posts and Telecommunications Administration. He had also served as the Director General of the Directorate General of Telecommunications of the Ministry of Posts and Telecommunications, the Director General of the Beijing Telecommunications Bureau, and the Director General of the Directorate General of Posts and Telecommunications. Mr. Zhang graduated from Beijing University of Posts and Telecommunications and has over 37 years of management experience in the telecommunications industry.
On July 3, 2002, Mr. Ding Donghua retired and resigned as our Director and Chief Financial Officer. On August 1, 2002, Professor Arthur Li Kwok Cheung resigned as our independent non-executive director. On March 18, 2003, Mr. Li Zhenqun resigned as our Vice Chairman and Chief Operating Officer. On the same date, each of Mr. Liu Ping, Mr. Yuan Jianguo and Mr. Wei Yiping resigned as our Director.
COMPENSATION
The aggregate amount of compensation that we paid to our directors and executive officers during 2002 for services performed as directors, officers or employees was approximately RMB 15 million (US$ 1.8 million).
We adopted a share option scheme on October 8, 1997, or the Old Scheme, pursuant to which our directors may, at their discretion, invite our employees, including executive directors, or employees of our subsidiaries, to take up options to subscribe for ordinary shares up to a maximum aggregate number of ordinary shares equal to 10% of our total issued share capital.
Pursuant to a resolution passed at the annual general meeting held on June 24, 2002, the Old Scheme was terminated and a new share option scheme, or the New Scheme, was adopted. The purpose of the New Scheme is to provide the Company with a flexible and effective means of remunerating and providing benefits to the employees, the executive directors and the non-executive directors of the Company, any of its holdings companies and their respective subsidiaries and any entity in which the Company or any of its subsidiaries holds any equity interest, thereby providing incentives to these participants. Under the New Scheme, the directors of the Company may, at their discretion, invite the plan participants to take up options to subscribe for the ordinary shares of the Company.
The maximum aggregate number of ordinary shares which can be subscribed pursuant to options that are or may be granted under the above schemes equals to 10% of the total issued share capital of the Company as at the date of adoption of the New Scheme. Options lapsed or cancelled in accordance with the terms of the Old Scheme or the New Scheme will not be counted for the purpose of calculating this 10% limit.
As the Old Scheme was terminated with effect on June 24, 2002, no further options was granted under the Old Scheme thereafter. As at December 31, 2002, the total number of ordinary shares which may be issued on the exercise of the outstanding options granted under the Old Scheme is 112,761,500. As at the same date, the total number of ordinary shares which may be issued on the exercise of the outstanding options granted or to be granted under the New Scheme is 1,773,844,445.
The consideration payable for the grant of each option under each of the Old Scheme and the New Scheme is HK$ 1.00. For options granted before September 1, 2001 under the Old Scheme, the exercise price of the options was determined by the directors of the Company at their discretion provided that such price may not be set below a minimum price which is the higher of:
(i) the nominal value of a share; and
(ii) 80% of the average of the closing price of the ordinary share on The Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, on the five trading days immediately preceding the date on which the option was granted.
With effect from September 1, 2001, the Hong Kong Stock Exchange requires that the exercise price of options to be at least the higher of the nominal value of an ordinary share, the closing price of the ordinary shares on the Hong Kong Stock Exchange on the date on which the option was granted and the average closing price of the ordinary shares on the Hong Kong Stock Exchange for the five trading days immediately preceding the date on which the option was granted. During the year ended December 31, 2002, no option was granted under the Old Scheme.
For options granted under the New Scheme, the exercise price of the options shall be determined by the directors of the Company at their discretion provided that such price may not be set below a minimum price which is the highest of:
(i) the nominal value of an ordinary share;
(ii) the closing price of the ordinary shares on the Hong Kong Stock Exchange on the date on which the option was granted; and
(iii) the average closing price of the ordinary shares on the Hong Kong Stock Exchange for the five trading days immediately preceding the date on which the option was granted.
Share options involving 150,476,500 ordinary shares were granted under the New Scheme during the year ended December 31, 2002.
Under both the Old Scheme and the New Scheme, the term of the option is determined by the directors at their discretion, provided that all options shall be exercised within 10 years after the adoption of the scheme (in the case of the Old Scheme) and within 10 years after the date on which the option is granted (in the case of the New Scheme).
As at December 31, 2002, the directors and employees of the Company had options to subscribe for the ordinary shares of the Company granted under both the Old Scheme and, from June 24, 2002 onwards, the New Scheme. See "-- Share Ownership" below for details on options granted to our directors.
BOARD PRACTICES
To enhance our corporate governance, we established two board committees, the audit committee and the remuneration committee, in 1998 and 2000, respectively. These committees are comprised solely of independent non-executive directors. In 2001, having considered the relevant rules on corporate governance and the Code of Best Practice of the Listing Rules of the London Stock Exchange, we established the nomination committee. The nomination committee is comprised primarily of independent non-executive directors.
AUDIT COMMITTEE
The members of our audit committee are Dr. Lo Ka Shui, as chairman of the committee, Mr. Frank K.S. Wong and Mr. Moses M. C. Cheng. The audit committee's major responsibilities include:
- to review the financial reports, the related auditors' review report and management's responses to the review reports;
- to discuss audit procedures with the auditors as well as any issues arising out of such procedures;
- to review the auditors' appointment, the auditors' fees and any matters relating to the termination or resignation of the auditor; and
- to examine the effectiveness of our internal controls, to review our internal audit plan and to submit relevant reports and recommendations to our Board on a regular basis.
The audit committee usually meets four times each year.
REMUNERATION COMMITTEE
The members of our remuneration committee are Dr. Lo Ka Shui, as chairman of the committee, Mr. Frank K. S. Wong and Mr. Moses M. C. Cheng. The remuneration committee's major responsibilities include:
- to advise the Board in relation to the remuneration structure and payments of our executive directors and executives; and
- to represent the Board in confirming the individual remuneration packages and employment terms of executive directors and approving their related employment contracts.
Meetings of the remuneration committee are held when necessary.
NOMINATION COMMITTEE
The members of our nomination committee are Mr. Wang Xiaochu, as chairman of the committee, Dr. Lo Ka Shui, Mr. Frank K. S. Wong and Mr. Moses M. C. Cheng. The primary responsibilities of the nomination committee include reviewing, advising and making recommendations to the board on the matters in relation to the appointment and re-appointment of board members, and ensuring the proper and transparent procedures for the appointment and re-appointment of directors. Meetings of the nomination committee are held when necessary.
EMPLOYEES
See "Item 4. Information on the Company -- Business Overview -- Employees".
SHARE OWNERSHIP
As of December 31, 2002, the following directors and those members of our senior management named in the section entitled "Directors and Senior Management" had interests in our share capital:
DIRECTOR NUMBER OF ADSS PERCENTAGE OF CLASS
-------- -------------- -------------------
Wang Xiaochu...................... 500 *
Li Zhenqun (resigned)............. 100 *
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Under our Memorandum and Articles of Association, our directors and senior management do not have different voting rights when compared to other holders of shares in the same class.
As of December 31, 2002, options exercisable for an aggregate of 14,479,000 shares had been granted to the following directors and those members of our senior management named in the section "Directors and Senior Management" under our share option scheme and were outstanding.
The following options are exercisable at a price of HK$ 33.91 per share through October 7, 2007.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu....................... 3,900,000
He Ning............................ 1,000,000
Li Gang............................ 1,000,000
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The following options are exercisable at a price of HK$ 45.04 per share through October 7, 2007.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 100,000
He Ning............................. 83,000
Li Gang............................. 90,000
Xu Long............................. 585,000
Liu Ping (resigned)................. 581,000
Yuan Jiangguo (resigned)............ 580,000
Wei Yiping (resigned)............... 578,000
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The following options are exercisable at a price of HK$ 45.04 per share from April 25, 2005 through October 7, 2007.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 100,000
He Ning............................. 83,000
Li Gang............................. 90,000
Xu Long............................. 585,000
Liu Ping (resigned)................. 581,000
Yuan Jiangguo (resigned)............ 580,000
Wei Yiping (resigned)............... 578,000
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The following options are exercisable at a price of HK$ 32.10 per share from June 22, 2003 through October 7, 2007.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 60,000
Li Zhenqun (resigned)............... 560,000
He Ning............................. 45,000
Li Gang............................. 50,000
Xu Long............................. 47,500
Liu Ping (resigned)................. 40,000
Yuan Jianguo (resigned)............. 45,000
Wei Yiping (resigned)............... 40,000
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The following options are exercisable at a price of HK$ 32.10 per share from June 22, 2006 through October 7, 2007.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 60,000
Li Zhenqun (resigned)............... 560,000
He Ning............................. 45,000
Li Gang............................. 50,000
Xu Long............................. 47,500
Liu Ping (resigned)................. 40,000
Yuan Jianguo (resigned)............. 45,000
Wei Yiping (resigned)............... 40,000
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The following options are exercisable at a price of HK$ 22.85 per share from July 3, 2004 through July 2, 2012.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 150,000
Xue Taohai.......................... 100,000
Li Zhenqun (resigned)............... 100,000
He Ning............................. 90,000
Li Gang............................. 95,000
Xu Long............................. 90,000
Liu Ping (resigned)................. 50,000
Yuan Jianguo (resigned)............. 80,000
Wei Yiping (resigned)............... 50,000
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The following options are exercisable at a price of HK$ 22.85 per share from July 3, 2007 through July 2, 2012.
DIRECTOR NUMBER OF SHARES COVERED BY OPTIONS
-------- -----------------------------------
Wang Xiaochu........................ 150,000
Xue Taohai.......................... 100,000
Li Zhenqun (resigned)............... 100,000
He Ning............................. 90,000
Li Gang............................. 95,000
Xu Long............................. 90,000
Liu Ping (resigned)................. 50,000
Yuan Jianguo (resigned)............. 80,000
Wei Yiping (resigned)............... 50,000
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ITEM 7. SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
MAJOR SHAREHOLDERS
As of May 31, 2003, approximately 75.7% of our outstanding shares were held by China Mobile Hong Kong (BVI) Limited, a wholly-owned subsidiary of China Mobile (Hong Kong) Group Limited. China Mobile Communications Corporation, a state-owned company, holds all of the voting shares and economic interest in China Mobile (Hong Kong) Group Limited. No other persons own 5% or more of our ordinary shares. Between our initial public offering and May 31, 2003, our majority shareholders held, directly or indirectly, between approximately 75% and 76.5% of equity interest in us, except for brief periods following our equity offerings in 1999 and 2000 but before the issuance of consideration shares to our direct shareholder, China Mobile Hong Kong (BVI) Limited, for the related acquisitions, during which periods the shareholding was temporarily lower. See "Item 4. Information on the Company -- Industry Restructuring and Changes in Our Shareholding Structure" for changes during the past three years with respect to our majority shareholders. Under our Memorandum and Articles of Association, our major shareholders do not have different voting rights when compared to other holders of shares in the same class.
We are not aware of any arrangement which may at a subsequent date result in a change of control over us.
RELATED PARTY TRANSACTIONS
As of May 31, 2003, China Mobile Communications Corporation indirectly owns an aggregate of approximately 75.7% of our issued and outstanding share capital.
We and each of our subsidiaries have entered into various related party transactions. The principal terms of the agreements for these related party transactions are described below.
Certain charges for the services under these agreements are based on tariffs set by the Chinese regulatory authorities. Those transactions where the charges are not set by Chinese regulatory authorities are based on commercial negotiation between the parties, in each case on an arm's length basis. In this regard, we have the benefit of the undertaking from China Mobile Communications Corporation that to the extent within its control, we will be treated equally with any other mobile telecommunications entities in respect of all approvals, transactions and arrangements between us on the one hand and China Mobile Communications Corporation and other mobile telecommunications operators controlled by China Mobile Communications Corporation on the other hand, as described below under "Undertaking from China Mobile Communications Corporation".
ROAMING ARRANGEMENTS
We offer domestic and international roaming services to our subscribers. In September 1997, in connection with our initial public offering, we entered into domestic roaming arrangements with the mobile communications networks previously controlled by the former Ministry of Posts and Telecommunications. Those arrangements were replaced by our interconnection and roaming agreement with China Mobile Communications Corporation entered in May 2000, which sets forth the current terms of our domestic and international roaming arrangements. Under this agreement, with regard to inter-provincial roaming, 80% of the base roaming calling charges payable by a roaming subscriber is credited to the visited network and the remaining 20% is retained by the roaming subscriber's home network. This agreement is valid for two years from April 1, 1999, and will be automatically renewed on an annual basis unless either party notifies the other of its intention to terminate at least three months prior to the expiration of the term.
With regard to international roaming, roaming calling charges incurred by an international mobile telecommunications services subscriber making or receiving a call while roaming in our service regions in Mainland China are collected for us and credited to us by China Mobile Communications Corporation, and we will make the necessary settlement with the relevant telecommunications operators in Mainland China. China Mobile Communications Corporation also collects a 15% handling charge on the roaming calling charges from the international mobile telecommunications operators and shares such handling charge equally with us with respect to
roaming in calls to our service regions. When our subscribers roam internationally, we will collect the roaming calling charges together with a 15% handling charge from our subscribers and will pay the roaming calling charges together with half of the handling charge collected to China Mobile Communications Corporation, which will make the necessary settlement with the international mobile telecommunications operators concerned.
LICENSING OF TRADEMARK
China Mobile Communications Corporation is the owner of the "CHINA MOBILE" name and logo, a registered trademark in Mainland China, Cambodia and New Zealand. In addition, it has filed applications in Bangladesh, Canada, Hong Kong, India, Indonesia, Macau, Malaysia, Philippines, South Korea, Taiwan, Thailand and the Untied States to register the "CHINA MOBILE" name and logo as a trademark for certain goods and services. In July 2002, we entered into a new licensing agreement with China Mobile Communications Corporation for, among other things, the use of the "CHINA MOBILE" name and logo by us and our operating subsidiaries. The new licensing agreement replaces the previous licensing agreements entered into with China Mobile Communications Corporation in October 1999 and the supplemental licensing agreement entered into in September 2000. Under this agreement, no license fee is payable by us for the first five years from the effective date of the trademark registration in China and any fees payable after that will be no less favorable than fees paid by other affiliates of China Mobile Communications Corporation. China Mobile Communications Corporation may terminate the license agreement if it no longer has any interests in us.
SPECTRUM FEES
The Ministry of Information Industry and the Ministry of Finance jointly determine the standardized spectrum fees payable to the Ministry of Information Industry by all mobile telecommunications operators in Mainland China, including us. In accordance with a joint circular from the State Development and Reform Commission and the Ministry of Finance, China Mobile Communications Corporation entered into an agreement with us that specifies the amount of fees to be paid to the Ministry of Information Industry for spectrum usage by each mobile telecommunications network operator under the Ministry of Information Industry's control based on the bandwidth of the frequency used and the number of base transceiver stations within the relevant operator's networks. In October 1999, we entered into an agreement with China Mobile Communications Corporation (as supplemented by two supplemental agreements entered into in September 2000 and April 2002), under which we have been granted the exclusive right to use the frequency spectrum and telephone numbers allocated to us in our service regions. For the usage of the 800/900 MHz and the 1800 MHz frequency bands, the charges will be shared between our operating subsidiaries and China Mobile Communications Corporation's operating subsidiaries. Sixty percent of the charges will be shared on the basis of the number of base stations at the end of the previous year and 40% of the charges will be shared on the basis of the bandwidth of the spectrum used. The agreement is valid for one year and will be automatically renewed on an annual basis unless either party notifies the other of its intention to terminate at least three months prior to the expiration of the term.
On May 2, 2002, the relevant regulatory authorities in China informed us that the standard spectrum usage fees for GSM networks will be adjusted progressively over a period of three years, and the adjustments will be effective from July 1, 2002 for a period of five years. For the first year, spectrum usage fees for GSM networks will be charged at the annual rate of RMB 7.5 million per MHz frequency. For the second year, the annual fee will be RMB 11.25 million per MHz frequency and from the third year onward, the annual fee will be RMB 15 million per MHz frequency. All adjusted annual fees are charged on the basis that upward and downward frequencies are separately charged. The allocation of spectrum usage fees between China Mobile Communications Group and us remains the same under our existing agreement. The adjustments will increase our expenses on an after-tax basis by approximately RMB 224 million, RMB 343 million and RMB 462 million, respectively for the first, second, and third year after the effectiveness of these new rates.
SHARING OF INTER-PROVINCIAL TRANSMISSION LINE LEASING FEES
In May 2000, we entered into an inter-provincial leased line agreement with China Mobile Communications Corporation, which was supplemented in September 2000, extending the application of this agreement to the seven regional mobile telecommunications companies we acquired in 2000 effective upon our acquisition. We entered into a further supplemental agreement in April 2002, which extended the application of this agreement to the eight regional mobile telecommunications companies we acquired in 2002. More details about the arrangements are described under "Item 5. Operating and Financial Review and Prospects -- Overview of Our Operations -- Our Operating Arrangements with China Mobile Communications Corporation Have Affected and May Continue to Affect Our Financial Results".
INTERCONNECTION ARRANGEMENTS
Our networks interconnect with the mobile telecommunications networks of China Mobile Communications Corporation in other regions. In May 2000, we entered into an interconnection and roaming agreement with China Mobile Communications Corporation (as amended by two supplemental agreements entered in September 2000 and April 2002). Under these agreements, with regard to inter-provincial roaming, when the roaming subscriber places a call from a roaming location, the operator of the visited network receives all long distance calling charges, if any, and when the roaming subscriber receives a call at a roaming location, the network operator with whom the subscriber is registered retains all long distance calling charges, if any.
International long distance calling charges incurred by an international mobile telecommunications services subscriber making an international long distance call while roaming in the areas in Mainland China where we operate are collected by China Mobile Communications Corporation and are credited to us. We will make the necessary settlement with the relevant telecommunications operators in Mainland China. China Mobile Communications Corporation also collects a 15% handling charge on such international long distance calling charges from the international mobile telecommunications operators and shares such handling charges equally with us. When our subscribers roam internationally, we will collect the international long distance calling charges, if any, together with a 15% handling charge from our subscribers and will pay the international long distance calling charges together with half of the handling charges to China Mobile Communications Corporation, which will make the necessary settlement with the international mobile telecommunications operators concerned. Where long distance charges cannot be distinguished from base roaming charges, such long distance charges are grouped under roaming charges.
PREPAID SERVICES
Prepaid services allow subscribers to add value to their SIM cards by purchasing top-off cards from any of our network operators or China Mobile Communications Corporation's other network operators. We have entered into an agreement with China Mobile Communications Corporation regarding the sharing and settlement of revenue when prepaid subscribers purchase top-off cards from network operators other than their home network operators. This agreement is for a term of one year from July 1, 2000 (the sharing of revenue from prepaid subscribers purchasing top-off cards from network operators other than their home network operators commenced from February 1, 2000) and will be automatically renewed on an annual basis unless either party notifies the other of its intention to terminate at least three months prior to the expiration of the term. The agreement was amended on May 11, 2001 with retroactive effect from April 21, 2001, and was further amended on April 29, 2002 to extend the application of the arrangement to the eight regional mobile telecommunications companies we acquired in 2002. Under the amended agreement, the mobile network operator in the location that issues the top-off card remits 95% of the face value of the top-off card to the subscriber's home network operator, and keeps the remainder as a handling charge. Prior to the amendment, the remittance amount to home network operator was 85% of the face value of the top-off card.
PLATFORM DEVELOPMENT
Aspire is 66.4% owned by us, and it is a joint venture with Vodafone and Hewlett-Packard Company. It entered into a platform development master agreement with each of us and China Mobile Communications Corporation on January 10, 2001. Under the two platform development master agreements, Aspire (or its subsidiaries) will provide the same scope of technology platform development and maintenance services to us and our subsidiaries and to China Mobile Communications Corporation and their respective mobile telecommunications
subsidiaries in various regions in Mainland China. These services include system and gateway integration services, hardware, software and system development (including development of applications), technical support and major overhaul services for a standardized, nation-wide platform for wireless data.
Under the platform development master agreements, we and China Mobile Communications Corporation will each pay Aspire equipment charges, systems integration fees, software licensing fees, technical support fees and/or major overhaul charges, which will be determined according to standards laid down by the relevant governmental departments and/or by reference to market rates.
PROPERTY LEASING AND MANAGEMENT SERVICES
We lease from other subsidiaries of China Mobile Communications Corporation various properties that are used as office space and for locating our cell sites and switching equipment. In relation to leased properties, the rental payments are determined with reference to market rates. In relation to properties sub-leased by such subsidiaries to the companies that we acquired in November 2000 (which were in turn leased to such subsidiaries by third parties), the rental is equal to the rental payable to such third parties, and such subsidiaries do not make any gains as the intermediate lessors. Some of such subsidiaries of China Mobile Communications Corporation also provide property management services in relation to the properties leased or subleased (other than for Tianjin Mobile and Guangxi Mobile). Property management fees are determined with reference to market rates.
The initial terms of such leases and sub-leases range from six months to ten years. The initial terms of such leases and sub-leases to Guangxi Mobile are renewable on an annual basis if Guangxi Mobile gives six months' notice of its intention to renew. Guangxi Mobile is entitled to terminate such leases and sub-leases by giving three months' notice at any time. The initial terms of such leases and sub-leases to Tianjin Mobile are automatically renewable on an annual basis unless terminated by Tianjin Mobile by three months' notice given at any time or by the relevant lessor by giving notice of its intention to terminate three months prior to expiration of the relevant term. The initial terms of such leases and sub-leases to Shanghai Mobile are automatically renewed on an annual basis unless terminated by Shanghai Mobile by three months' notice given at any time or in relation to sub-leases terminated by the relevant lessor by giving three months' notice prior to the expiration of the relevant term. In relation to our other subsidiaries, the relevant lease terms and (subject to the relevant head lease being valid or renewable for the extended term) sub-lease terms will be automatically renewed on an annual basis unless terminated by the relevant companies with three months' notice given at any time and, in relation to sub-leased properties, the relevant lessor may also terminate by giving three months' notice prior to the expiration of the relevant term. Beijing Mobile also leases certain properties and provides property management services to a subsidiary of China Mobile Communications Corporation for an initial term of one year and on terms substantially similar to those set out above in this paragraph.
CONSTRUCTION AND RELATED SERVICES
Beijing Mobile, Shanghai Mobile, Liaoning Mobile and Shandong Mobile entered into agreements with certain subsidiaries of China Mobile Communications Corporation under which such subsidiaries provide services such as construction, design, equipment installation, testing and/or maintenance services and/or act as general contractors in relation to construction and other projects of our subsidiaries. Such agreements are for terms of between 6 months and 16 months, which will be automatically renewed on an annual basis unless either party (in the case of Shandong Mobile, Shanghai Mobile and Beijing Mobile) or Liaoning Mobile (in the case of Liaoning Mobile) notifies the other in writing at least three months prior to the expiration of the term of its intention to terminate the arrangement. Beijing Mobile had also previously entered into other agreements for the provision of certain construction and related services which have continued to be performed according to their terms after Beijing Mobile was acquired by us in November 2000. The charges payable for services rendered under such agreements are determined according to standards laid down by relevant governmental departments and/or by reference to market rates.
EQUIPMENT MAINTENANCE AND RELATED SERVICES
Beijing Mobile, Shanghai Mobile and Liaoning Mobile entered into agreements with certain subsidiaries of China Mobile Communications Corporation under which such subsidiaries provide equipment maintenance and related services to such companies. Such agreements are for terms of between 6 months and 15 months, which will be
automatically renewed on an annual basis unless either party (in the case of Beijing Mobile) or Shanghai Mobile or Liaoning Mobile (in the case of Shanghai Mobile and Liaoning Mobile, respectively) notifies the other of its intention to terminate in writing at least three months prior to the expiration of the term. Beijing Mobile had also previously entered into another agreement for the provision of certain equipment maintenance services which continued to be performed according to its terms after Beijing Mobile was acquired by us in November 2000. The charges payable for services rendered under such agreements are determined according to standards laid down by relevant governmental departments and/or by reference to market rates.
TRANSMISSION TOWER PRODUCTION, SALES AND OTHER SERVICES AND ANTENNA
MAINTENANCE SERVICES
Hebei Mobile entered into an agreement with a subsidiary of China Mobile Communications Corporation under which such subsidiary provides transmission tower design, production, installation and maintenance services and antenna maintenance services to Hebei Mobile, and sells transmission towers and spare parts to Hebei Mobile. The initial term of this agreement is for one year from August 1, 2000 to July 30, 2001. This agreement will be automatically renewed on an annual basis unless either party notifies the other of its intention to terminate in writing at least three months prior to the expiration of the term. The price of such transmission towers and spare parts and the charges payable for services rendered under this agreement are determined according to standards laid down by relevant governmental departments and/or by reference to market rates.
COLLECTION SERVICES AND SALES ARRANGEMENTS
Henan Mobile entered into an agreement with a subsidiary of China Mobile Communications Corporation in August 1999 in respect of the provision by the China Mobile Communications Corporation subsidiary of certain payment collection services to Henan Mobile. The collection service charges payable by Henan Mobile amount to 1% of the collections.
In addition, Henan Mobile also entered into a sales service agreement with a subsidiary of China Mobile Communications Corporation in August 1999 pursuant to which such subsidiary has agreed to market through its outlets Henan Mobile's mobile telecommunications services. The maximum sales service charges of RMB 250 per subscriber are based on commercial negotiation on an arm's length basis by reference to the prevailing market rates.
TELECOMMUNICATION SERVICES
In April 2002, each of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile has, respectively, entered into an agreement with the respective subsidiary of China Mobile Communications Corporation for the provision of certain telecommunications services. These services include:
(i) telecommunications projects planning, design and constructions services and telecommunications lines and pipelines construction services (as the case may be);
(ii) telecommunications lines maintenance services provided to Anhui Mobile, Jiangxi Mobile, Shaanxi Mobile and Shanxi Mobile; and
(iii) property leasing and property management services.
For the services described in (i) and (ii) above, the charges payable are generally determined with reference to and cannot exceed relevant standards set by and revised from time to time by relevant governmental authorities in Mainland China. Where there are no such standards, the charges are determined with reference to market rates.
TRANSMISSION TOWER SALES, INSTALLATION AND MAINTENANCE
On May 8, 2002, we entered into an agreement with Hubei Communication Services Company, a wholly-owned subsidiary of China Mobile Communications Corporation, under which Hubei Communication
Services Company provided transmission towers and spare parts and related installation and maintenance services to our operating subsidiaries. The price of such transmission towers and spare parts and the charges payable for the services rendered under the agreement are determined either according to standards set by relevant governmental authorities in Mainland China or by reference to market rates.
MISCELLANEOUS
These transactions entered into by us (including our subsidiaries) have been entered into in the ordinary course of business and on normal commercial terms. Under the Listing Rules of the Hong Kong Stock Exchange, these transactions are considered to be "connected transactions" and (other than the licensing of trademarks) would normally require full disclosure and prior independent shareholders' approval on each occasion they arise. As the transactions are expected to be continued in the normal course of business, our directors consider that such disclosure and approval would be impractical. Accordingly, our directors have requested the Hong Kong Stock Exchange to grant, and the Hong Kong Stock Exchange has granted, waivers from compliance with the normal approval and disclosure requirements related to connected transactions under the Listing Rules (except for the licensing of trademarks), which will be effective until December 31, 2004, except that the waivers for transactions relating to prepaid services and platform development will be effective until December 31, 2006, upon the following conditions as applicable:
(1) the transactions as well as the respective agreements governing such transactions will be (a) entered into in the ordinary and usual course of business on terms that are fair and reasonable so far as our independent shareholders are concerned, and (b) on normal commercial terms and in accordance with the terms of the agreements governing such transactions;
(2) details of the transactions, as required by rule 14.25(1)(A) to (D) of the Listing Rules, shall be disclosed in our Hong Kong annual report;
(3) our independent non-executive directors shall review annually the transactions and confirm in our Hong Kong annual report and accounts for the relevant year that the transactions have been conducted in the manner stated in paragraph (1) above and within the upper limits stated below;
(4) our auditors shall review annually the transactions and provide our directors with a letter, details of which will be set out in our Hong Kong annual accounts, stating that the transactions:
- received the approval of our board of directors;
- are in accordance with the pricing policies as stated in our annual report;
- have been conducted in the manner as stated in (1)(b) above; and
- have not exceeded the upper limits as set forth in paragraph
(7) below;
(5) details of the transactions are disclosed to our independent shareholders who shall have voted in favor of an ordinary resolution to approve the connected transactions and the upper limits set out below at our extraordinary general meeting;
(6) China Mobile Communications Corporation has undertaken to us that our auditors will be granted access to such of its and its associates' accounting records for the purposes of reviewing the transactions mentioned above; and
(7) with respect to the following types of transactions entered into and to be entered into by us, the waiver was applied for and granted under the additional condition that they shall not exceed the relevant upper limits set out below in each of our fiscal years:
- payments payable by us (other than the eight regional mobile telecommunications companies we acquired in 2002), to subsidiaries of China Mobile Communications Corporation for collection service charges in any fiscal year shall not exceed 0.1% of our consolidated operating revenue in such year, and payment payable by us (other than the eight regional mobile telecommunications companies we acquired in 2002) to subsidiaries of China Mobile Communications Corporation for sales service charges in any fiscal year shall not exceed 0.3% of our consolidated operating revenue in such year;
- payments payable by us (other than the eight regional mobile telecommunications companies we acquired in 2002), to subsidiaries of China Mobile Communications Corporation for rental and property management fees in any fiscal year shall not exceed 0.56% of our consolidated operating revenue in such year;
- payments payable by us (other than the eight regional mobile telecommunications companies we acquired in 2002), to subsidiaries of China Mobile Communications Corporation for construction and related services in any fiscal year shall not exceed 0.25% of our consolidated operating revenue in such year;
- payments payable by us (other than the eight regional mobile telecommunications companies we acquired in 2002), to subsidiaries of China Mobile Communications Corporation for equipment maintenance and related services in any fiscal year shall not exceed 0.05% of our consolidated operating revenue in such year;
- payments payable by Hebei Mobile to the relevant subsidiaries of China Mobile Communications Corporation for purchase of transmission towers, transmission tower-related services and antenna maintenance services in any fiscal year shall not exceed 0.06% of our consolidated operating revenue in such year;
- handling charges received by us (other than the eight regional mobile telecommunications companies we acquired in 2002), from subsidiaries of China Mobile Communications Corporation in respect of prepaid services in 2003 shall not exceed 2% of our consolidated operating revenue in 2003 and in any fiscal years thereafter shall not exceed 1% of our consolidated operating revenue for such year, and handling charges paid by us to subsidiaries of China Mobile Communications Corporation in respect of prepaid services in 2003 shall not exceed 2% of our consolidated operating revenue in 2003 and in any fiscal years thereafter shall not exceed 1% of our consolidated operating revenue for such year;
- payments payable by each of us (other than the eight regional mobile telecommunications companies we acquired in 2002), and China Mobile Communications Corporation to Aspire in respect of platform development charges in any fiscal year shall not exceed 3% of our consolidated net tangible assets as of the end of such year;
- handling charges received by the eight regional mobile telecommunications companies we acquired in 2002 from the subsidiaries of China Mobile Communications Corporation in respect of prepaid services in any fiscal year shall not exceed 1% of our consolidated operating revenue in such year, and handling charges paid by the eight regional mobile telecommunications companies we acquired in 2002 to subsidiaries of China Mobile Communications Corporation in respect of prepaid services in any fiscal year shall not exceed 1% of our consolidated operating revenue in such year;
- payments in respect of telecommunications projects planning, design and construction services and telecommunications lines and pipelines construction services payable by the eight regional mobile telecommunications companies we acquired in 2002 to the subsidiaries of China Mobile Communications Corporation in any fiscal year shall not exceed 0.25% of our consolidated operating revenue in such year;
- telecommunications lines maintenance services payments payable by the eight regional mobile telecommunications companies we acquired in 2002 to the subsidiaries of China Mobile Communications Corporation in any fiscal year shall not exceed 0.04% of our consolidated operating revenue in such year;
- property leasing and property management services payments payable by the eight regional mobile telecommunications companies we acquired in 2002 to the subsidiaries of China Mobile Communications Corporation in any fiscal year shall not exceed 0.25% of our consolidated operating revenue in such year; and
- payments to Hubei Communication Services Company, a subsidiary of China Mobile Communications Corporation, by us in respect of the purchase of transmission towers and related services in any fiscal year shall not exceed 0.5% of our consolidated operating revenue in such year.
Our independent shareholders approved the connected transactions and the related upper limits at our extraordinary general meeting held on June 12, 2001, June 24, 2002 and May 15, 2003, respectively.
UNDERTAKING FROM CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation has undertaken that:
- it will extend its full support to our present operations and future development;
- we will be the only mobile telecommunications services company operating in Mainland China under China Mobile Communications Corporation's control that will be listed on any securities exchange in Hong Kong or outside China;
- to the extent within China Mobile Communications Corporation's control, we will be treated equally with any other mobile telecommunications operators in respect of all approvals, transactions and arrangements between us and China Mobile Communications Corporation and other mobile telecommunications entities controlled by China Mobile Communications Corporation;
- China Mobile Communications Corporation and the provincial entities under its control will not, directly or indirectly, participate in the operation of any mobile telecommunications services in any province in which we currently operate or may operate in the future; and
- in the provinces in which we operate, we will have the option to operate additional telecommunications services that fall within China Mobile Communications Corporation's scope of business (including the testing and commercial operation of services using new technologies), and we will have the right to acquire China Mobile Communications Corporation's interest in such services.
ITEM 8. FINANCIAL INFORMATION.
CONSOLIDATED FINANCIAL STATEMENTS
Our audited consolidated financial statements are set forth beginning on page F-1.
LEGAL PROCEEDINGS
We are not involved in any material litigation, arbitration or administrative proceedings, and, so far as we are aware, we do not have any pending or threatened litigation, arbitration or administrative proceeding that is expected to have a material effect on our financial conditions and results of operation.
POLICY ON DIVIDEND DISTRIBUTIONS
We hold in the highest regard the interests of our shareholders and the returns achieved for our shareholders, especially minority shareholders. Taking into account such factors as our business growth, financial position and cash flow, our board of directors is of the view that we have sufficient cash flow and financial strength to support our long-term development targets and to make a cash payout to shareholders. Having also considered the need to maintain sufficient financial resources and the capability to complete future acquisitions and investments in quality assets, as well as a possible share buyback under appropriate circumstances, with a view to generating the best possible return for shareholders, our board of directors recommended the first ever payment of a final dividend of HK$0.32 per share for the financial year ended December 31, 2002, representing a dividend payout ratio of 20%. We will endeavor to achieve a sustainable, steadily increasing dividend, with a view to generating the best possible return for shareholders.
ITEM 9. THE OFFER AND LISTING.
In connection with our initial public offering, our American depositary shares, or ADSs, each representing twenty ordinary shares, were listed and commenced trading on the New York Stock Exchange on October 22, 1997 under the symbol "CHL". Effective from July 5, 2000, our ADS-to-share ratio has been changed to one-to-five. Our shares were listed and commenced trading on the Hong Kong Stock Exchange on October 23, 1997. Prior to these listings, there was no public market for our equity securities. The New York Stock Exchange and the Hong Kong Stock Exchange are the principal trading markets for our ADSs and ordinary shares, which are not listed on any other exchanges in or outside the United States.
As of December 31, 2002 and May 31, 2003, there were 19,671,653,899 and 19,671,653,899, respectively, ordinary shares issued and outstanding. As of December 31, 2002 and May 31, 2003, there were, respectively, 110 and 111 registered holders of American depositary receipts evidencing 37,049,168 and 41,474,619 ADSs. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons. The depositary for the ADSs is The Bank of New York.
The high and low closing sale prices of the shares on the Hong Kong Stock Exchange and of the ADSs on the NYSE for the periods indicated are as follows. The information for periods prior to July 2000 has been restated to reflect the change in our ADS-to-share ratio from one-to-twenty to one-to-five, which became effective on July 5, 2000.
PRICE PER SHARE (HK$) PRICE PER ADS (US$)
------------------------ -------------------------
HIGH LOW HIGH LOW
---- --- ---- ----
1998.................................... 16.25 8.90 10.66 5.73
1999.................................... 48.60 12.60 32.16 8.09
2000.................................... 79.00 40.30 50.73 25.94
2001
First Quarter..................... 50.50 33.30 33.00 21.45
Second Quarter.................... 42.70 29.70 27.45 19.50
Third Quarter..................... 42.30 19.40 26.99 13.19
Fourth Quarter.................... 29.95 21.30 19.03 13.76
2002
First Quarter..................... 28.40 21.50 17.87 13.60
Second Quarter.................... 27.30 22.35 17.61 14.25
Third Quarter..................... 23.55 17.80 15.25 11.30
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PRICE PER SHARE (HK$) PRICE PER ADS (US$)
------------------------ -------------------------
HIGH LOW HIGH LOW
---- --- ---- ----
Fourth Quarter.................... 21.75 18.20 13.81 11.65
2002
November.......................... 21.15 18.95 13.65 12.15
December.......................... 21.75 18.50 13.81 11.80
2003
January........................... 20.10 18.40 12.88 11.56
February.......................... 18.30 16.80 11.90 10.94
March............................. 17.35 15.45 11.28 9.85
April............................. 16.35 14.85 10.34 9.30
May............................... 17.95 15.85 11.71 9.90
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ITEM 10. ADDITIONAL INFORMATION.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Under Section 3 of our Memorandum of Association, we have the capacity and the rights, powers and privileges of a natural person and, in addition and without limit, we may do anything which it is permitted or required to do by any enactment or rule of law.
DIRECTORS
MATERIAL INTERESTS. A director who is in any way directly or indirectly interested in a contract or proposed contract with us shall declare the nature of his interest in accordance with the provisions of the Companies Ordinance (Chapter 32) of Hong Kong and the Articles of Association. A director shall not vote, or be counted in the quorum, on any resolution of the board in respect of any contract or arrangement or proposal in which he is, to his knowledge, materially interested, and if he shall do so his vote shall not be counted or counted in the quorum for that resolution. The above prohibition shall not apply to any contract, arrangement or proposal:
- for the giving by us of any security or indemnity to the director in respect of money lent or obligations incurred or undertaken by him at the request of, or for, our or any of our subsidiaries' benefit;
- for the giving by us of any security to a third party in respect of our or any of our subsidiaries' debt or obligation for which the director has himself assumed responsibility or guaranteed or secured in whole or in part whether alone or jointly;
- concerning an offer of the shares or debentures or other securities of or by us or any other company which we may promote or be interested in for subscription or purchase where the director is, or is to be, interested as a participant in the underwriting or sub-underwriting of the offer;
- in which the director is interested in the same manner as other holders of our shares or debentures or other securities by virtue only of his interest in our shares or debentures or other securities;
- concerning any other company in which the director is interested, directly or indirectly, as an officer or a shareholder or in which the director is beneficially interested in shares of that company other than a company in which the director, together with any of his associates, is beneficially interested in five percent or more of the issued share of any class of the equity share capital of such company (or of any third company through which his interest is derived) or of the voting rights;
- for the benefit of our or any of our subsidiaries' employees, including the adoption, modification or operation of a pension fund or retirement, death or disability benefit scheme which relates to both our, or any of our subsidiaries', directors and employees and does not give the director any privilege not generally accorded to the class of persons to whom such scheme or fund relates; and
- concerning the adoption, modification or operation of any employees' share scheme involving the issue or grant of options over shares or other securities by us to, or for the benefit of, our or any of our subsidiaries' employees under which the director may benefit.
COMPENSATION AND PENSION. The directors are entitled to receive by way of remuneration for their services such sum as we may determine from time to time in general meeting. The directors are also entitled to be repaid their reasonable traveling, hotel and other expenses incurred by them in or about the performance of their duties as directors. The directors may award special remuneration out of our funds, by way of salary, commission or otherwise as the directors may determine, to any director who performs services which, in the opinion of the directors, are outside the scope of the ordinary duties of a director.
The board may establish and maintain any contributory or
non-contributory pension or superannuation funds for the benefit of, or give
donations, gratuities, pensions, allowances or emoluments to any persons (1) who
are or were at any time in employment or service of our company (or any of our
subsidiaries) or are allied or associated with us or any of our subsidiaries, or
(2) who are or were at any time our (or any of our subsidiaries') directors or
officers, and who are holding or have held any salaried employment or office in
our company or any of our subsidiaries, and the wives, widows, families and
dependants of any of these persons. Any director holding any such employment or
office is entitled to participate in, and retain for his own benefit, any such
donation, gratuity, pension, allowance or emolument.
BORROWING POWERS. The directors may exercise all the powers of our company to borrow money and to mortgage or charge all or any part of our undertaking, property and assets (present and future) and uncalled capital and to issue debentures, debenture stocks, bonds and other securities, whether outright or as collateral security for the debt, liability or obligation of our company or any third party.
QUALIFICATION; RETIREMENT. A director need not hold any of our shares to qualify as a director. There is no age limit requirement for a director's retirement or non-retirement.
At each annual general meeting, one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office by rotation except for any director holding office as chairman or chief executive officer. The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day shall be determined by lot unless they otherwise agree between themselves. The retiring directors shall be eligible for re-election.
RIGHTS ATTACHING TO ORDINARY SHARES
The section entitled "Description of Share Capital" in our Registration Statement on Form F-3 (File No. 333-47256), as filed with the Securities and Exchange Commission on October 30, 2000, is incorporated by reference into this annual report.
Pursuant to ordinary resolutions passed at our extraordinary general meeting held on November 10, 2000, our authorized share capital was increased, by the creation of an additional 14,000,000,000 ordinary shares of HK$ 0.10 each, which rank pari passu with the existing ordinary shares, to a total of HK$ 3,000,000,000 divided into 30,000,000,000 ordinary shares.
ANNUAL GENERAL MEETINGS AND EXTRAORDINARY GENERAL MEETINGS
We must hold, in each year, a general meeting as our annual general meeting in addition to any other meetings in that year. The annual general meeting must be held at such time (which shall be within a period of not
more than 15 months, or such longer period as the Registrar of Companies may authorize in writing, after the holding of the last preceding annual general meeting) and place as may be determined by the directors. All other general meetings are extraordinary meetings. The directors may proceed to convene an extraordinary general meeting whenever they think fit, in accordance with the Companies Ordinance.
In general, an annual general meeting and a meeting called for the passing of a special resolution shall be called by not less than 21 days' notice in writing, and any other general meeting shall be called by not less than 14 days' notice in writing. The notice must specify the place, date and time of the meeting and, in the case of special business, the general nature of that business.
MISCELLANEOUS
We keep our share register with our share registrar, which is Hong Kong Registrars Limited, Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong. In addition, we also file certain documents with the Registrar of Companies, Hong Kong, China, in accordance with the requirements of the Companies Ordinance. Our company number is 622909.
MATERIAL CONTRACTS
See "Item 7. Major Shareholders and Related Party Transactions -- Related Party Transactions" for certain arrangements we have entered into with China Mobile Communications Corporation.
INTERCONNECTION ARRANGEMENTS
Each of our operating subsidiaries has entered into an interconnection agreement with fixed line operators in its network area. A large portion of calls on our networks involve interconnection with the fixed line networks. The economic terms of the interconnection arrangements are described under "Item 4. Information on the Company -- Business Overview -- Interconnection".
ASPIRE BUSINESS ALLIANCE WITH VODAFONE
In addition, on January 9, 2002, Vodafone Americas Asia Inc., a subsidiary of Vodafone, and Aspire entered into a business alliance agreement under which Aspire will engage Vodafone Global Platform and Internet Services, a unit of Vodafone Americas Asia Inc., as a preferred provider of wireless data applications software in relation to the Aspire Mobile Information Service Center Platform, provided that software supplied to Aspire has at least equivalent technical specifications on the same or better commercial terms. Aspire and Vodafone Global Platform and Internet Services also agreed to use their reasonable efforts to coordinate the development of their respective wireless data platforms with the intention of providing a seamless delivery of wireless data services for their respective customers and enabling content and application providers to use a single application programming interface.
EXCHANGE CONTROLS
The Renminbi currently is not a freely convertible currency. The State Administration of Foreign Exchange, under the authority of the People's Bank of China, controls the conversion of Renminbi into foreign currency. Prior to January 1, 1994, Renminbi could be converted to foreign currency through the Bank of China or other authorized institutions at official rates fixed daily by the State Administration of Foreign Exchange. Renminbi could also be converted at swap centers open to Chinese enterprises and foreign invested enterprises, subject to State Administration of Foreign Exchange approval of each foreign currency trade, at exchange rates negotiated by the parties for each transaction. In the year ended December 31, 1993, as much as 80% by value of all foreign exchange transactions in China took place through the swap centers. The exchange rate quoted by the Bank of China differed substantially from that available in the swap centers. Effective January 1, 1994, a unitary exchange rate system was introduced in China, replacing the dual-rate system previously in effect. In connection with the creation of a unitary exchange system, the China Foreign Exchange Trading System inter-bank foreign exchange market was established. Under the unitary foreign exchange system, People's Bank of China sets daily exchange rates for conversion of
Renminbi into U.S. dollars and other currencies based on the China Foreign Exchange Trading System interbank market rates, and the Bank of China and other authorized banks may engage in foreign exchange transactions at rates that vary within a prescribed range above or below rates set by the People's Bank of China.
In the event of shortages of foreign currencies, we may be unable to convert sufficient Renminbi into foreign currency to meet its foreign currency obligations or to pay dividends in foreign currency.
The value of the Renminbi is subject to changes in Chinese government policies and to international economic and political developments. During the few years prior to 1994, the Renminbi experienced a devaluation against most major currencies, and a devaluation of approximately 50% of the Renminbi against the U.S. dollar occurred on January 3, 1994 in connection with the adoption of the new unitary exchange rate system. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. dollars has been stable, and the Renminbi has appreciated slightly against U.S. dollars. Any future devaluation of the Renminbi would increase our effective cost of foreign manufactured equipment or components, and of satisfying any other foreign currency denominated liabilities. In addition, any such devaluation would reduce the U.S. dollar value of any dividends declared in Renminbi. During 2001 and 2002, the Renminbi has remained stable against the U.S. dollar.
There are no limitations on the right of non-resident or foreign owners to remit dividends or to hold or vote the ordinary shares or the ADSs imposed by Hong Kong law or by our memorandum and articles of association or other constituent documents.
TAXATION -- HONG KONG
The taxation of income and capital gains of holders of ordinary shares or ADSs is subject to the laws and practices of Hong Kong and of jurisdictions in which holders of ordinary shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions under Hong Kong law is based on current law and practice, is subject to changes therein and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the ordinary shares or ADSs. Accordingly, each prospective investor (particularly those subject to special tax rules, such as banks, dealers, insurance companies, tax-exempt entities and holders of 10% or more of our voting capital stock) should consult its own tax advisor regarding the tax consequences of an investment in the ordinary shares and ADSs. The discussion is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. There is no reciprocal tax treaty in effect between Hong Kong and the United States.
TAX ON DIVIDENDS
Under the current practices of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of dividends paid by us unless such dividends are attributable to a trade, profession or business carried on in Hong Kong.
PROFITS TAX
No tax is imposed in Hong Kong in respect of capital gains from the sale of property (such as the ordinary shares and ADSs). Trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16% on corporations and at a maximum rate of 15% on individuals. Gains from sales of the ordinary shares effected on the Hong Kong Stock Exchange may be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax may thus arise in respect of trading gains from sales of ordinary shares or ADSs realized by persons carrying on a business or trading or dealing in securities in Hong Kong.
STAMP DUTY
Hong Kong stamp duty, currently charged at the rate of HK$ 1 per HK$ 1,000 or part thereof on the higher of the consideration for or the value of the ordinary shares, will be payable by the purchaser on every purchase
and by the seller on every sale of ordinary shares (i.e., a total of HK$ 2 per HK$ 1,000 or part thereof is currently payable on a typical sale and purchase transaction involving ordinary shares). In addition, a fixed duty of HK$ 5 is currently payable on any instrument of transfer of ordinary shares. The withdrawal of ordinary shares upon the surrender of ADSs, and the issuance of ADSs upon the deposit of ordinary shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless the withdrawal or deposit does not result in a change in the beneficial ownership of the ordinary shares under Hong Kong law, in which case only a fixed duty of HK$ 5 is payable on the transfer. The issuance of the ADSs upon the deposit of ordinary shares issued directly to the depositary or for the account of the depositary does not attract stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong.
ESTATE DUTY
The ordinary shares are Hong Kong property under Hong Kong law, and accordingly such ordinary shares may be subject to estate duty on the death of the beneficial owner of the ordinary shares (regardless of the place of the owner's residence, citizenship or domicile). Hong Kong estate duty is currently imposed on a progressive scale from 5% to 15%. The rate of and the threshold for estate duty has, in the past, been adjusted on a fairly regular basis. No estate duty is payable when the aggregate value of the dutiable estate does not exceed HK$ 7.5 million, and the maximum rate of duty of 15% applies when the aggregate value of the dutiable estate exceeds HK$ 10.5 million.
TAXATION -- UNITED STATES FEDERAL INCOME TAXATION
This section describes the material United States Federal income tax consequences of the ownership and disposition of our shares or ADSs. This section applies to you only if you hold your shares or ADSs as capital assets for United States Federal income tax purposes. This section does not discuss special rules that may apply to you if you are a member of a special class of holders subject to special rules, including:
- a dealer in securities;
- a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
- a tax-exempt organization;
- a life insurance company;
- a person liable for alternative minimum tax;
- a person that actually or constructively owns 10% or more of our voting stock;
- a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction; or
- a person whose functional currency is not the U.S. dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.
You are a U.S. holder if you are a beneficial owner of shares or ADSs and you are:
- a citizen or resident of the United States;
- a domestic corporation;
- an estate whose income is subject to United States Federal income tax regardless of its source; or
- a trust if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust.
You should consult your own tax advisor regarding the United States Federal, state and local and other tax consequences of owning and disposing of shares or ADSs in your particular circumstances.
In general, and taking into account the earlier assumptions, for United States Federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to the United States Federal income tax.
TAXATION OF DIVIDENDS
Under the United States Federal income tax laws, and subject to the passive foreign investment company, or PFIC, rules discussed below, if you are a U.S. holder, the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for United States Federal income tax purposes) is subject to United States Federal taxation. If you are a noncorporate U.S. holder, dividends paid to you after December 31, 2002 and before January 1, 2009 that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15% provided that you hold the shares or ADSs for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date and meet other holding period requirements, dividends we pay with respect to the shares or ADSs will be qualified dividend income provided that, in the year that you receive the dividend, the shares or ADSs are readily tradable on an established securities market in the United States.
The dividend is taxable to you when you, in the case of shares, or the Depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income will be the U.S. dollar value of the Hong Kong dollar payments made, determined at the spot Hong Kong dollar/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. This gain or loss generally will be from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits (as determined for United States Federal income tax purposes) will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain. Dividends will be income from sources outside the United States, but generally will be "passive income" or "financial services income", which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.
TAXATION OF CAPITAL GAINS
Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for United States Federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a noncorporate U.S. holder that is recognized on or after May 6, 2003 and before January 1, 2009 is generally taxed at a maximum rate of 15% where the property is held more than one year. The deductibility of capital losses is subject to limitations. The gain or loss will generally be from sources within the United States for foreign tax credit limitation purposes.
PFIC RULES
We believe that shares or ADSs should not be treated as stock of a PFIC for United States Federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to
change. In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our shares or ADSs:
- at least 75% of our gross income for the taxable year is passive income; or
- at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.
Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation's income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will be subject to special rules with respect to:
- any gain you realize on the sale or other disposition of your shares or ADSs; and
- any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the shares or ADSs during the three preceding taxable years or, if shorter, your holding period for the shares or ADSs).
Under these rules:
- the gain or excess distribution will be allocated ratably over your holding period for the shares or ADSs;
- the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income;
- the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and
- the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
If you own shares or ADSs in a PFIC that are treated as marketable stock, you may make a mark-to-market election. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your shares or ADSs at the end of the taxable year over your adjusted basis in your shares or ADSs. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income on long-term capital gains. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your basis in the shares or ADSs will be adjusted to reflect any such income or loss amounts.
In addition, notwithstanding any election you make with regard to the shares or ADSs, dividends that you receive from us will not constitute qualified dividend income to you if we are a PFIC either in the taxable year of the distribution or the preceding are not eligible for taxation at the 15% maximum rate applicable to qualified dividend income, Instead, you must include the gross amount of any such dividend paid by us out of our accumulated earnings and profits (as determined for Untied States federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to ordinary income.
If you own shares or ADSs during any year that we are a PFIC, you must file Internal Revenue Service
Form 8621.
DOCUMENTS ON DISPLAY
You may read and copy documents referred to in this annual report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission at the SEC's public reference room located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.
The SEC allows us to "incorporate by reference" the information we file with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form 20-F.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to market rate risks due to fluctuations in interest rates. The majority of our debt is in the form of long-term, fixed- and variable-rate bank and other loans with original maturities ranging from one to fifteen years. Accordingly, fluctuations in interest rates can lead to significant fluctuations in the fair value of these debt instruments. From time to time, we may enter into interest rate swap agreements designed to mitigate our exposure to interest rate risks, although we did not consider it necessary to do so in 2002.
We are also exposed to foreign currency risk as a result of our telecommunications equipment being sourced substantially from overseas suppliers. Specifically, our foreign currency exposure relates primarily to our foreign currency-denominated short-term and long-term debt, our firm purchase commitments and, to a limited extent, cash and cash equivalents denominated in foreign currencies. We may, from time to time, enter into currency swap agreements and foreign exchange forward contracts designed to mitigate our exposure to foreign currency risks, although we did not consider this to be necessary in 2002. Our foreign currency hedging activity generally is expected to be limited to hedging of specific future commitments and long-term debt denominated in foreign currencies.
The following table provides information regarding our interest rate-sensitive financial instruments, which consist of fixed and variable rate short-term and long-term debt obligations, as of December 31, 2002 and 2001.
AS OF DECEMBER 31, AS OF DECEMBER 31,
EXPECTED MATURITY DATE 2002 2001
------------------------------------------------------ ------------------ -----------------
TOTAL TOTAL
RECORDED FAIR RECORDED FAIR
2003 2004 2005 2006 2007 THEREAFTER AMOUNT VALUE AMOUNT VALUE
---- ---- ---- ---- ---- ---------- ------ ----- ------ -----
(RMB EQUIVALENT IN MILLIONS, EXCEPT INTEREST RATES)
Debt:
Obligations under
capital leases........... 68 - - - - - 68 68 1,720 1,733
Average interest rate.... 4.96% - - - - - 4.96% - 5.22% -
Fixed rate bank and
other loans.............. 4,562 145 62 - - - 4,769 4,762 5,472 5,553
Average interest rate.... 4.80% 6.56% 5.29% - - - 4.86% - 6.01% -
Variable rate bank and
other loans.............. 3,570 11,479 880 40 40 30 16,039 16,039 4,986 4,986
Average interest rate.... 5.05% 3.84% 5.36% 5.76% 5.76% 5.76% 5.05% - 5.67% -
Fixed rate notes........... - 4,961 - - - - 4,961 5,418 4,956 5,375
Average interest rate.... - 7.88% - - - - 7.88% - 7.88% -
Convertible notes.......... - - 5,711 - - - 5,711 5,576 5,708 5,400
Average interest rate.... - - 2.25% - - - 2.25% - 2.25% -
Bonds...................... - - - - 3,000 10,000 13,000 13,309 5,000 5,045
Average interest rate.... - - - - 3.50% 4.18% 4.03% - 4.00% -
Deferred payable........... - - - - - 15,176 15,176 15,176 - -
Average interest rate.... - - - - - 3.80% 3.80% - - -
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The following table provides information regarding our foreign currency-sensitive financial instruments and transactions, which consist of deposits with banks, cash and cash equivalents, short and long-term debt obligations and capital commitments as of December 31, 2002 and 2001.
AS OF DECEMBER 31, AS OF DECEMBER 31,
EXPECTED MATURITY DATE 2002 2001
------------------------------------------------------ ------------------ ------------------
TOTAL TOTAL
RECORDED FAIR RECORDED FAIR
2003 2004 2005 2006 2007 THEREAFTER AMOUNT VALUE AMOUNT VALUE
---- ---- ---- ---- ---- ---------- ------ ----- ------ -----
(RMB EQUIVALENT IN MILLIONS, EXCEPT INTEREST RATES)
On-balance sheet financial
instruments:
Deposits with banks:
in U.S. dollars............. 539 - - - - - 539 539 2,604 2,604
in Hong Kong dollars........ 132 - - - - - 132 132 130 130
Cash and cash equivalents:
in U.S. dollars............. 2,574 - - - - - 2,574 2,574 2,505 2,505
in Hong Kong dollars........ 767 - - - - - 767 767 1,068 1,068
Debts:
Fixed rate bank and other
loans (U.S. dollar)......... 230 144 62 - - - 436 446 413 436
Average interest rate... 6.88% 6.56% 5.29% - - - 6.55% - 7.50% -
Variable rate bank and other
loans (U.S.dollar)(1)....... 69 - - - - - 69 69 79 79
Average interest rate..... 3.68% - - - - - 3.68% - 7.58% -
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AS OF DECEMBER 31, AS OF DECEMBER 31,
EXPECTED MATURITY DATE 2002 2001
------------------------------------------------------ ------------------ -----------------
TOTAL TOTAL
RECORDED FAIR RECORDED FAIR
2003 2004 2005 2006 2007 THEREAFTER AMOUNT VALUE AMOUNT VALUE
---- ---- ---- ---- ---- ---------- ------ ----- ------ -----
(RMB EQUIVALENT IN MILLIONS, EXCEPT INTEREST RATES)
Fixed rate notes (U.S.
dollar)..................... - 4,961 - - - - 4,961 5,418 4,956 5,375
Average interest rate..... - 7.88% - - - - 7.88% - 7.88% -
Convertible notes (U.S.
dollar)..................... - - 5,711 - - - 5,711 5,576 5,708 5,400
Average interest rate..... - - 2.25% - - - 2.25% - 2.25% -
Deferred payable(2)........... - - - - - 15,176 15,176 15,176 - -
Average interest rate..... - - - - - 3.80% 3.80% - - -
Off-balance sheet commitments
Capital commitments
authorized and contracted
for in U.S. dollar.......... 48 - - - - - 48 48 469 469
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(2) Pursuant to our agreement with China Mobile Communications Corporation and China Mobile Hong Kong (BVI) Limited for our acquisition of the eight regional mobile telecommunications companies in July 2002, we have the option to pay the deferred payable in either U.S. dollars, Hong Kong dollars or Renminbi.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
Not Applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHT OF SECURITY HOLDERS AND USE OF PROCEEDS.
None.
ITEM 15. CONTROLS AND PROCEDURES.
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended) within 90 days of the date of this Form 20-F, have concluded that, as of such date, the Company's disclosure controls and procedures were effective to ensure that material information relating to the Company was made known to them by others within the Company particularly during the period in which this Form 20-F was being prepared.
There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date our Chief Executive Officer and Chief Financial Officer completed their evaluation, nor were there any significant deficiencies or material weaknesses in the Company's internal controls requiring corrective actions.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 16B. CODE OF ETHICS.
Not applicable.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEM 16. Not applicable.
ITEM 17. FINANCIAL STATEMENTS.
The Company has elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.
ITEM 18. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this annual report.
CHINA MOBILE (HONG KONG) LIMITED:
Index to consolidated financial statements.................................................... F-1
Independent auditors' report.................................................................. F-2
Consolidated statements of income for each of the three years ended December 31,
2000, 2001 and 2002...................................................................... F-3
Consolidated balance sheets for each of the three years ended December 31, 2000,
2001 and 2002............................................................................ F-5
Consolidated statements of cash flows for each of the three years ended
December 31, 2000, 2001 and 2002......................................................... F-7
Consolidated statements of shareholders' equity for each of the three years ended
December 31, 2000, 2001 and 2002......................................................... F-11
Notes to the accounts......................................................................... F-12
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ITEM 19. EXHIBITS.
(a) See Item 18 for a list of the financial statements filed as part of this annual report.
(b) Exhibits to this annual report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
1.1 Memorandum and Articles of Association (as amended).(6)
2.1 We agree to provide the Securities and Exchange Commission, upon request, copies of instruments
defining the rights of holders of our long-term debt.
2.2 Guarantee from China Mobile Communications Corporation for the RMB 5 billion guaranteed bonds due
2011 issued by Guangdong Mobile.(6)
2.3 Letter of Guarantee from China Mobile Communications Corporation for the RMB 3 billion guaranteed
bonds due 2007 and RMB 5 billion guaranteed bonds due 2017, both issued by Guangdong Mobile in
2002 (with English translation).
4.1 Trademark License Agreement, dated July 18, 2002, between China Mobile Communications Corporation
and China Mobile (Hong Kong) Limited (with English translation).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.2 Tax Indemnity dated July 1, 2002 between China Mobile Hong Kong (BVI) Limited, China Mobile (Hong
Kong) Limited and China Mobile Communications Corporation.
4.3 Amendment Letter dated June 18, 2002 between China Mobile (Hong Kong) Limited, Vodafone Group Plc
and Vodafone Holdings.
4.4 Supplemental Agreement relating to Frequency Spectrum/Numbering Resources Usage Agreement, Sharing
Agreement of Inter-provincial Long Distance Transmission Line Leasing Fee, Inter-provincial
Interconnection and Domestic and International Roaming Settlement Agreement, Agreement on
"Shenzhouxing" Roaming Settlement and Sharing of Revenue From Sales of Top-Off Cards From Network
Operators Other Than Their Home Network Operators, and Supplemental Agreement to Agreement on
"Shenzhouxing" Roaming Settlement and Sharing of Revenue from Sales And Value-Adding of Top-Off
Cards from Network Operators Other Than Their Home Network Operators dated April 29, 2002 between
China Mobile Communications Corporation, China Mobile (Hong Kong) Limited and the eight regional
mobile communications companies (Anhui Mobile Communication Company Limited, Jiangxi Mobile
Communication Company Limited, Chongqing Mobile Communication Company Limited, Sichuan Mobile
Communication Company Limited, Hubei Mobile Communication Company Limited, Hunan Mobile
Communication Company Limited, Shaanxi Mobile Communication Company Limited, and Shanxi Mobile
Communication Company Limited) (with English translation).
4.5 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Anhui
Mobile Communication Company Limited and Anhui Communication Service Company (with English
translation).
4.6 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Jiangxi Mobile Communication Company Limited and Jiangxi Communication Service Company (with
English translation).
4.7 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Chongqing Mobile Communication Company Limited and Chongqing Communication Service Company (with
English translation).
4.8 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Sichuan Mobile Communication Company Limited and Sichuan Communication Service Company (with
English translation).
4.9 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Hubei
Mobile Communication Company Limited and Hubei Communication Service Company (with English
translation).
4.10 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Hunan
Mobile Communication Company Limited and Hunan Communication Service Company (with English
translation).
4.11 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Shaanxi Mobile Communication Company Limited and Shaanxi Communication Service Company (with
English translation).
4.12 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Shanxi
Mobile Communication Company Limited and Shanxi Communication Service Company (with English
translation).
4.13 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Anhui Mobile
Communication Company Limited and Anhui Communication Service Company (with English translation).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.14 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Jiangxi Mobile
Communication Company Limited and Jiangxi Communication Service Company (with English
translation).
4.15 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Chongqing
Mobile Communication Company Limited and Chongqing Communication Service Company (with English
translation).
4.16 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Sichuan Mobile
Communication Company Limited and Sichuan Communication Service Company (with English
translation).
4.17 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Hubei Mobile
Communication Company Limited and Hubei Communication Service Company (with English translation).
4.18 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Hunan Mobile
Communication Company Limited and Hunan Communication Service Company (with English translation).
4.19 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Shaanxi Mobile
Communication Company Limited and Shaanxi Communication Service Company (with English
translation).
4.20 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Shanxi Mobile
Communication Company Limited and Shanxi Communication Service Company (with English translation).
4.21 Telecommunications Services Agreement dated April 10, 2002 between Anhui Mobile Communication
Company Limited and Anhui Communication Service Company (with English translation).
4.22 Telecommunications Services Agreement dated April 10, 2002 between Jiangxi Mobile Communication
Company Limited and Jiangxi Communication Service Company (with English translation).
4.23 Telecommunications Services Agreement dated April 10, 2002 between Chongqing Mobile Communication
Company Limited and Chongqing Communication Service Company (with English translation).
4.24 Telecommunications Services Agreement dated April 27, 2002 between Sichuan Mobile Communication
Company Limited and Sichuan Communication Service Company (with English translation).
4.25 Telecommunications Services Agreement dated April 10, 2002 between Hubei Mobile Communication
Company Limited and Hubei Communication Service Company (with English translation).
4.26 Telecommunications Services Agreement dated April 10, 2002 between Hunan Mobile Communication
Company Limited and Hunan Communication Service Company (with English translation).
4.27 Telecommunications Services Agreement dated April 10, 2002 between Shaanxi Mobile Communication
Company Limited and Shaanxi Communication Service Company (with English translation).
4.28 Telecommunications Services Agreement dated April 10, 2002 between Shanxi Mobile Communication
Company Limited and Shanxi Communication Service Company (with English translation).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.29 Service Agreement for Supply Installation and Maintenance of Steel Towers dated May 8, 2002
between China Mobile (Hong Kong) Limited and Hubei Communication Services Company (with English
translation).
4.30 Co-operation Framework Agreement in respect of Indirect Loan dated May 10, 2002 between China
Mobile Communications Corporation and China Mobile (Hong Kong) Limited (with English translation).
4.31 Trademark License Agreement, dated April 24, 2002, between China Mobile Communications Corporation
and China Mobile (Hong Kong) Limited. (7)
4.32 Conditional Sale and Purchase Agreement, dated May 16, 2002, among China Mobile Hong Kong (BVI)
Limited, China Mobile (Hong Kong) Limited and China Mobile Communications Corporation.(7)
4.33 Subscription Agreement, dated May 16, 2002, among Vodafone Group Plc, Vodafone Holdings (Jersey)
Limited and China Mobile (Hong Kong) Limited. (7)
4.34 Prepaid services agreement dated May 11, 2001, between China Mobile (Hong Kong) Limited and China
Mobile Communications Corporation.(6)
4.35 Inter-Provincial Long-Distance Transmission Leased Line Fee Sharing Agreement, dated May 5, 2000,
between China Mobile Communications Corporation and China Telecom (Hong Kong) Limited. (4)
4.36 Inter-Provincial Network Interconnection, Domestic and International Roaming and Settlement
Agreement, dated May 5, 2000, between China Mobile Communications Corporation and China Telecom
(Hong Kong) Limited. (4)
4.37 Tenancy Agreement, dated June 7, 2000, between Fu Hao Properties Limited and China Telecom (Hong
Kong) Limited.(4)
4.38 Agreement Regarding the Roaming Settlement of "Shenzhouxing" Prepaid Services "Shenzhouxing" and
Revenues Sharing for Sales of Stored Value for Stored Value Cards, dated October 4, 2000, between
China Mobile Communications Corporation and China Mobile (Hong Kong) Limited.(1)
4.39 Contract on Termination of the Trademark Licensing, dated September 15, 2000, between China
Telecommunications Corporation and China Mobile (Hong Kong) Limited.(1)
4.40 Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
Mobile and Beijing Communications Service Company ("Beijing Service").(1)
4.41 Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
Mobile and Beijing Service.(1)
4.42 Agreement on Mobile Communications Equipment Maintenance and Modulation, dated September 18, 2000,
between Beijing Mobile and Beijing Huarui Wireless Communications Equipment Installation Company
("Beijing Huarui").(1)
4.43 Agreement on Communications Projects Design and Construction, dated September 18, 2000, between
Beijing Mobile and Beijing Huarui.(1)
4.44 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Beijing Mobile and Beijing Service.(1)
4.45 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Beijing Mobile and Beijing Service.(1)
4.46 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Beijing Mobile and Beijing Service.(1)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.47 Agreement on Mobile Communications Equipment Maintenance, dated September 20, 2000, between
Shanghai Mobile and Shanghai Long-distance Telecommunications Engineering Company ("Shanghai
Engineering").(1)
4.48 Agreement on Contracting Mobile Communications Projects, dated September 20, 2000, between
Shanghai Mobile and Shanghai Engineering.(1)
4.49 Building Leasing and Property Management Agreement, dated September 20, 2000, between Shanghai
Mobile and Shanghai Communications Service Company ("Shanghai Service").(1)
4.50 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Shanghai Mobile and Shanghai Service.(1)
4.51 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Shanghai Mobile and Shanghai Service.(1)
4.52 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Shanghai Mobile and Shanghai Service.(1)
4.53 Building Leasing Agreement, dated August 1, 2000, between Tianjin Mobile and Tianjin
Communications Service Company ("Tianjin Service").(1)
4.54 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Tianjin Mobile and Tianjin Service.(1)
4.55 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Tianjin Mobile and Tianjin Service.(1)
4.56 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Tianjin Mobile and Tianjin Service.(1)
4.57 Building Leasing and Property Management Agreement, dated August 1, 2000, between Hebei Mobile and
Hebei Communications Service Company ("Hebei Service").(1)
4.58 Agreement on the Sales and Maintenance of Masts and Maintenance of Antennas and Feeder Lines,
dated August 1, 2000, between Hebei Mobile and Hebei Provincial Posts and Telecommunications
Equipment and Machinery Plant.(1)
4.59 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Hebei Mobile and Hebei Service.(1)
4.60 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Hebei Mobile and Hebei Service.(1)
4.61 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Hebei Mobile and Hebei Service.(1)
4.62 Building Leasing and Property Management Agreement, dated August 10, 2000, between Liaoning Mobile
and Liaoning Communications Service Company ("Liaoning Service").(1)
4.63 Agreement on Communications Equipment Maintenance, dated September 8, 2000, between Liaoning
Mobile and Liaoning Provincial Posts and Telecommunications Engineering Bureau ("Liaoning
Engineering").(1)
4.64 Agreement on Mobile Communications Projects Construction, dated September 8, 2000, between
Liaoning Mobile and Liaoning Engineering.(1)
4.65 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Liaoning Mobile and Liaoning Service.(1)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.66 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Liaoning Mobile and Liaoning Service.(1)
4.67 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Liaoning Mobile and Liaoning Service.(1)
4.68 Building Leasing and Property Management Agreement, dated September 1, 2000, between Shandong
Mobile and Shandong Communications Service Company ("Shandong Service").(1)
4.69 Agreement on Contracting Mobile Communications Projects, dated September 1, 2000, between Shandong
Mobile and Shandong Mobile Communications Engineering Bureau.(1)
4.70 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Shandong Mobile and Shandong Service. (1)
4.71 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Shandong Mobile and Shandong Service. (1)
4.72 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Shandong Mobile and Shandong Service.(1)
4.73 Building Lease Agreement, dated August 26, 2000, between Guangxi Mobile and Guangxi Communications
Service Company ("Guangxi Service").(1)
4.74 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Guangxi Mobile and Guangxi Service.(1)
4.75 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Guangxi Mobile and Guangxi Service.(1)
4.76 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Guangxi Mobile and Guangxi Service.(1)
4.77 Strategic Investor Placing Agreement among China Mobile (Hong Kong) Limited, Vodafone Group Plc,
China International Capital Corporation, Goldman Sachs (Asia) L.L.C. and Merrill Lynch Far East
Limited.(1)
4.78 Syndicated loan agreement for RMB 7,500,000,000 among China Mobile (Shenzhen) Limited,
Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank of China,
Industrial and Commercial Bank of China, Bank of Communications, Hong Kong and Shanghai Banking
Corporation Ltd., China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated
October 7, 2000.(1)
4.79 Syndicated loan agreement for RMB 5,000,000,000 among China Mobile (Shenzhen) Limited,
Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank of China,
Industrial and Commercial Bank of China, Bank of Communications, Hong Kong & Shanghai Banking
Corporation Ltd., China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated
October 7, 2000.(1)
4.80 Conditional Sale and Purchase Agreement, dated October 4, 2000, among China Mobile Communications
Corporation, China Mobile Hong Kong (BVI) Limited and China Mobile (Hong Kong) Limited.(1)
4.81 Conditional Sale and Purchase Agreement, dated October 4, 1999, among China Telecom Hong Kong
(BVI) Limited, China Telecom (Hong Kong) Group Limited and China Telecom (Hong Kong) Limited.(2)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.82 Agreement Regarding Provincial Network Interconnection, Roaming and Settlement of Account, dated
October 8, 1999, between China Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited.(2)
4.83 Agreement Regarding the Use of Frequency/Number Resources, dated October 8, 1999, between China
Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited.(2)
4.84 Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999,
between Guangdong Mobile and Guangdong Posts and Telecommunications Administration ("PTA").(2)
4.85 Agreement Regarding Network Interconnection and Settlement of Account, dated October 5, 1999,
between Zhejiang Mobile and Zhejiang PTA.(2)
4.86 Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999,
between Jiangsu Mobile and Jiangsu PTA.(2)
4.87 Agreement Regarding Network Interconnection and Settlement of Account, dated August 30, 1999,
between Fujian Mobile Communication Bureau and Fujian PTA.(2)
4.88 Synchronous Clock Port Leasing Agreement, dated August 30, 1999, between Fujian Mobile
Communication Bureau and Fujian PTA.(2)
4.89 Building and Facilities Leasing Agreement, dated August 30, 1999, between Fujian Mobile and Fujian
PTA.(2)
4.90 Building and Facilities Leasing Agreement (leasing to PTA), dated August 30, 1999, between Fujian
Mobile Communication Bureau and Fujian PTA.(2)
4.91 Building and Facility Leasing Agreement, dated September 25, 1999, between Fujian Mobile and
Fujian Xunjie Communications Technical Services Company ("Xunjie").(2)
4.92 Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999,
between Henan Mobile and Henan PTA.(2)
4.93 Synchronous Clock Port Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
PTA.(2)
4.94 Building and Facilities Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
PTA.(2)
4.95 Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999,
between Hainan Mobile and Hainan PTA.(2)
4.96 Building and Facilities Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
PTA.(2)
4.97 Real Estates Leasing Agreement, dated September 24, 1999, between Hainan Mobile and Hainan
Communication Service Company ("Hainan Service").(2)
8.1 List of major subsidiaries.
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(2) Incorporated by reference to our Registration Statement on Form F-3 (File No. 333-10956), filed with the Securities and Exchange Commission on October 30, 1999.
(3) Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-7634), filed with the Securities and Exchange Commission on September 29, 1997.
(4) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 1999 (File No. 1-14696), filed with the Securities and Exchange Commission on June 20, 2000.
(5) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 1998 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 25, 1999.
(6) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2000 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 26, 2001.
(7) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2001 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 13, 2002.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
CHINA MOBILE (HONG KONG) LIMITED
By: /s/ WANG Xiaochu
--------------------------------------------
Name: Wang Xiaochu
Title: Chairman and Chief Executive Officer
Date: June 17, 2003
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CERTIFICATIONS
I, WANG Xiaochu, certify that:
1. I have reviewed this annual report on Form 20-F of China Mobile (Hong Kong) Limited;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ WANG Xiaochu
-----------------------------------------------
Name: WANG Xiaochu
Title: Chairman and Chief Executive Officer
Date: June 17, 2003
|
I, XUE Taohai, certify that:
1. I have reviewed this annual report on Form 20-F of China Mobile (Hong Kong) Limited;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ XUE Taohai
----------------------------------------------------
Name: XUE Taohai
Title: Vice President and Chief Financial Officer
Date: June 17, 2003
|
[KPMG LOGO]
China Mobile (Hong Kong) Limited
For the year ended December 31, 2002
Consolidated Financial Statements
China Mobile (Hong Kong) Limited Consolidated Financial Statements
Index to Consolidated Financial Statements
PAGE NO.
Independent auditors' report F-2
Consolidated statements of income for each of the three years ended
December 31, 2000, 2001 and 2002 F-3 - F-4
Consolidated balance sheets as of December 31, 2001 and 2002 F-5 - F-6
Consolidated statements of cash flows for each of the three years ended
December 31, 2000, 2001 and 2002 F-7 - F-10
Consolidated statements of shareholders' equity for each of the three
years ended December 31, 2000, 2001 and 2002 F-11
Notes to consolidated financial statements F-12 - F-110
|
[KPMG LOGO]
Independent Auditors' Report
The Board of Directors and Shareholders of China Mobile (Hong Kong) Limited:
We have audited the accompanying consolidated balance sheets of China Mobile (Hong Kong) Limited and subsidiaries (the "Group") as of December 31, 2001 and 2002 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2002, all expressed in Renminbi. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in the United States of America and Hong Kong. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of China Mobile (Hong Kong) Limited and subsidiaries as of December 31, 2001 and 2002 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002 in conformity with accounting principles generally accepted in Hong Kong.
Accounting principles generally accepted in Hong Kong vary in certain material respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected results of operations for each of the years in the three-year period ended December 31, 2002 and shareholders' equity as of December 31, 2001 and 2002 to the extent summarized in Note 33 to the consolidated financial statements.
The accompanying consolidated financial statements as of and for the year ended December 31, 2002 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation, and in our opinion, the consolidated financial statements expressed in Renminbi have been translated into United States dollars on the basis set forth in Note 1 to the consolidated financial statements.
KPMG
Hong Kong
March 18, 2003
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Income
(Amounts in millions, except share data)
Year ended December 31,
---------------------------------------------------------------
Note 2000 2001 2002 2002
RMB RMB RMB US$
OPERATING REVENUE
Usage fees 46,287 73,458 93,272 11,269
Monthly fees 9,623 14,085 16,901 2,042
Connection fees 2,213 711 - -
Other operating revenue 6,861 12,077 18,388 2,221
------ ------- ------- ------
TOTAL OPERATING REVENUE 3 64,984 100,331 128,561 15,532
------ ------- ------- ------
OPERATING EXPENSES
Leased lines 5,501 5,005 5,287 639
Interconnection 8,329 13,055 12,975 1,568
Depreciation 9,759 17,664 26,827 3,241
Personnel 3,991 5,325 6,757 816
Other operating expenses 10,578 18,270 27,919 3,373
------ ------- ------- ------
TOTAL OPERATING EXPENSES 4 38,158 59,319 79,765 9,637
====== ======= ======= ======
OPERATING PROFIT 26,826 41,012 48,796 5,895
AMORTIZATION OF GOODWILL 14 - - (936) (113)
WRITE-DOWN AND WRITE-OFF OF ANALOG
NETWORK EQUIPMENT 5 (1,525) - - -
OTHER NET INCOME 6 915 1,594 1,686 204
NON-OPERATING NET (EXPENSES) / INCOME 7 (5) (6) 571 69
INTEREST INCOME 1,006 857 713 86
FINANCE COSTS 20 (824) (1,740) (1,852) (224)
------ ------- ------- ------
PROFIT BEFORE TAX 26,393 41,717 48,978 5,917
INCOME TAX 8 (8,366) (13,703) (16,234) (1,961)
------ ------- ------- ------
PROFIT AFTER TAX 18,027 28,014 32,744 3,956
MINORITY INTERESTS - 1 (2) -
------ ------- ------- ------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 18,027 28,015 32,742 3,956
====== ======= ======= ======
DIVIDENDS ATTRIBUTABLE TO THE YEAR:
Final dividend proposed after the balance
sheet date 9 - - 6,678 807
====== ======= ======= ======
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Income (Continued)
(Amounts in millions, except share data)
Year ended December 31,
-------------------------------------------------------------------
Note 2000 2001 2002 2002
RMB RMB RMB US$
BASIC NET PROFIT PER SHARE 2(u) RMB 1.25 RMB 1.51 RMB 1.71 US$ 0.21
============= ============= ============= ========
WEIGHTED AVERAGE
NUMBER OF SHARES USED
IN CALCULATING BASIC NET
PROFIT PER SHARE
(THOUSANDS) 14,394,313 18,605,371 19,151,322
============= ============= =============
DILUTED NET PROFIT PER
SHARE 2(u) RMB 1.25 RMB 1.51 RMB 1.71 US$ 0.21
============= ============= ============= ========
WEIGHTED AVERAGE
NUMBER OF SHARES USED
IN CALCULATING DILUTED
NET PROFIT PER SHARE
(THOUSANDS) 14,409,503 18,698,023 19,243,050
============= ============= =============
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Balance Sheets
(Amounts in millions)
December 31,
------------------------------------
Note 2001 2002 2002
RMB RMB US$
ASSETS
Current assets
Cash and cash equivalents 21,821 32,575 3,935
Deposits with banks 14,970 11,069 1,337
Accounts receivable 10 5,728 6,066 733
Other receivables 11 1,189 1,465 177
Inventories 1,029 1,586 192
Deferred tax - current portion 17 1,362 3,116 377
Prepayments and other current assets 1,571 2,059 249
Amount due from ultimate holding
company 12 503 1,282 155
------- ------- ------
Total current assets 48,173 59,218 7,155
Fixed assets 13 105,208 165,409 19,984
Construction in progress 19,981 23,013 2,780
Goodwill 14 - 36,522 4,412
Interest in associates 15 16 16 2
Investment securities 16 77 77 9
Deferred tax - long term portion 17 114 455 54
Deferred expenses 18 180 190 23
------- ------- ------
TOTAL ASSETS 173,749 284,900 34,419
======= ======= ======
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Balance Sheets (Continued)
(Amounts in millions)
December 31,
----------------------------------
Note 2001 2002 2002
RMB RMB US$
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 19 11,317 19,251 2,326
Bills payable 1,458 1,256 152
Deferred revenue - current portion 23 3,417 6,760 816
Bank loans and other interest-bearing
borrowings 20 4,531 8,132 982
Taxes payable 6,003 6,568 794
Obligations under capital lease
- current portion 21 908 68 8
Amount due to immediate holding
company 12 - 402 49
Amount due to ultimate holding company 12 241 1,217 147
Accrued expenses and other payables 22 10,840 16,460 1,989
------- ------- ------
Total current liabilities 38,715 60,114 7,263
Bank loans and other interest-bearing
borrowings 20 21,591 36,348 4,391
Obligations under capital lease
- long term portion 21 812 - -
Amount due to immediate holding
company 12 - 15,176 1,833
Deferred revenue - long term portion 23 820 869 105
------- ------- ------
TOTAL LIABILITIES 61,938 112,507 13,592
Minority interests 32 191 23
SHAREHOLDERS' EQUITY 111,779 172,202 20,804
------- ------- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 173,749 284,900 34,419
======= ======= ======
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Cash Flows
(Amounts in millions)
Year ended December 31,
----------------------------------------------------
2000 2001 2002 2002
RMB RMB RMB US$
OPERATING ACTIVITIES
Profit before taxation 26,393 41,717 48,978 5,917
Adjustment for:
- Depreciation of fixed assets 9,759 17,664 26,827 3,241
- Write-down and write-off of analog network
equipment 1,525 - - -
- Amortization of goodwill - - 936 113
- Provision for interest in associates - 30 - -
- Profit on deemed disposal of a subsidiary - (54) (255) (31)
- Loss on sale of fixed assets 126 275 205 25
- Write off of fixed assets - - 96 12
- Provision for doubtful accounts 1,346 1,737 1,749 211
- Amortization of deferred expenses 15 39 43 5
- Interest income (1,006) (857) (713) (86)
- Interest expense and capital lease charges 824 1,740 1,852 224
- Dividend income (26) (43) (25) (3)
- Unrealized exchange loss, net (2) 4 8 1
------ ------- ------- ------
OPERATING PROFIT BEFORE CHANGES IN WORKING
CAPITAL 38,954 62,252 79,701 9,629
Increase in inventories (408) (124) (234) (28)
Decrease in amount due from ultimate holding
company 409 54 765 92
Increase in accounts receivable (985) (213) (733) (89)
Decrease/(increase) in other receivables 54 1,111 (234) (28)
(Increase)/decrease in prepayments and other current
assets (262) (282) 91 11
Decrease in amounts due from related parties 1,700 - - -
Increase/(decrease) in amount due to ultimate holding
company 14 (437) 450 54
Increase in amount due to immediate holding
company - - 402 49
Increase/(decrease) in accounts payable 1,179 (1,724) 4,915 594
Decrease in amount due to related parties (1,696) - - -
Increase in accrued expenses and other payables 1,319 2,616 469 57
Increase in deferred revenue 1,123 583 2,370 286
------ ------- ------- ------
CASH GENERATED FROM OPERATIONS 41,401 63,836 87,962 10,627
Tax paid
- PRC income tax paid (5,952) (12,865) (18,540) (2,240)
------ ------- ------- ------
NET CASH FROM OPERATING ACTIVITIES CARRIED FORWARD 35,449 50,971 69,422 8,387
------ ------- ------- ------
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)
Year ended December 31,
----------------------------------------------
Note 2000 2001 2002 2002
RMB RMB RMB US$
NET CASH FROM OPERATING ACTIVITIES BROUGHT FORWARD 35,449 50,971 69,422 8,387
------- ------- ------- ------
INVESTING ACTIVITIES
Payment of amount due to immediate holding company
in respect of acquisition of subsidiaries - (4,136) - -
Payment for acquisition of subsidiaries (net of cash and
cash equivalents acquired) (b) (67,299) - (28,733) (3,471)
Capital expenditure (21,964) (39,500) (41,000) (4,954)
Proceeds from sale of fixed assets 264 204 411 50
Proceeds from issuance of shares to minority interest
by subsidiary, net of expenses 17 69 412 50
(Increase)/decrease in deposits with banks (3,881) (2,766) 3,901 471
Interest received 994 867 867 105
Dividends received from associate - 14 25 3
------- ------- ------- ------
NET CASH USED IN INVESTING ACTIVITIES (91,869) (45,248) (64,117) (7,746)
------- ------- ------- ------
FINANCING ACTIVITIES
Proceeds from issue of shares, net of expenses 55,812 4 5,970 721
Proceeds from bank and other loans 12,736 5,407 6,955 840
Repayments of bank and other loans (8,130) (17,897) (12,232) (1,478)
Repayment of obligations under capital lease (362) (2,055) (1,652) (200)
Proceeds from issue of bonds - 5,000 8,000 967
Expenses on issue of bonds - (55) (53) (6)
Proceeds from issue of convertible notes 5,708 - - -
Expenses on issue of convertible notes (128) - - -
Interest paid (863) (2,008) (1,539) (186)
------- ------- ------- ------
NET CASH FROM / (USED IN) FINANCING ACTIVITIES 64,773 (11,604) 5,449 658
======= ======= ======= ======
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 8,353 (5,881) 10,754 1,299
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 19,349 27,702 21,821 2,636
------- ------- ------- ------
CASH AND CASH EQUIVALENTS AT END OF YEAR 27,702 21,821 32,575 3,935
======= ======= ======= ======
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
Deposits with banks maturing within three months
when placed 6,457 3,818 5,004 604
Cash and bank balances 21,245 18,003 27,571 3,331
------- ------- ------- ------
27,702 21,821 32,575 3,935
======= ======= ======= ======
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)
(a) ACQUISITION OF SUBSIDIARIES
Year ended December 31,
-----------------------------------
2000 2001 2002
RMB RMB RMB
Net assets acquired:
Fixed assets 37,391 - 43,665
Construction in progress 5,104 - 7,024
Investment securities 35 - -
Deferred tax 723 - 619
Inventories 213 - 323
Amount due from ultimate holding company 874 - 1,544
Accounts receivable 2,656 - 1,206
Other receivables 1,790 - 344
Prepayments and other current assets 510 - 579
Deposits with banks 96 - -
Cash and cash equivalents 7,681 - 5,339
Bank and other loans (4,241) - (4,342)
Bills payable (57) - (66)
Obligations under capital lease - current portion (1,706) - -
Amount due to ultimate holding company - - (526)
Accounts payable (4,926) - (3,849)
Accrued expenses and other payables (2,897) - (4,657)
Long-term bank and other loans (7,521) - (11,285)
Taxes payable (1,436) - (1,395)
Obligations under capital lease - long-term portion (1,305) - -
Deferred revenue (1,039) - (1,022)
------- ------ -------
31,945 - 33,501
Goodwill arising on acquisition 239,540 - 37,458
------- ------ -------
271,485 - 70,959
======= ====== =======
Satisfied by: Cash consideration 79,116 - 49,248
Issue of ordinary shares 192,369 - 21,711
------- ------ -------
271,485 - 70,959
======= ====== =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)
(b) ANALYSIS OF NET OUTFLOW OF CASH AND CASH EQUIVALENTS IN RESPECT OF THE ACQUISITION OF SUBSIDIARIES
Year ended December 31,
------------------------------------
2000 2001 2002
RMB RMB RMB
Cash consideration 79,116 - 49,248
Cash and cash equivalents acquired (7,681) - (5,339)
Amount due to immediate holding company (4,136) - (15,176)
------- ------ -------
Net outflow of cash and cash equivalents in
respect of acquisition of subsidiaries 67,299 - 28,733
======= ====== =======
|
(c) SIGNIFICANT NON-CASH TRANSACTIONS:
The Group incurred payables of RMB10,270 and RMB1,190 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2002. On July 1, 2002, the Group issued new shares to China Mobile Hong Kong (BVI) Limited ("CMHK (BVI)") at HK$20,458 (RMB equivalent 21,711) respectively as part of the consideration for the acquisition of the entire issued share capital of Anhui Mobile (BVI) Limited ("Anhui Mobile BVI"), Jiangxi Mobile (BVI) Limited ("Jiangxi Mobile BVI"), Chongqing Mobile (BVI) Limited ("Chongqing Mobile BVI"), Sichuan Mobile (BVI) Limited ("Sichuan Mobile BVI"), Hubei Mobile (BVI) Limited ("Hubei Mobile BVI"), Hunan Mobile (BVI) Limited ("Hunan Mobile BVI"), Shaanxi Mobile (BVI) Limited ("Shaanxi Mobile BVI") and Shanxi Mobile Communication (BVI) Limited ("Shanxi Mobile BVI").
The Group incurred payables of RMB8,679 and RMB1,337 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2001.
The Group incurred payables of RMB5,555 and RMB1,005 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2000. In November 2000, the Group issued new shares to CMHK (BVI) at HK$181,412 (RMB equivalent 192,369) as part of the consideration for the acquisition of Beijing Mobile (BVI) Limited ("Beijing Mobile BVI"), Shanghai Mobile (BVI) Limited ("Shanghai Mobile BVI"), Tianjin Mobile (BVI) Limited ("Tianjin Mobile BVI"), Hebei Mobile (BVI) Limited ("Hebei Mobile BVI"), Liaoning Mobile (BVI) Limited ("Liaoning Mobile BVI"), Shandong Mobile (BVI) Limited ("Shandong Mobile BVI") and Guangxi Mobile (BVI) Limited ("Guangxi Mobile BVI").
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Consolidated Statements of Shareholders' Equity
(Amounts in millions, except share data)
STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS:
Number of
ordinary Share Share Capital General
shares capital premium Reserve reserve
RMB RMB RMB RMB
Shareholders' equity at January 1, 2000 13,706,287,021 1,467 99,345 (56,930) 72
Goodwill arising on acquisition of subsidiaries - - - (239,540) -
Transfer from statements of income - - - - -
Shares issued under share option scheme 3,974,000 - 89 - -
Issue of new shares to the professional and institutional
investors 1,115,643,845 119 56,694 - -
Issue of consideration shares for acquisition of subsidiaries 3,779,407,375 400 191,969 - -
Expenses incurred in connection with the issue of new shares to
professional and institutional investors - - (1,090) - -
Appropriation - - - - -
-------------- ------ ------- -------- ---
Shareholders' equity at December 31, 2000 18,605,312,241 1,986 347,007 (296,470) 72
============== ====== ======= ======== ===
Shareholders' equity at January 1, 2001 18,605,312,241 1,986 347,007 (296,470) 72
Transfer from statements of income - - - - -
Shares issued under share option scheme 93,000 - 4 - -
Appropriation - - - - -
-------------- ------ ------- -------- ---
Shareholders' equity at December 31, 2001 18,605,405,241 1,986 347,011 (296,470) 72
============== ====== ======= ======== ===
Shareholders' equity at January 1, 2001 18,605,405,241 1,986 347,011 (296,470) 72
Transfer from statements of income - - - - -
Shares issued under share option scheme 2,100,000 - 24 - -
Issue of new shares 236,634,212 25 6,180 - -
Issue of consideration shares for acquisition of subsidiaries 827,514,446 88 21,623 - -
Expenses incurred in connection with the issue of consideration
shares - - (259) - -
Appropriation - - - - -
-------------- ------ ------- -------- ---
Shareholders' equity at December 31, 2002 19,671,653,899 2,099 374,579 (296,470) 72
============== ====== ======= ======== ===
|
PRC
statutory Retained
reserves earnings Total
RMB RMB RMB
Shareholders' equity at January 1, 2000 5,727 7,411 57,092
Goodwill arising on acquisition of subsidiaries - - (239,540)
Transfer from statements of income - 18,027 18,027
Shares issued under share option scheme - - 89
Issue of new shares to the professional and institutional
investors - - 56,813
Issue of consideration shares for acquisition of subsidiaries - - 192,369
Expenses incurred in connection with the issue of new shares to
professional and institutional investors - - (1,090)
Appropriation 6,916 (6,916) -
-------- ------- --------
Shareholders' equity at December 31, 2000 12,643 18,522 83,760
======== ======= ========
Shareholders' equity at January 1, 2001 12,643 18,522 83,760
Transfer from statements of income - 28,015 28,015
Shares issued under share option scheme - - 4
Appropriation 5,033 (5,033) -
-------- ------- --------
Shareholders' equity at December 31, 2001 17,676 41,504 111,779
======== ======= ========
Shareholders' equity at January 1, 2001 17,676 41,504 111,779
Transfer from statements of income - 32,742 32,742
Shares issued under share option scheme - - 24
Issue of new shares - - 6,205
Issue of consideration shares for acquisition of subsidiaries - - 21,711
Expenses incurred in connection with the issue of consideration
shares - - (259)
Appropriation 7,038 (7,038) -
-------- ------- --------
Shareholders' equity at December 31, 2002 24,714 67,208 172,202
======== ======= ========
|
See accompanying notes to consolidated financial statements.
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
China Mobile (Hong Kong) Limited ("the Company") and its subsidiaries
(hereinafter collectively referred to as the "Group") are principally
engaged in the provision of cellular telephone and related services in
Guangdong, Zhejiang, Jiangsu, Fujian, Henan, Hainan, Hebei, Liaoning,
Shandong, Anhui, Jiangxi, Sichuan, Hubei, Hunan, Shaanxi and Shanxi
provinces, Beijing, Shanghai, Tianjin and Chongqing municipalities, and
Guangxi Zhuang Autonomous Region of the People's Republic of China
("PRC") and market their services under the "China Mobile" logo, which
is a registered trademark owned by China Mobile Communications
Corporation ("China Mobile"), a company incorporated in the PRC in July
1999 to hold and operate the cellular telecommunications networks
nationwide as a result of restructuring of the telecommunications
industry in the PRC. The telecommunications operations in the PRC
previously controlled by the Ministry of Information Industry ("MII")
have been separated into four business lines: fixed line
communications, mobile communications, paging services and satellite
communications. Since then, the MII act exclusively as the industry
regulator and are not involved in managing the day-to-day operations of
telecommunications service providers in the PRC.
Prior to the restructuring (as described below, the "Restructuring"),
the Group's Total Access Communications Systems ("TACS") and Global
System for Mobile Communications ("GSM") cellular networks in Guangdong
were owned by Guangdong Mobile Communication Corporation (together with
the successor wholly-owned foreign enterprise formed in connection with
the Restructuring, "Guangdong Mobile"), an enterprise formed in
September 1988 and wholly owned by the MII on behalf of the State.
Prior to the Restructuring, the Group's GSM cellular network in
Zhejiang was owned by Zhejiang GSM Mobile Communication Company Limited
(together with the successor sino-foreign joint venture company formed
in connection with the Restructuring, "Zhejiang Mobile"), a company
formed in February 1996 and 98.55% owned by the Zhejiang Provincial
Posts and Telecommunications Administrations ("PTA") ("Zhejiang PTA"),
while the Group's TACS cellular networks in Zhejiang were owned and
operated directly by the Zhejiang PTA.
F-12
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Restructuring
Pursuant to the Restructuring, the Company was established as a
wholly-owned subsidiary of China Mobile Hong Kong (BVI) Limited ("CMHK
(BVI)"), a company incorporated with limited liability in the British
Virgin Islands. CMHK (BVI) is controlled by China Mobile (Hong Kong)
Group Limited ("CMHKG"), which in turn is 51% owned by Telpo
Communications (Group) Limited ("Telpo"), a Hong Kong company wholly
owned by the MII, and as to 49% by the China Telecommunications
Corporation (previously known as the Directorate General of
Telecommunications, or the DGT). At December 31, 1999, the percentages
of equity interests of CMHK (BVI), which in turn were owned by Telpo
and DGT were changed to 57% and 43%, respectively. On May 12, 2000,
China Mobile acquired a 100% controlling interest in CMHKG. As a result
of this, China Mobile indirectly holds approximately 75% equity
interest in the Company. Guangdong Mobile was formed as a wholly
foreign-owned enterprise whereas Zhejiang Mobile was formed as a
sino-foreign joint venture company. The Company is the sole equity
owner in Guangdong Mobile and was initially the 99.63% joint venture
partner in Zhejiang Mobile, with the remaining interests held by
various local investors. The Company acquired the remaining 0.37%
interest in Zhejiang Mobile in April 1999. Subsequent to the
acquisition, Zhejiang Mobile became a wholly foreign-owned enterprise.
In connection with the Restructuring and in anticipation of the initial
offering of the Company's ordinary shares, the fixed assets of
Guangdong Mobile and Zhejiang Mobile were revalued as of May 31, 1997,
by a firm of independent valuers and approved by the China State-owned
Assets Administration Bureau. The value of fixed assets of Guangdong
Mobile and Zhejiang Mobile pursuant to the valuation, based on a
depreciated replacement cost basis, was determined at RMB15,630. Upon
the transfer of interests in Guangdong Mobile and Zhejiang Mobile by
the MII and the DGT to the Company, 9,010,000,000 ordinary shares of
HK$0.10 each were issued by the Company to CMHK (BVI) for consideration
valued at RMB19,466. Such amount was based on the net asset value of
Guangdong Mobile and Zhejiang Mobile at May 31, 1997, the effective
date of the Restructuring, adjusted for additional earnings to
September 26, 1997, the completion date of the Restructuring, of
RMB1,132, which is reflected as capital reserve.
F-13
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Equity offering
Subsequent to the Restructuring, in October 1997, the Company completed
an initial public offering (the "Offering") of an aggregate of
2,770,788,000 ordinary shares. Net proceeds to the Company for the
Offering, after deduction of offering expenses, were approximately
RMB33,570.
Acquisition of Jiangsu Mobile Communication Company Limited ("Jiangsu
Mobile")
Pursuant to the ordinary resolution passed by the Company's
shareholders on June 3, 1998, the Company acquired the entire issued
share capital of China Telecom Jiangsu Mobile (BVI) Limited ("Jiangsu
Mobile BVI") from CMHK (BVI) by a total cash consideration of HK$22,475
(RMB equivalent 24,120) (hereinafter referred to as the "First
Acquisition").
The only asset of Jiangsu Mobile BVI is its interest in the entire
equity of Jiangsu Mobile. Subsequent to the First Acquisition, Jiangsu
Mobile became a wholly foreign-owned enterprise.
In connection with the First Acquisition, the fixed assets of Jiangsu
Mobile were revalued as of December 31, 1997, by a firm of independent
valuers and approved by the China State-owned Assets Administration
Bureau. The value of fixed assets of Jiangsu Mobile pursuant to the
valuation, based on a depreciated replacement cost basis, was
determined at RMB7,879.
Goodwill arising on the acquisition of Jiangsu Mobile BVI and Jiangsu
Mobile (RMB15,622), being the excess of the cost of investments
(RMB24,120) over the fair value of the Group's share of the separable
net assets acquired (RMB8,498), was eliminated against reserves
immediately on acquisition. The fair value of the Group's share of the
separable net assets acquired was based on the net asset value of
Jiangsu Mobile at December 31, 1997 (RMB8,009), adjusted for additional
earnings to June 3, 1998, the completion date of the First Acquisition,
of RMB489.
F-14
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Acquisition of Fujian Mobile Communication Company Limited ("Fujian
Mobile"), Henan Mobile Communication Company Limited ("Henan Mobile")
and Hainan Mobile Communication Company Limited ("Hainan Mobile")
Pursuant to an ordinary resolution passed by the Company's shareholders
on November 11, 1999, the Company acquired the entire issued share
capital of Fujian Mobile (BVI) Limited ("Fujian Mobile BVI"), Henan
Mobile (BVI) Limited ("Henan Mobile BVI") and Hainan Mobile (BVI)
Limited ("Hainan Mobile BVI") from CMHK (BVI) for a total consideration
of HK$49,715 (RMB equivalent 52,953) (hereinafter referred to as the
"Second Acquisition"). The consideration was satisfied by cash of
HK$19,031 (RMB equivalent 20,268) and an allotment of 1,273,195,021
ordinary shares of HK$0.10 each to CMHK (BVI) amounting to HK$30,684
(RMB equivalent 32,685). The only assets of each of Fujian Mobile BVI,
Henan Mobile BVI and Hainan Mobile BVI are their interests in the
entire equity of Fujian Mobile, Henan Mobile and Hainan Mobile,
respectively.
In connection with the Second Acquisition, the fixed assets of Fujian
Mobile, Henan Mobile and Hainan Mobile were revalued as of June 30,
1999, by a firm of independent valuers and approved by the Ministry of
Finance. The value of fixed assets of Fujian Mobile, Henan Mobile and
Hainan Mobile pursuant to the valuation, based on a depreciated
replacement cost basis, was determined at RMB10,684.
Goodwill arising on the acquisition of Fujian Mobile, Henan Mobile and
Hainan Mobile (RMB42,440), being the excess of the cost of investments
(RMB52,953) over the fair value of the Group's share of the separable
net assets acquired (RMB10,513), was eliminated against reserves
immediately on acquisition. The fair value of the Group's share of the
separable net assets acquired was based on the net assets of Fujian
Mobile, Henan Mobile and Hainan Mobile at June 30, 1999 (RMB9,524),
adjusted for additional earnings to November 11, 1999, the completion
date of the Second Acquisition, of RMB989.
F-15
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Equity offering and debt offering
In order to finance the acquisition consideration, the Company
completed an international offering of an aggregate of 644,804,000
ordinary shares and debt offering with a principal amount of US$600
with maturity due on November 2, 2004. Further, the Company issued
1,273,195,021 consideration shares to CMHK (BVI), credited as fully
paid as part of the acquisition consideration. Net proceeds to the
Company for such equity offering and debt offering, after deduction of
offering expenses and discount, were approximately RMB16,134 and
RMB4,899, respectively.
Acquisition of Beijing Mobile Communication Company Limited ("Beijing
Mobile"), Shanghai Mobile Communication Company Limited ("Shanghai
Mobile"), Tianjin Mobile Communication Company Limited ("Tianjin
Mobile"), Hebei Mobile Communication Company Limited ("Hebei Mobile"),
Liaoning Mobile Communication Company Limited ("Liaoning Mobile"),
Shandong Mobile Communication Company Limited ("Shandong Mobile") and
Guangxi Mobile Communication Company Limited ("Guangxi Mobile")
Pursuant to an ordinary resolution passed by the Company's shareholders
on November 10, 2000, the Company acquired the entire issued share
capital of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI,
Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI and Guangxi
Mobile BVI from CMHK (BVI) for a total consideration of HK$256,021 (RMB
equivalent 271,485) (hereinafter referred to as the "Third
Acquisition"). The consideration was satisfied by cash of HK$74,609
(RMB equivalent 79,116) and an allotment of 3,779,407,375 ordinary
shares of HK$0.10 each to CMHK (BVI) amounting to HK$181,412 (RMB
equivalent 192,369). The only assets of each of Beijing Mobile BVI,
Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning
Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI are their
interests in the entire equity of Beijing Mobile, Shanghai Mobile,
Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
Guangxi Mobile, respectively.
F-16
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
In connection with the Third Acquisition, the fixed assets of Beijing
Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
Shandong Mobile and Guangxi Mobile were revalued as of June 30, 2000,
by a firm of independent valuers and approved by the Ministry of
Finance. The value of fixed assets of Beijing Mobile, Shanghai Mobile,
Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
Guangxi Mobile pursuant to the valuation, based on a depreciated
replacement cost basis, was determined at RMB37,252.
Goodwill arising on the acquisition of Beijing Mobile, Shanghai Mobile,
Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
Guangxi Mobile (RMB239,540), being the excess of the cost of
investments (RMB271,485) over the fair value of the Group's share of
the separable net assets acquired (RMB31,945), was eliminated against
reserves immediately on acquisition. The fair value of the Group's
share of the separable net assets acquired was based on the net assets
of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile,
Liaoning Mobile, Shandong Mobile and Guangxi Mobile at June 30, 2000
(RMB29,317), adjusted for additional earnings to November 12, 2000, the
completion date of the Third Acquisition, of RMB2,628.
Equity offering and debt offering
In order to finance the acquisition consideration, the Company
completed an international offering of an aggregate of 1,115,643,845
ordinary shares and debt offering with a principal amount of US$690
with maturity due on November 3, 2005. Further the Company issued
3,779,407,375 consideration shares to CMHK (BVI), credited as fully
paid as part of the acquisition consideration. Net proceeds to the
Company for such equity offering and debt offering, after deduction of
offering expenses and discount, were approximately RMB55,723 and
RMB5,580, respectively.
F-17
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Acquisition of Anhui Mobile Communication Company Limited ("Anhui
Mobile"), Jiangxi Mobile Communication Company Limited ("Jiangxi
Mobile"), Chongqing Mobile Communication Company Limited ("Chongqing
Mobile"), Sichuan Mobile Communication Company Limited ("Sichuan
Mobile"), Hubei Mobile Communication Company Limited ("Hubei Mobile"),
Hunan Mobile Communication Company Limited ("Hunan Mobile"), Shaanxi
Mobile Communication Company Limited ("Shaanxi Mobile") and Shanxi
Mobile Communication Company Limited ("Shanxi Mobile")
Pursuant to a resolution passed at the extraordinary general meeting
held on June 24, 2002, the Company acquired the entire issued share
capital of Anhui Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI,
Sichuan Mobile BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile
BVI and Shanxi Mobile BVI from CMHK(BVI). The acquisition was completed
on July 1, 2002 for a total consideration of US$8,573 (RMB equivalent
70,959) (hereinafter referred to as the "Fourth Acquisition"). The
consideration was satisfied by cash of RMB49,248 and an allotment of
827,514,446 ordinary shares of HK$0.10 each to CMHK (BVI) amounting to
HK$20,458 (RMB equivalent 21,711). The only assets of each of Anhui
Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI, Sichuan Mobile
BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile BVI and Shanxi
Mobile BVI are their interests in the entire equity of Anhui Mobile,
Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan
Mobile, Shaanxi Mobile and Shanxi Mobile, respectively.
In connection with the Fourth Acquisition, the fixed assets of Anhui
Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile,
Hunan Mobile, Shaanxi Mobile and Shanxi Mobile were revalued as of
December 31, 2001, by a firm of independent valuers and approved by the
Ministry of Finance. The value of fixed assets of Anhui Mobile, Jiangxi
Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile,
Shaanxi Mobile and Shanxi Mobile pursuant to the valuation, based on a
depreciated replacement cost basis, was determined at RMB39,499.
F-18
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Positive goodwill arising on the acquisition of Anhui Mobile, Jiangxi
Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile,
Shaanxi Mobile and Shanxi Mobile (RMB37,458), being the excess of the
cost of investments (RMB70,959) over the fair value of the Group's
share of the separable net assets acquired (RMB33,501), is amortized to
the consolidated statements of income on a straight-line basis over 20
years. Positive goodwill is stated in the consolidated balance sheet at
cost less accumulated amortization and any impairment losses. The fair
value of the Group's share of the separable net assets acquired was
based on the net assets of Anhui Mobile, Jiangxi Mobile, Chongqing
Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and
Shanxi Mobile at December 31, 2001 (RMB30,663), adjusted for additional
earnings to June 30, 2002, the completion date of the Fourth
Acquisition, of RMB2,818.
Equity offering and debt offering
In order to finance the acquisition consideration, the Company issued
236,634,212 new shares to Vodafone Holdings (Jersey) Limited at
HK$5,850 (RMB equivalent 6,205). Further, the Company issued
827,514,446 consideration shares to CMHK (BVI), credited as fully paid
as part of the acquisition consideration. Net proceeds to the Company
for the equity offering, after deduction of offering expenses, was
approximately RMB5,946. In addition, Guangdong Mobile issued five-year
guaranteed bonds and fifteen-year guaranteed bonds, with a principal
amount of RMB3,000 and RMB5,000 respectively, at an issue price equal
to the face value of the bonds. Net proceeds to the Group for the debt
offering, after deduction of offering expenses, was approximately
RMB7,947.
F-19
|
China Mobile (Hong Kong) Limited
Consolidated financial statements
for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
Basis of preparation
The consolidated financial statements have been prepared on a
consolidated basis to reflect the financial position and results of
operations of the Company, Guangdong Mobile and Zhejiang Mobile from
the date of the Restructuring and of Jiangsu Mobile, Fujian Mobile,
Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin
Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile, Guangxi Mobile,
Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei
Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile from their
respective dates of acquisition. The consolidated statements of income
for the year ended December 31, 2002 includes the results of the
Company, Guangdong Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian
Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile,
Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
Guangxi Mobile for the year ended December 31, 2002 and the
post-acquisition results of Anhui Mobile, Jiangxi Mobile, Chongqing
Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and
Shanxi Mobile for the period from July 1, 2002 to December 31, 2002.
The consolidated statements of income for the year ended December 31,
2001 includes the results of the Company, Guangdong Mobile, Zhejiang
Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan Mobile,
Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning
Mobile, Shandong Mobile and Guangxi Mobile for the year ended December
31, 2001. The consolidated statements of income for the year ended
December 31, 2000 includes the results of the Company, Guangdong
Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile
and Hainan Mobile for the year ended December 31, 2000 and the
post-acquisition results of Beijing Mobile, Shanghai Mobile, Tianjin
Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi
Mobile for the period from November 13, 2000 to December 31, 2000.
The financial statements have been prepared in accordance with
accounting principles generally accepted in Hong Kong ("HK GAAP").
Significant differences between HK GAAP and accounting principles
generally accepted in the United States ("US GAAP") are set forth in
Note 33.
F-20
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
1 ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
(CONTINUED)
The consolidated financial statements are expressed in Renminbi. Solely
for the convenience of the reader, for the December 31, 2002 financial
statements have been translated into United States dollars at the rate
of US$1.00 = RMB8.2772 quoted by the People's Bank of China on December
31, 2002. No representation is made that the Renminbi amounts could
have been, or could be, converted into United States dollars at that
rate or at any other certain rate on December 31, 2002, or any other
certain date.
2 PRINCIPAL ACCOUNTING POLICIES
(a) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries (see Note 30 for details of the
Company's principal subsidiaries). The results of subsidiary companies
are included in the consolidated statements of income, and the share
attributable to minority interest is deducted from or added to the
consolidated income after taxation. All significant inter-company
balances and transactions have been eliminated.
(b) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and on hand, demand
deposits with banks, and short-term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to
an insignificant risk of changes in value, having been within three
months of maturity at acquisition. None of the Group's cash and cash
equivalents is restricted as to withdrawal.
(c) ASSOCIATES
An associate is a company in which the Group has significant influence,
but not control or joint control, over its management, including
participation in the financial and operating policy decisions.
The Group's share of the results of its associates is included in the
consolidated statements of income. Such amounts were immaterial for the
years presented. In the consolidated balance sheets, interest in
associates is stated at cost adjusted for post-acquisition retained
result of operations, less impairment losses (see note 2(h)), unless it
is acquired and held exclusively with a view to subsequent disposal in
the near future or operates under severe long-term restrictions that
significantly impair its ability to transfer funds to the investor, in
which case, it is stated at fair value with changes in fair value
recognized in the consolidated statements of income as they arise.
F-21
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(d) GOODWILL
Positive goodwill arising on consolidation represents the excess of the
cost of the acquisition over the Group's share of the fair value of the
identifiable assets and liabilities acquired. In respect of controlled
subsidiaries:
- for acquisitions before January 1, 2001, positive goodwill is
eliminated against reserves and is reduced by impairment
losses (see note 2(h)); and
- for acquisitions on or after January 1, 2001, positive
goodwill is amortized to the consolidated statements of income
on a straight-line basis over 20 years. Positive goodwill is
stated in the consolidated balance sheets at cost less
accumulated amortization and any impairment losses (see note
2(h)).
Negative goodwill arising on acquisitions of controlled subsidiaries
represents the excess of the Group's share of the fair value of the
identifiable assets and liabilities acquired over the cost of the
acquisition. Negative goodwill is accounted for as follows:
- for acquisitions before January 1, 2001, negative goodwill is
credited to a capital reserve; and
- for acquisitions on or after January 1, 2001, to the extent
that negative goodwill relates to an expectation of future
losses and expenses that are identified in the plan of
acquisition and can be measured reliably, but which have not
yet been recognized, it is recognized in the consolidated
statements of income when the future losses and expenses are
recognized. Any remaining negative goodwill, but not exceeding
the fair values of the non-monetary assets acquired, is
recognized in the consolidated statements of income over the
weighted average useful life of those non-monetary assets that
are depreciable/amortisable. Negative goodwill in excess of
the fair values of the non-monetary assets acquired is
recognized immediately in the consolidated statements of
income.
In respect of any negative goodwill not yet recognized in the
consolidated statements of income, it is shown in the consolidated
balance sheets as a deduction from assets in the same balance sheet
classification as positive goodwill.
F-22
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(e) OTHER INVESTMENTS IN SECURITIES
The Group's policies for investments in securities other than
investments in subsidiaries and associates are as follows:
(i) Investments held on a continuing basis for an identified
long-term purpose are classified as investment securities.
Investment securities are stated in the consolidated balance
sheet at cost less any provisions for diminution in value.
Provisions are made when the fair values have declined below
the carrying amounts, unless there is evidence that the
decline is temporary, and are recognized as an expense in the
consolidated statements of income, such provisions being
determined for each investment individually.
(ii) Profits or losses on disposal of investments in securities are
determined as the difference between the estimated net
disposal proceeds and the carrying amount of the investments
and are accounted for in the consolidated statements of income
as they arise.
(f) FIXED ASSETS AND DEPRECIATION
(i) Fixed assets are stated at cost less accumulated depreciation
and impairment losses (see note 2(h)). The circumstances and
basis under which the revalued amount is arrived at are set
out in details in Note 13.
(ii) The cost of fixed assets comprises the purchase price and any
directly attributable costs of bringing the asset to its
working condition and location for its intended use.
Expenditure incurred after the fixed asset has been put into
operation, such as repairs and maintenance and overhaul costs,
is normally charged to the consolidated statements of income
in the year in which it is incurred. In situations where it
can be clearly demonstrated that the expenditure has resulted
in an increase in the future economic benefits expected to be
obtained from the use of the fixed asset, the expenditure is
capitalized as an additional cost of the fixed asset.
(iii) Gains or losses arising from the retirement or disposal of a
fixed asset are determined as the difference between the
estimated net disposal proceeds and the carrying amount of the
asset and are recognized in the consolidated statements of
income on the date of retirement or disposal.
F-23
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(f) FIXED ASSETS AND DEPRECIATION (CONTINUED)
|
(iv) Depreciation is calculated to write-off the cost of fixed assets on a straight-line basis over their estimated useful lives, to residual values, as follows:
Depreciable life Residual value
Land use rights Over the period of grant -
Buildings 8 -35 years 3%
Telecommunication transceivers,
switching centers and other
network equipment 7 years 3%
Office equipment, furniture and
fixtures and others 4 - 18 years 3%
|
(g) LEASED ASSETS
Leases of assets under which the lessee assumes substantially all the risks and benefits of ownership are classified as capital leases.
Where the Group acquires the use of assets under capital leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in the fixed assets and the corresponding liabilities, net of finance charges, are recorded as obligations under capital leases. Depreciation is provided at rates which write off the cost of the assets in equal annual amounts over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 2(f). Impairment losses are accounted for in accordance with the accounting policy as set out in note 2(h). Finance charges implicit in the lease payments are charged to the consolidated statements of income over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting year.
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(h) IMPAIRMENT OF ASSETS
Internal and external sources of information are reviewed at each
balance sheet date to identify indications that the following assets
may be impaired or an impairment loss previously recognized no longer
|
exists or may have decreased:
- fixed assets;
- construction in progress;
- investments in associates; and
- positive goodwill (whether taken initially to reserves or recognized as an asset).
If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.
(i) Calculation of recoverable amount
The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).
(ii) Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is reversed only if the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event.
A reversal of impairment losses is limited to the asset's carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to the consolidated statements of income in the year in which the reversals are recognized.
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(i) CONSTRUCTION IN PROGRESS
Construction in progress is stated at cost. Cost comprises direct costs
of construction as well as interest expense and exchange differences
capitalized during the years of construction and installation.
Capitalization of these costs ceases and the construction in progress
is transferred to fixed assets when substantially all the activities
necessary to prepare the assets for their intended use are completed.
No depreciation is provided in respect of construction in progress
until it is completed and ready for its intended use. Exchange
differences capitalized during the years presented were immaterial.
(j) INVENTORIES
Inventories, which consist primarily of handsets, SIM cards and
accessories, are stated at the lower of cost and net realizable value.
Cost represents purchase cost of goods calculated using the weighted
average cost method. Net realizable value is determined by reference to
the sales proceeds of items sold in the ordinary course of business
after the balance sheet date or to management's estimates based on
prevailing market conditions.
When inventories are sold, the carrying amount of those inventories is
recognized as a deduction of other income due to its insignificance.
The amount of any write-down of inventories to net realizable value and
all losses of inventories are recognized as an expense in the year the
write-down or loss occurs. The amount of any reversal of any write-down
of inventories, arising from an increase in net realizable value, is
recognized as a reduction in the amount of inventories recognized as an
expense in the year in which the reversal occurs.
(k) DEFERRED REVENUE
Deferred revenue, which consists primarily of deferred revenue from
prepaid service fees received from subscribers and deferred revenue
from assignment of rights to income from subscribers with distributors
of telecommunications services are stated in the balance sheet at the
amount of consideration received according to the relevant assignment
contracts if applicable, less income recognized in the consolidated
statements of income up to the balance sheet date.
Revenue from prepaid service fees is recognized when the cellular
services are rendered.
F-26
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China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(k) DEFERRED REVENUE (CONTINUED)
Income from assignment of rights is deferred and recognized on a
straight-line basis over the relevant assignment period. For assignment
contracts which the distributors surrender for early cancellation, the
balance of the Group's deferred revenue in respect of those contracts
is recognized in the consolidated statements of income when the
assignment contracts are cancelled.
(l) FIXED RATE NOTES, BONDS AND CONVERTIBLE NOTES
Fixed rate notes, bonds and convertible notes are stated in the balance
sheet at face value, less unamortized discount arising thereon, if any.
The discount is amortized on a straight-line basis over the period from
the date of issue to the date of maturity.
(m) DEFERRED EXPENSES
Deferred expenses comprise incidental costs incurred in relation to the
issue of the fixed rate notes, bonds and convertible notes of the Group
and are amortized on a straight-line basis over the periods from the
date of issue to the date of maturity. In the event that the notes are
redeemed prior to the maturity date, the unamortized expenses are
charged immediately to the consolidated statements of income.
(n) BORROWING COSTS
Borrowing costs are expensed in the consolidated statements of income
in the year in which they are incurred, except to the extent that they
are capitalized as being directly attributable to the acquisition or
construction of an asset which necessarily takes a substantial period
of time to get ready for its intended use.
(o) REVENUE RECOGNITION
Revenue is recognized when it is probable that the economic benefits
will accrue to the Group and when the revenue can be measured reliably
on the following basis:
(i) usage fees are recognized as revenue when the service is
rendered;
F-27
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(o) REVENUE RECOGNITION (CONTINUED)
|
(ii) monthly fees are recognized as revenue in the month during which the service is rendered;
(iii) connection fees are recognized as revenue when receivable;
(iv) deferred revenue from prepaid services is recognized as income when the cellular telephone services are rendered upon actual usage by subscribers;
(v) deferred revenue from assignment of rights to income from subscribers is recognized on a straight-line basis over the duration of the assignment period;
(vi) interest income is recognized on a time proportion basis by reference to the principal outstanding and at the rate applicable; and
(vii) sales of SIM cards and handsets are recognized on delivery of goods to the buyer. Such revenue, net of cost of goods sold, is included in other net income due to its insignificance.
(p) ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is the Group's best estimate of the amount of probable credit losses in the Group's existing accounts receivable and other receivable. The Group determines the allowance based on the length of time the receivables are past due, the current business environment and the Group's historical experience.
(q) TRANSLATION OF FOREIGN CURRENCIES
The functional currency of the Group's operations is Renminbi. See Note
29. Foreign currency transactions are recorded at the applicable rates
of exchange prevailing on the transaction dates. Monetary assets and
liabilities denominated in currencies other than the functional
currency are translated at the exchange rates ruling at the balance
sheet date. Exchange differences attributable to the translation of
borrowings denominated in currencies other than the functional
currency, and used for financing the construction of fixed assets, are
included in the cost of the related construction in progress. Exchange
differences capitalized to construction in progress are immaterial for
the years presented. Other exchange gains and losses are recognized in
the consolidated statements of income.
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(r) DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of
the taxation effect arising from all material timing differences
between the accounting and tax treatment of income and expenditure,
which are expected with reasonable probability to crystallize in the
foreseeable future. Future deferred tax benefits are not recognized
unless their realization is assured beyond reasonable doubt.
(s) PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognized for liabilities of uncertain timing or amount
when the Group has a legal or constructive obligation arising as a
result of a past event, it is probable that an outflow of economic
benefits will be required to settle the obligation and a reliable
estimate can be made. Where the time value of money is material,
provisions are stated at the present value of the expenditures expected
to settle the obligation.
Where it is not probable that an outflow of economic benefits will be
required, or the amount cannot be estimated reliably, the obligation is
disclosed as a contingent liability, unless the probability of outflow
of economic benefits is remote. Possible obligations, whose existence
will only be confirmed by the occurrence or non-occurrence of one or
more future events are also disclosed as contingent liabilities unless
the probability of outflow of economic benefits is remote.
(t) EMPLOYEE BENEFITS
(i) Salaries, annual bonuses, paid annual leave, leave passage and
the cost to the Group of non-monetary benefits are accrued in
the year in which associated services are rendered by
employees of the Group. Where payment or settlement is
deferred and the effect would be material, these amounts are
stated at their present values.
(ii) The Company's contributions to the Mandatory Provident Funds,
as required under the Hong Kong Mandatory Provident Fund
Schemes Ordinance, are recognized as an expense in the
consolidated statements of income as incurred.
F-29
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(t) EMPLOYEE BENEFITS (CONTINUED)
|
(iii) The employees of the subsidiaries participate in defined contribution retirement plans managed by the local government authorities whereby the subsidiaries are required to contribute to the schemes at fixed rates of the employees' salary costs. In addition to the local governmental defined contribution retirement plans, certain subsidiaries also participate in supplementary defined contribution retirement plans managed by independent insurance companies whereby the subsidiaries are required to make contributions to the retirement plans at fixed rates of the employees' salary costs. The Group's contributions to these plans are charged to the consolidated statements of income when incurred. The subsidiaries have no obligation for the payment of retirement and other post-retirement benefits of staff other than the contributions described above.
(iv) When the Group grants employees options to acquire shares of the Company at nil consideration, no employee benefit cost or obligation is recognized at the date of grant. When the options are exercised, equity is increased by the amount of the proceeds received.
(v) Termination benefits are recognized when, and only when the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.
(u) NET PROFIT PER SHARE
The calculation of basic net profit per share for the years ended December 31, 2000, 2001 and 2002 are based on the net profit and the weighted average number of shares in issue during the years.
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(u) NET PROFIT PER SHARE (CONTINUED)
The calculation of diluted net profit per share for the years ended
December 31, 2001 and 2002 have been computed after adding back the
interest expense on the convertible notes and adjusting for the effects
of all dilutive potential ordinary shares. All dilutive potential
ordinary shares arise from the share options granted to the directors
under the share option scheme and convertible notes issued by the Group
which, if converted to ordinary shares, would decrease net profit per
share. In 2000, since all potential ordinary shares arising from the
convertible notes, if converted to ordinary shares, would increase
profit attributable to shareholders per share as a result of the
savings on the interest payable on the convertible notes, the effects
of anti-dilutive potential ordinary shares were ignored in calculating
diluted net profit per share.
(v) OPERATING LEASES
Leases of assets under which the lessor has not transferred all the
risks and benefits of ownership are classified as operating leases.
Where the Group has the use of assets under operating lease, payments
made under the leases are charged to the consolidated statements of
income in equal instalments over the accounting periods covered by the
lease term, except where an alternative basis is more representative of
the pattern of benefits to be derived from the leased asset. Lease
incentives received are recognized in the consolidated statements of
income as an integral part of the aggregate net lease payments made.
Contingent rentals are charged to the consolidated statements of income
in the accounting period in which they are incurred.
(w) RELATED PARTIES
For the purposes of these accounts, parties are considered to be
related to the Group if the Group has the ability, directly or
indirectly, to control the party or exercise significant influence over
the party in making financial and operating decisions, or vice versa,
or where the Group and the party are subject to common control or
common significant influence. Related parties may be individuals or
other entities.
All material related parties transactions have been disclosed in the
relevant notes on the accounts.
F-31
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
2 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(x) SEGMENT REPORTING
A segment is a distinguishable component of the group that is engaged
either in providing products or services (business segment), or in
providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are
different from those of other segments.
No analysis of the Group's operating revenue and contribution to profit
from operations by geographical segment or business segment has been
presented as all the Group's operating activities are carried out in
the PRC and less than 10% of the Group's operating revenue and
contribution to profit from operations were derived from activities
outside the Group's cellular telephone and related services activities.
There is no other geographical or business segment with segment assets
equal to or greater than 10% of the Group's total assets.
(y) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
years reported. Actual results could differ from those estimates.
Estimates are used when accounting for allowance for doubtful accounts,
the fixed assets' depreciation and amortization periods and impairment
of long-lived assets including goodwill. Actual results may differ from
these estimates.
F-32
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
3 OPERATING REVENUE
The principal activities of the Group are the provision of cellular
telephone and related services in Guangdong, Zhejiang, Jiangsu, Fujian,
Henan, Hainan, Hebei, Liaoning, Shandong, Anhui, Jiangxi, Sichuan,
Hubei, Hunan, Shaanxi and Shanxi provinces, Beijing, Shanghai, Tianjin
and Chongqing municipalities and Guangxi Zhuang Autonomous Region of
the PRC. The principal activity of the Company is investment holding.
Operating revenue primarily represents usage fees, monthly fees,
connection fees and other operating revenue derived from the Group's
cellular telephone networks, net of PRC business tax and government
surcharges. Business tax and government surcharges are charged at 3% to
3.3% of the corresponding revenue.
Operating revenue consist of:
(i) Usage fees which represent standard local usage fee for
airtime and, where applicable, Domestic Direct Dial ("DDD")
charges and International Direct Dial ("IDD") charges
receivable from subscribers for the use of the Group's
cellular telecommunication networks and facilities; revenue
from assignment of rights to income from subscribers, and fees
in respect of roaming out calls. Roaming out calls are those
made by the Group's subscribers outside the local service
areas. See Note 4 (ii).
(ii) Monthly fees which represent fixed amounts charged to
subscribers each month for their entitlement to use the
Group's cellular telephone and related services.
(iii) Connection fees which represent amounts charged to subscribers
for the initial connection to the Group's cellular
telecommunications network.
(iv) Other operating revenue mainly represents charges for wireless
data and value added services, roaming in fees and
interconnection revenue.
F-33
|
China Mobile (Hong Kong) Limited
Consolidated Financial Statements
For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
4 OPERATING EXPENSES
Operating expenses consist of:
(i) Leased line charges which represent expenses paid or payable
for the use of leased lines between the main switches, base
transceiver stations, base station controllers, base stations,
fixed line network connectors and long distance network
connectors.
(ii) Interconnection charges which represent amounts paid or
payable in respect of call made between the Group's cellular
networks, the fixed line networks and other GSM network
operators in the relevant provinces and other provinces in the
PRC. Included in the amounts are also charges in respect of
the Group's subscribers roaming outside the service areas of
Guangdong Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian
Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai
Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
Shandong Mobile, Guangxi Mobile, Anhui Mobile, Jiangxi Mobile,
Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile,
Shaanxi Mobile and Shanxi Mobile (see Note 3 (i)).
(iii) Personnel expenses which represent staff salaries, bonuses and
medical benefits, provision for staff welfare expenses and
contributions to staff retirement scheme.
|
(iv) Other operating expenses which consist of:
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Selling and promotion 3,940 7,897 12,259
Maintenance 745 1,289 2,691
Provision for doubtful accounts 1,346 1,737 1,749
Operating lease charges 936 1,347 1,701
Other expenses (Note (a)) 3,611 6,000 9,519
------- ------- -------
10,578 18,270 27,919
======= ======= =======
|
(a) Other expenses consist of offices expenses, utilities charges, travelling expenses, entertainment expenses, spectrum charges, insurance expenses, consumables and supplies, debt collection fees and other miscellaneous expenses.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
5 WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Write-down of analog network equipment (a) 1,330 - -
Write-off of analog network equipment (b) 195 - -
------- ------- -------
1,525 - -
======= ======= =======
|
(a) In 2000, based on the operations and net cash flow position of
the analog network, the Group considered that the recoverable
amount of the analog network equipment had declined below its
carrying amount. Based on the expected future cash flows to be
generated by the analog network, a full provision was made
against the carrying amount of the analog network equipment at
December 31, 2000. The amount of the write-down of RMB1,330
was recognized as an expense in the consolidated statements of
income. At December 31, 2001, all analog network equipment
which were written down in previous years had been removed
from service.
(b) This represents the write-off of certain analog network
equipment which had been removed from service.
6 OTHER NET INCOME
Other net income primarily consists of the gross margin from sales of
cellular telephone SIM cards and handsets.
|
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Sales of SIM cards and handsets 1,928 3,338 3,641
Cost of SIM cards and handsets (1,013) (1,744) (1,955)
------- ------- -------
915 1,594 1,686
======= ======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
7 NON-OPERATING NET (EXPENSES) / INCOME
Non-operating net (expenses) / income consists of:
Year ended December 31,
-------------------------------
2000 2001 2002
RMB RMB RMB
Exchange (loss) / gain (60) (39) 47
Loss on sale of fixed assets (126) (275) -
Penalty income on overdue accounts 149 165 192
Others 32 143 332
---- ---- ---
Total non-operating net (expenses) / income (5) (6) 571
==== ==== ===
|
In 2002, there is RMB255 (2001: RMB54) included in others being gain recognized on deemed disposal of shareholding in Aspire Holdings Limited, a non-wholly owned subsidiary of the Company. The Company has no intention to re-acquire the shares of this subsidiary. The loss on sale of fixed assets of RMB 205 in 2002 was included in other operating expenses - other expenses.
8 INCOME TAX
(i) No provision has been made for Hong Kong profits tax as there were no estimated Hong Kong assessable profits for the years ended December 31, 2000, 2001 and 2002.
(ii) The provision for the PRC enterprise income tax is based on a statutory rate of 33% of the assessable profit of the Group as determined in accordance with the relevant income tax rules and regulations of the PRC during the year, except for certain subsidiaries of the Company and certain operations of the subsidiaries located within special economic zones in the PRC, which enjoy a preferential rate of 30% and 15% respectively.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
8 INCOME TAX (CONTINUED)
Income tax in the consolidated statements of income represents:
Year ended December 31,
--------------------------------
2000 2001 2002
RMB RMB RMB
Provision for PRC enterprise income tax on
the estimated taxable profits for the year 8,371 12,153 17,724
Under/(over)-provision in respect of PRC
enterprise income tax for prior year 12 (20) (14)
----- ------ ------
8,383 12,133 17,710
Transfer (to)/from deferred tax (Note 17) (17) 1,570 (1,476)
----- ------ ------
8,366 13,703 16,234
===== ====== ======
|
The provision for income tax differs from the amount computed by applying the PRC statutory income tax rate of 33% to profit before tax and minority interests for the following reasons:
Year ended December 31,
-----------------------------------
2000 2001 2002
RMB RMB RMB
Expected PRC taxation at statutory tax rates 8,710 13,767 16,163
Non-taxable items
- Connection fee (36) - -
- Surcharge (28) - -
- Interest income (74) (32) (25)
Non-deductible expenses 422 142 851
Rate differential on PRC operations (718) (558) (859)
Rate differential on Hong Kong operations 32 165 229
Reversal of deferred taxation due to change of tax rate - 29 (97)
Tax losses not recognized for deferred tax - 203 242
Non-recognition of deferred taxes
- Generation of timing difference 423 519 533
- Reversal of timing difference (388) (565) (696)
Others 23 33 (107)
----- ------ ------
Income tax 8,366 13,703 16,234
===== ====== ======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
9 DIVIDENDS
Dividends attributable to the year:
Year ended December 31,
-------------------------------
2000 2001 2002
RMB RMB RMB
Final dividend proposed after the balance sheet date of
HK$0.32 (equivalent to RMB0.34) (2000 and 2001: Nil)
per share - - 6,678
==== ===== =====
|
The final dividend proposed after the balance sheet date has not been recognized as a liability at the balance sheet date.
10 ACCOUNTS RECEIVABLE
December 31,
----------------------
2001 2002
RMB RMB
Accounts receivable 9,701 10,367
Less: Allowance for doubtful accounts (3,973) (4,301)
------ ------
5,728 6,066
====== ======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
10 ACCOUNTS RECEIVABLE (CONTINUED)
The ageing of accounts receivable, net of allowance for doubtful accounts, is analyzed as follows:
December 31,
--------------------
2001 2002
RMB RMB
Within 30 days 5,100 5,150
31-60 days 443 580
61-90 days 185 336
----- -----
5,728 6,066
===== =====
|
Balances are due for payment within one month from the date of billing. Customers with balances that are overdue or exceed credit limits are required to settle all outstanding balances before any further phone calls can be made.
Allowance for doubtful accounts for the years is analyzed as follows:
RMB
At January 1, 2000 1,356
Acquired on acquisition of subsidiaries 2,533
Provision for the year 1,346
Written-off (1,175)
------
At December 31, 2000 4,060
Provision for the year 1,737
Written-off (1,824)
------
At December 31, 2001 3,973
Acquired on acquisition of subsidiaries 992
Provision for the year 1,601
Written-off (2,265)
------
At December 31, 2002 4,301
======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
11 OTHER RECEIVABLES
December 31,
-------------------
2001 2002
RMB RMB
Other receivables 1,189 1,590
Less: Allowance for doubtful accounts - (125)
----- -----
1,189 1,465
===== =====
|
Included in other receivables as at December 31, 2001 and 2002 are amounts due from the PRC fixed line telephone services providers, including China Telecommunications Corporation ("China Telecom") and its subsidiaries (collectively the "China Telecom Group") and China Network Communications Group Corporation ("China Netcom") and its subsidiaries (collectively the "China Netcom Group"), amounting to RMB227 and RMB108, representing primarily revenue collected on behalf of the Group. These balances are unsecured, non-interest bearing and repayable within one year.
Allowance for doubtful accounts for the years is analyzed as follows:
RMB
At January 1, 2000 -
Provision for the year -
Written-off -
---
At December 31, 2000 -
Provision for the year -
Written-off -
---
At December 31, 2001 -
Provision for the year 148
Written-off (23)
---
At December 31, 2002 125
===
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
12 AMOUNTS DUE FROM/TO ULTIMATE HOLDING COMPANY AND AMOUNT DUE TO IMMEDIATE HOLDING COMPANY
Amounts due from/to ultimate holding company are unsecured, non-interest bearing, repayable on demand and arose in the ordinary course of business.
At December 31, 2002, amount due to immediate holding company included in non-current liabilities primarily represented the balance of the purchase consideration for acquisition of subsidiaries as described in note 26(b), which is unsecured, bears interest at the rate of two year US dollar LIBOR swap rate per annum (at December 31, 2002: 3.801%) and is not expected to be settled within one year. The balance is due on July 1, 2017 and is subordinated to other senior debts owed by the Company from time to time including the fixed rate notes and convertible notes. The Company may make early payment of all or part of the balance at any time before the date without penalty.
The current portion of amount due to immediate holding company represented interest payable on the unpaid balance of the purchase consideration, which is expected to be settled within one year.
13 FIXED ASSETS
December 31,
--------------------------
2001 2002
RMB RMB
Land use rights and buildings 10,594 19,182
Telecommunications transceivers, switching
centers and other network equipment 127,392 202,537
Office equipment, furniture and fixtures and others 6,095 9,600
------- -------
144,081 231,319
Less: accumulated depreciation (38,873) (65,910)
------- -------
105,208 165,409
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
13 FIXED ASSETS (CONTINUED)
All of the Group's buildings are located outside Hong Kong.
The carrying value of fixed assets of the Group includes an amount of RMB6,836 and RMB111 in respect of assets held under capital lease as at December 31, 2001 and 2002, respectively. None of the leases include contingent rentals.
In connection with the Restructuring, pursuant to an approval document dated September 5, 1997 issued by China State-owned Assets Administration Bureau, the fixed assets of Guangdong Mobile and Zhejiang Mobile as of May 31, 1997 were valued by Zhongqihua Assets Appraisal Company ("ZAAC"), a firm of independent valuers registered in the PRC, on a depreciated replacement cost basis. The value of fixed assets of Guangdong Mobile and Zhejiang Mobile has been determined at RMB15,630 reflecting a surplus on revaluation of approximately RMB3,529.
In connection with the acquisition of Jiangsu Mobile, and pursuant to an approval document dated April 7, 1998 issued by China State-owned Assets Administration Bureau, the fixed assets of Jiangsu Mobile as of December 31, 1997 were valued by ZAAC on a depreciated replacement cost basis. The value of fixed assets of Jiangsu Mobile has been determined at RMB7,879 reflecting a surplus on revaluation of approximately RMB2,443.
In connection with the acquisition of Fujian Mobile, Henan Mobile and Hainan Mobile, and pursuant to an approval document dated September 27, 1999 issued by the Ministry of Finance, the fixed assets of Fujian Mobile, Henan Mobile and Hainan Mobile as of June 30, 1999 were valued by China International Engineering Consulting Corporation ("CIECC") on a depreciated replacement cost basis. The aggregate value of fixed assets of Fujian Mobile, Henan Mobile and Hainan Mobile has been determined at RMB10,684 reflecting a surplus on revaluation of approximately RMB391.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
13 FIXED ASSETS (CONTINUED)
In connection with the acquisition of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile and pursuant to an approval document dated August 28, 2000 issued by the Ministry of Finance, the fixed assets of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile as of June 30, 2000 were valued by China Assets Appraisal Corporation Ltd. ("CAAC") on a depreciated replacement cost basis. The aggregate value of fixed assets of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile has been determined at RMB37,252 reflecting a surplus on revaluation of approximately RMB4,823.
In connection with the acquisition of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile, and pursuant to an approval document dated May 15, 2002 issued by the Ministry of Finance, the fixed assets of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile as of December 31, 2001 were valued by China Enterprise Appraisals ("CEA") on a depreciated replacement cost basis. The aggregate value of fixed assets of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile has determined at RMB39,499 reflecting a net deficit on revaluation of approximately RMB833.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
13 FIXED ASSETS (CONTINUED)
The Group's land and buildings in Guangdong Mobile and Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile and Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile, and Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile were also valued separately by Chesterton Petty Limited, independent qualified valuers in Hong Kong as of May 31, 1997, December 31, 1997, June 30, 1999, June 30, 2000 and December 31, 2001 respectively. The values of such reports have been determined at approximately the same amounts as the ZAAC, CIECC, CAAC and CEA reports.
Other than revaluations carried out in compliance with relevant PRC rules and regulations, the Group has no plan to revalue its fixed assets on a regular basis.
The effect of the above five revaluations is to increase annual depreciation charges by approximately RMB646 (2001: approximately RMB1,098).
The historical cost net book value of the fixed assets of these subsidiaries in the Group's financial statements as of the respective revaluation dates and the revalued basis of these fixed assets are as follows:
Revalued
Net Book Value Amount
-------------- --------
RMB RMB
Land use rights and buildings 5,574 8,087
Telecommunications transceivers, switching
centers and other network equipment 92,176 100,090
Office equipment, furniture and fixtures and others 2,841 2,767
------- -------
100,591 110,944
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
14 GOODWILL
Positive
goodwill
carried in
Goodwill reserves
-------- ----------
RMB RMB
Cost:
Balance at beginning of year - 297,605
Addition arising on acquisition of subsidiaries 37,458 -
-------- ---------
Balance at end of year 37,458 297,605
-------- ---------
Accumulated amortization:
Balance at beginning of year - -
Amortization for the year 936 -
-------- ---------
936 -
Balance at end of year -------- ---------
Carrying amount:
At December 31, 2002 36,522 297,605
======== =========
At December 31, 2001 - 297,605
======== =========
|
15 INTEREST IN ASSOCIATES
December 31,
----------------
2001 2002
RMB RMB
Unlisted shares, at cost 37 37
Capital contributions, at cost 9 9
--- ---
46 46
Less: Provision for impairment (30) (30)
--- ---
16 16
=== ===
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
15 INTEREST IN ASSOCIATES (CONTINUED)
Details of the associates, all of which are unlisted corporate entities, are as follows:
Proportion of
Place of ownership
incorporation interest held Principal
Name of associate and operation by the subsidiary activity
China Motion United Hong Kong 30% Provision of
Telecom Limited telecommunication services
Shenzhen China Motion PRC 30% Provision of
Telecom United telecommunication services
Limited
Fujian Nokia Mobile PRC 50% Network planning and
Communication Technology optimizing construction-
Company Limited testing and supervising,
technology support,
development and training of
Nokia GSM 900/1800
Mobile Communication
System
|
16 INVESTMENT SECURITIES
December 31,
------------------
2001 2002
RMB RMB
Unlisted equity securities in the PRC, at cost 77 77
==== ====
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
17 DEFERRED TAX
Movements on deferred taxation comprise:
December 31,
-------------------
2001 2002
RMB RMB
Balance at beginning of year 3,046 1,476
Acquired on acquisition of subsidiaries - 619
Transferred (to)/from consolidated statements of income (Note 8) (1,570) 1,476
------ ------
Balance at end of year 1,476 3,571
====== ======
|
Deferred tax of the Group provided for are as follows:
December 31,
---------------------
2001 2002
RMB RMB
Deferred tax assets:
Provision for obsolete inventories 4 16
Write-down and write-off of fixed assets relating to network equipment 171 200
Amortization of deferred revenue 140 154
Income recognition on prepaid service fees 1,161 3,259
------ ------
1,476 3,629
Deferred tax liabilities:
Capitalized interest - (58)
------ ------
Net deferred tax assets 1,476 3,571
Less: Current portion of net deferred tax assets (1,362) (3,116)
------ ------
114 455
====== ======
|
Deferred tax assets of the Group not provided for are as follows:
December 31,
------------------
2001 2002
RMB RMB
Provision for doubtful accounts 1,204 1,362
===== =====
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
17 DEFERRED TAX (CONTINUED)
As described in Note 13, in connection with the Restructuring and the subsequent acquisitions, the fixed assets of Guangdong Mobile and Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile and Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile, and Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile were revalued on May 31, 1997, December 31, 1997, June 30, 1999, June 30, 2000 and December 31, 2001, respectively. As a result of such valuation, the fixed assets basis differences that gave rise to the potential deferred tax liabilities of these subsidiaries as of May 31, 1997, December 31, 1997, June 30, 1999, June 30, 2000 and December 31, 2001 amounting to RMB547, RMB149, RMB825, RMB1,809 and RMB2,011, respectively, were eliminated.
Additionally, the tax losses carried forward relating to Liaoning Mobile and Guangxi Mobile, and Chongqing and Sichuan Mobile of RMB72 and RMB378 were eliminated as of June 30, 2000 and December 31, 2001 respectively.
18 DEFERRED EXPENSES
Year ended December 31,
-----------------------
2001 2002
RMB RMB
Balance at beginning of year 164 180
Additions during the year 55 53
Less: Amortization for the year (39) (43)
----- ----
Balance at the end of year 180 190
===== ====
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
19 ACCOUNTS PAYABLE
Included in accounts payable as at December 31, 2001 and 2002 are amounts due to the China Telecom Group amounting to RMB1,725 and RMB2,119 respectively, representing primarily payables for leased lines and interconnection expenses.
The ageing analysis of accounts payable as at December 31 is analyzed as follows:
December 31,
---------------------
2001 2002
RMB RMB
Amounts payables in the next:
1 month or on demand 5,964 10,904
2-3 months 1,634 2,160
4-6 months 1,022 2,599
7-9 months 1,049 1,594
10-12 months 1,648 1,994
------ ------
11,317 19,251
====== ======
|
20 BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS
December 31,
-----------------------------------------------------------------------------
2001 2002
---------------------------------- ---------------------------------
Non- Non-
Current current Current current
liabilities liabilities Total liabilities liabilities Total
------------ ----------- ----- ----------- ------------ -----
Note RMB RMB RMB RMB RMB RMB
Bank loans (a) 4,319 5,680 9,999 6,243 2,613 8,856
Other loans (a) 212 247 459 1,889 10,063 11,952
Fixed rate notes (b) - 4,956 4,956 - 4,961 4,961
Convertible
notes (c) - 5,708 5,708 - 5,711 5,711
Bonds (d) - 5,000 5,000 - 13,000 13,000
----- ------ ------ ----- ------ ------
4,531 21,591 26,122 8,132 36,348 44,480
===== ====== ====== ===== ====== ======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
20 BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS (CONTINUED)
All of the above bank and other loans are unsecured.
At December 31, 2002, other loans include designated loans borrowed from China Mobile, the ultimate holding company, totalling RMB11,680, which bear interest rates between 3.45% to 3.57% with maturities in 2003 to 2004.
The Group's borrowings under short-term bank and other loans are used primarily to finance construction projects and generally consist of unsecured loans and are repayable in full on respective due dates with interest rates ranging from 5.02% to 7.29% at December 31, 2001 and from 3.45% to 7.5% at December 31, 2002. The Group's weighted average interest rate on short-term loans was 5.67% and 4.48% at December 31, 2001 and 2002, respectively. Included in short-term bank and other loans as of December 31, 2002, there is RMB2,500 syndicated loan. Guangdong Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile and Hainan Mobile (the "six subsidiaries") have provided joint and several guarantees in respect of these loans. Under these guarantees, the six subsidiaries will not be permitted to incur other indebtedness or contingent liability without prior written consent of the relevant lenders if the aggregate outstanding amount of their indebtedness and contingent liabilities exceeds 120% of their collective owners' equity. For the years presented, the six subsidiaries have complied with their debt covenants.
(a) LONG-TERM BANK AND OTHER LOANS
December 31,
----------------
2001 2002
Interest rate and final maturity RMB RMB
RENMINBI DENOMINATED BANK LOANS:
For construction of Floating interest rates ranging from 5.22% to
telecommunications network 6.03% per annum as of December 31, 2002 with
maturities 2003 to 2008 (i) 2,245 2,899
Fixed interest rates ranging from 5.46% to 5.94%
per annum as of December 31, 2002 with
maturities in 2003 3,449 785
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31,2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
20 BANK LOANS AND OTHER INTEREST - BEARING BORROWINGS (CONTINUED)
(a) LONG-TERM BANK AND OTHER LOANS (CONTINUED)
December 31,
--------------------
2001 2002
Interest rate and final maturity RMB RMB
RENMINBI DENOMINATED BANK LOANS:
For working capital Floating interest rate ranging from 4.94% to
5.49% per annum as of December 31, 2002 with
maturities through 2005 2,500 2,950
Fixed interest rates ranging from 5.35% to 5.94%
per annum as of December 31, 2001 with
maturities 2003 to 2004 70 -
RENMINBI DENOMINATED OTHER LOANS:
For construction of Floating interest rate at 3.57% per annum as of
telecommunications December 31, 2002 with maturities in 2004
network - 9,980
US DOLLAR DENOMINATED BANK LOANS:
For construction of Floating interest rate at 3.68% per annum as of
telecommunications December 31, 2002 with maturities in 2003
network 33 69
Fixed interest rate ranging from 5.25% to 5.75%
per annum as of December 31, 2002 with
maturities through 2005 - 188
US DOLLAR DENOMINATED OTHER LOANS:
For construction of Floating interest rates ranging from 4.36% to
telecommunications 8.24% per annum as of December 31, 2001
network with maturities through 2002 46 -
Fixed interest rate at 7.5% per annum as of
December 31, 2002 with maturities through 2004 413 248
------ ------
Total long-term loans 8,756 17,119
Less: current portion (2,829) (4,443)
------ ------
5,927 12,676
====== ======
|
(i) At December 31, 2002, bank loans amounting to RMB750 was guaranteed by Hebei Provincial Telecommunications Company ("PTC").
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31,2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
20 BANK LOANS AND OTHER INTEREST - BEARING BORROWINGS (CONTINUED)
(a) LONG-TERM BANK AND OTHER LOANS (CONTINUED)
The aggregate maturities of long-term bank and other loans subsequent to December 31, 2002 are as follows:
RMB
2003 4,443
2004 11,624
2005 942
2006 40
2007 40
Thereafter 30
------
17,119
======
|
Interest expense, net of the amounts capitalized, is as follows:
Year ended December 31,
------------------------
2000 2001 2002
RMB RMB RMB
Interest incurred 477 1,068 1,213
Interest element of capital lease 52 129 47
Interest capitalized (119) (88) (181)
---- ----- -----
410 1,109 1,079
Interest expenses of fixed rate notes 393 394 394
Interest expenses of convertible notes 21 129 128
Interest expenses of bonds - 108 251
---- ----- -----
Interest expense 824 1,740 1,852
==== ===== =====
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31,2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
20 BANK LOANS AND OTHER INTEREST - BEARING BORROWINGS (CONTINUED)
(b) FIXED RATE NOTES
On November 2, 1999, the Company issued unsecured fixed rate notes (the "FRN") with a principal amount of US$600 at an issue price equal to 99.724% of the principal amount of the FRN, due on November 2, 2004. The FRN bear interest at the rate of 7.875% per annum and such interest is payable semi-annually on May 2 and November 2 of each year, commencing May 2, 2000. In accordance with the covenants of the FRN, there is a limitation on the Group's pledges, sale and leaseback transactions and the ability of the Company's subsidiaries to incur debt. So long as any notes remain outstanding, whereas no additional debt is allowed to incur by any subsidiaries if the aggregate debt of the subsidiaries exceeds 120% of the consolidated adjusted earnings before interest, tax, depreciation, amortization and write-down and write-off of fixed assets ("adjusted EBITDA") for the most recently completed 12 months period. For the years presented, the Group has complied with the above covenants.
(c) CONVERTIBLE NOTES
(i) On November 3, 2000, the Company issued convertible notes (the "CN") in an aggregate principal amount of US$690 at an issue price equal to 100% of the principal amount of the CN. The CN bear interest at the rate of 2.25% per annum, payable semi-annually on May 3 and November 3 of each year commencing May 3, 2001. Unless previously redeemed, converted or purchased and cancelled, the CN will be redeemed at 100% of the principal amount, plus any accrued and unpaid interest on November 3, 2005. The CN are unsecured, senior and unsubordinated obligations of the Company.
(ii) The CN are convertible at any time on or after December 3, 2000 and before the close of business on the third business day prior to the earlier of (1) the maturity date of November 3, 2005 or (2) the redemption date fixed for early redemption, at an initial conversion price, subject to adjustment in certain events, of HK$59.04 per share.
(iii) During the year, no CN were converted into ordinary shares of the Company.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31,2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
20 BANK LOANS AND OTHER INTEREST - BEARING BORROWINGS (CONTINUED)
(c) CONVERTIBLE NOTES (CONTINUED)
(iv) In accordance with the covenants given by the Company given to the note holders, there is a limitation on the Group's pledges, sale and leaseback transactions and the ability of the Company's subsidiaries to incur debt. So long as any notes remain outstanding, whereas no additional debt is allowed to incur by any subsidiaries if the aggregate debt of the subsidiaries exceeds 120% of the consolidated adjusted EBITDA for the most recently completed 12 months period. For the years presented, the Group has complied with the above covenants.
(d) BONDS
(i) On June 18, 2001, Guangdong Mobile issued guaranteed bonds with a principal amount of RMB5,000 (the "Ten-year Bonds") at an issue price equal to the face value of the bonds.
The Ten-year Bonds bear interest at a floating rate, adjusted annually from the first day of each interest payable year and payable annually. The bonds, redeemable at 100% of the principal amount, will mature on June 18, 2011 and the interest will be accrued up to June 17, 2011. Incidental costs incurred in relation to the issue of the bonds are amortized on a straight-line basis over the period from the date of issue to the date of maturity.
(ii) On October 28, 2002, Guangdong Mobile issued five-year guaranteed bonds (the "Five-year Bonds") and fifteen-year guaranteed bonds (the "Fifteen-year Bonds"), with a principal amount of RMB3,000 and RMB5,000 respectively, at an issue price equal to the face value of the bonds.
The Five-year Bonds and the Fifteen-year Bonds bear interest at the rate of 3.5% per annum and 4.5% per annum respectively and payable annually. They are redeemable at 100% of the principal amount and will mature on October 28, 2007 and October 28, 2017 and the interest will be accrued up to October 27, 2007 and October 27, 2017 respectively.
The Company has issued a joint and irrevocable guarantee (the "Guarantee") for the performance of the above bonds. China Mobile has also issued a further guarantee in relation to the performance by the Company of its obligations under the Guarantee. The maximum exposure of the Guarantee is the face value of the bonds which have been reflected as liabilities in the consolidated balance sheet as at December 31, 2002.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31,2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
21 OBLIGATIONS UNDER CAPITAL LEASE
(i) Hainan Mobile entered into certain capital lease agreements to finance the purchase of telecommunications equipment. The leases are denominated in Renminbi and the lease term is expiring in 2003. The legal title of the equipment will be transferred to Hainan Mobile when all outstanding lease payments are paid.
(ii) The following is a schedule by years of future minimum lease payments under capital lease together with the present value of the net minimum lease payments as of December 31, 2002:
RMB
2003 71
---
Total minimum lease payments 71
Less: Amount representing interest (3)
---
Present value of net minimum lease payments 68
Less: Obligations under capital lease - current portion (68)
---
-
===
|
(iii) As of December 31, 2002, capital lease payments of RMB68 is guaranteed by Hainan PTC.
22 ACCRUED EXPENSES AND OTHER PAYABLES
December 31,
------------------
2001 2002
RMB RMB
Other payables 6,744 5,355
Receipts in advance 1,674 8,066
Accrued salaries, wages and benefits 1,792 2,026
Accrued expenses 630 1,013
------ ------
10,840 16,460
====== ======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
23 DEFERRED REVENUE
Deferred revenue includes primarily prepaid service fees received from subscribers which is recognized as income when the cellular telephone services are rendered upon actual usage by subscribers.
Deferred revenue also includes income from assignment of rights. The balance at year end represents the unamortized portion of proceeds received by Guangdong Mobile from certain distributors of telecommunications services pursuant to agreements under which Guangdong Mobile sold certain mobile phone numbers to these distributors at RMB0.0092 each, in return for assigning to such distributors the rights to certain revenue such as usage fees, monthly fees, connection fees, telephone number selection fees and 50% value-added services fees from those subscribers over a period of seven years. The distributors have no recourse to the Group under the relevant agreements and the Group retains no credit risk from such subscribers during the seven-year period. The proceeds received by Guangdong Mobile have been accounted for as deferred revenue and are amortized over a period of seven years. After the expiration of the relevant agreements, the rights to income from these subscribers will revert to the Group.
December 31,
-------------------
2001 2002
RMB RMB
Balance at beginning of year 3,654 4,237
Additions on acquisition of subsidiaries - 1,022
Additions during the year 23,191 35,907
Recognized in the consolidated statements of income (22,608) (33,537)
------- -------
Balance at end of year 4,237 7,629
Less: Current portion (3,417) (6,760)
------- -------
Non-current portion 820 869
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
24 COMMITMENTS AND CONTINGENCIES
(a) OPERATING LEASES
Future minimum lease payments as of December 31, 2002 under non-cancellable operating leases having initial or remaining lease terms of more than one year are as follows:
RMB
2003 6,088
2004 2,751
2005 1,927
2006 1,089
2007 861
Thereafter 2,002
------
14,718
======
|
(b) CAPITAL COMMITMENTS
As of December 31, 2002, the Group had capital commitments as follows:
RMB
Authorized and contracted for 6,437
Authorized but not contracted for 26,690
------
33,127
======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
25 EMPLOYEE AND RETIREMENT BENEFITS
(a) As stipulated by the regulations of the PRC, the subsidiaries in the PRC participate in basic defined contribution pension plans organized by their respective Municipal Governments under which they are governed.
Employees in the PRC are entitled to retirement benefits equal to a fixed proportion of their salary at their normal retirement age. The Group has no other material obligation for payment of basic retirement benefits beyond the annual contributions which are calculated at a rate based on the salaries, bonuses and certain allowances of its employees.
Other than the above, certain subsidiaries also participate in supplementary defined contribution retirement plans managed by independent insurance companies whereby the subsidiaries are required to make contributions to the retirement plans at fixed rates of the employees' salary costs.
Expenses incurred by the subsidiaries in connection with the retirement scheme were RMB335, RMB287 and RMB451, respectively, for three years ended December 31, 2000, 2001 and 2002, respectively.
(b) The Group also operates a Mandatory Provident Fund Scheme ("the MPF scheme") under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the scheme at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$0.02. Contributions to the scheme vest immediately.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
25 EMPLOYEE AND RETIREMENT BENEFITS (CONTINUED)
(c) Pursuant to PRC regulation and prior to the Restructuring and the subsequent acquisitions, the subsidiaries were required to provide staff quarters to eligible employees and their immediate families. The Group has established separate employee housing reform schemes in order to comply with the regulation at the provincial level. Under such schemes, the Group is required to either purchase or build housing which is to be sold or rented to eligible employees. Through May 31, 1997, housing provided under the schemes was shared between Guangdong Mobile and the Guangdong PTA, in Guangdong Mobile's case, and purchased or built entirely by the Zhejiang PTA, in Zhejiang Mobile's case. Prior to the acquisitions of Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Shandong Mobile, Guangxi Mobile, Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile and Shaanxi Mobile, housing provided under the schemes were purchased or built entirely by the relevant PTAs or PTCs, except Liaoning Mobile and Shanxi Mobile where prior to the acquisition housing provided under the schemes were provided by Liaoning Mobile and Shanxi Mobile respectively. All previous costs incurred by the relevant PTAs or PTCs have not been charged to the Group.
Following the Restructuring and the subsequent acquisitions, the Group had accrued RMB230 for such housing schemes in respect of employees through December 31, 2000. Since the housing schemes had been terminated effective from January 1, 2001, no further cost was incurred in 2001 and subsequent year.
26 RELATED PARTY TRANSACTIONS
(a) Companies are considered to be related if one company has the ability, directly or indirectly, to control the other company or exercise significant influence over the other company in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
The Group has significant transactions with China Mobile (the Company's ultimate holding company) and its subsidiaries, other than the Group, (the "China Mobile Group").
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
As a result of the restructuring in May 2000, the MII ceased to have controlling interests in China Mobile, the DGT and the PTCs. However, the MII continues in its capacity as the industry regulator providing policy guidance and exercising regulatory authority over all telecommunications services providers in the PRC. China Telecom was set up as a result of the restructuring to operate the fixed line telephone networks in the PRC previously operated by the DGT and the PTCs, and is owned by the PRC government. As such, the MII or entities under the control of the MII including the DGT and the PTCs, and the China Telecom Group since its formation, are no longer considered to be related parties of the Group since May 2000.
The following is a summary of principal related party transactions entered into by the Group with China Mobile Group since its formation, and transactions which were carried out by the Group with the MII and the entities under the control of the MII including the DGT and the PTCs prior to May 2000.
Year ended December 31,
------------------------------------------------------
Note 2000 2001 2002
RMB RMB RMB
Interconnection revenue (i) 1,744 1,793 2,329
Interconnection charges (ii) 2,864 1,772 2,290
Leased line charges (iii) 2,464 278 484
Roaming revenue (iv) 2,674 4,688 5,838
Roaming expenses (v) 2,076 4,559 6,043
Spectrum fees (vi) 15 18 224
Operating lease charges (vii) 226 138 189
Sales commission expenses (viii) 248 - -
Debt collection service fees (viii) 91 - -
Roaming billing processing fees (viii) 148 201 225
Equipment maintenance service fees (ix) 1 46 54
Rental charges of synchronized clock ports (x) 3 - -
Construction and related service fees (xi) 20 161 223
Purchase of transmission tower and
transmission tower-related service and
antenna maintenance service fees (xii) 16 55 87
Prepaid card sales commission income (xiii) 114 241 197
Prepaid card sales commission expenses (xiii) 99 315 195
Technology platform development and
maintenance service income (xiv) - - 39
Telecommunications lines maintenance service
fees (xv) - - 22
Interest paid / payable (xvi) - - 645
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES:
(i) Interconnection revenue represents the amounts received or receivable from the China Mobile Group in respect of long distance calls made by non-Group's subscribers.
For the year ended December 31, 2000, interconnection revenue also included amounts received or receivable from the DGT in respect of long distance calls made by non-subscribers in Guangdong, Zhejiang, Jiangsu, Fujian, Henan and Hainan provinces ("the relevant provinces") and amounts received or receivable from the Guangdong PTC, the Zhejiang PTC, the Jiangsu PTC, the Fujian PTC, the Henan PTC and the Hainan PTC ("the relevant PTCs") in respect of long distance calls made between the Group's cellular networks and the fixed line networks in the relevant provinces and outbound calls originating from the fixed line networks in the relevant provinces which terminate on GSM network operators in other provinces in the PRC prior to May 2000.
(ii) Interconnection charges represent the amounts paid or payable to the China Mobile Group in respect of long distance calls made by the Group's subscribers roaming outside their registered provinces.
For the year ended December 31, 2000, interconnection expenses also included amounts paid or payable to the DGT in respect of long distance calls made by the Group's subscribers in the relevant provinces roaming outside their registered provinces and amounts paid or payable to the relevant PTCs in respect of calls made between the Group's cellular network, the fixed line networks in the relevant provinces and other GSM network operators in other provinces in the PRC prior to May 2000.
(iii) Leased line charges represent expenses paid or payable to the China Mobile Group for the use of inter-provincial leased lines which link the Group's mobile switching centers together and with other mobile switching centers of the China Mobile Group.
For the year ended December 31, 2000, leased line charges also included expenses paid or payable to the relevant PTCs for the use of leased line prior to May 2000.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES: (CONTINUED)
(iv) A cellular telephone user using roaming services is charged at the respective roaming usage rate for roaming in calls, in addition to applicable long distance charges. Roaming revenue represents domestic and international roaming in usage charges from non-subscribers received or receivable from the relevant domestic and international cellular telephone operators through the China Mobile Group.
(v) A cellular telephone user using roaming services is charged at the respective roaming usage rate for roaming out calls, in addition to applicable long distance charges. Roaming expenses represent the amount of domestic and international roaming out charges received or receivable from subscribers which is to be remitted to the relevant domestic and international cellular telephone operators for their share of the roaming revenue through the China Mobile Group.
(vi) Spectrum fees represent the spectrum usage fees paid or payable to the China Mobile Group for the usage of the frequency bands allocated to the Company's subsidiaries in the PRC.
(vii) Operating lease charges represent the rental and property management fees paid or payable to the subsidiaries of China Mobile for operating leases in respect of land and buildings and others.
For the year ended December 31, 2000, operating lease charges also included rental and property management fee paid or payable to the relevant PTCs prior to May 2000.
(viii) The Group entered into certain services agreements in respect of marketing services with authorized dealers, debt collection services and roaming billing processing with subsidiaries of China Mobile or the relevant PTCs prior to May 2000.
Debt collection service fees represent the amounts paid or payable to subsidiaries of China Mobile for their provision of debt collection services to the Company's subsidiaries.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES: (CONTINUED)
Roaming billing processing fees represent the amounts paid or payable to the China Mobile Group for the provision of the roaming billing processing services to the Company's subsidiaries.
For the year ended December 31, 2000, sales commission, debt collection service fees and roaming billing processing fees also included amounts paid or payable to the relevant PTCs for services rendered in the relevant provinces prior to May 2000.
(ix) Equipment maintenance service fees represent the amount paid or payable to subsidiaries of China Mobile for the provision of the maintenance services to the Company's subsidiaries.
For the year ended December 31, 2000, equipment maintenance service fees included amounts paid or payable to Fujian PTC for services rendered in the relevant province prior to May 2000.
(x) Rental charges of synchronized clock ports represent expenses paid or payable to the relevant PTCs for leasing of synchronized clock ports by the Company's subsidiaries prior to May 2000.
(xi) Construction and related service fees represent the amount paid or payable to subsidiaries of China Mobile for the provision of telecommunications projects plannings, design and construction services and telecommunications lines and pipelines construction services to the Company's subsidiaries.
(xii) This represents payment made by Hebei Mobile to acquire transmission towers from relevant subsidiary of China Mobile and expenses paid or payable to relevant subsidiary of China Mobile for the provision of transmission tower related services and antenna maintenance services provided to Hebei Mobile; and payment made by the Group to Hubei Communications Services Company, a subsidiary of China Mobile in respect of the purchase of transmission towers and for the provision of transmission tower related services.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES: (CONTINUED)
(xiii) Prepaid card sales commission income and commission expenses represent handling charges received/receivable from subsidiaries of China Mobile to the Company's subsidiaries or paid/payable by the Company's subsidiaries to subsidiaries of China Mobile in respect of prepaid card services.
(xiv) Technology platform development and maintenance service income represents the amounts received or receivable from China Mobile in respect of equipment charges, systems integration fees, software licensing fees, technical support fees and/or major overhaul charges for the mobile information service center platform.
(xv) Telecommunications lines maintenance service fees represent the amount paid or payable by Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile to the relevant subsidiaries of China Mobile for the provision of telecommunications lines maintenance services.
(xvi) Interest paid/payable represents the interest paid or payable to China Mobile and CMHK (BVI) in respect of the designated loans borrowed and the balance of purchase consideration for acquisition of subsidiaries.
(b) Pursuant to a resolution passed at the extraordinary general meeting held on June 24, 2002, the Company acquired the entire issued share capital of Anhui Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI, Sichuan Mobile BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile BVI and Shanxi Mobile BVI from CMHK (BVI), the immediate holding company of the Company, for a total consideration of US$8,573 (RMB equivalent 70,959). The consideration was satisfied by a cash payment of RMB49,248 and allotment of shares to CMHK (BVI) amounted to HK$20,458 (RMB equivalent 21,711). The only assets of each of Anhui Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI, Sichuan Mobile BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile BVI and Shanxi Mobile BVI are their interests in the entire equity of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile, Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile, respectively.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
26 RELATED PARTY TRANSACTIONS (CONTINUED)
Pursuant to the ordinary resolution passed by the Company's shareholders on November 10, 2000, the Company acquired the entire issued share capital of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI from CMHK (BVI), the immediate holding company of the Company, for a total consideration of HK$256,021 (RMB equivalent 271,485). The consideration was satisfied by a cash payment of HK$74,609 (RMB equivalent 79,116) and allotment of shares to CMHK (BVI) amounted to HK$181,412 (RMB equivalent 192,369). The only assets of each of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI are their interests in the entire equity of Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile, respectively.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY
SHARE CAPITAL
Nominal
Number of amount of
ordinary Each ordinary
shares share Amount
HK$
AUTHORIZED:
Balance at December 31, 2001 and 2002 30,000,000,000 HK$0.10 3,000
============== ======
ISSUED AND FULLY PAID:
Balance at January 1, 2001 18,605,312,241 HK$0.10 1,861
Shares issued under share option scheme 93,000 HK$0.10 -
-------------- ------
Balance at December 31, 2001 18,605,405,241 1,861
============== ======
RMB
equivalent 1,986
======
Balance at January 1, 2002 18,605,405,241 HK$0.10 1,861
Issue of new shares 236,634,212 HK$0.10 24
Issue of consideration shares for acquisition
of subsidiaries 827,514,446 HK$0.10 82
Shares issued under share option scheme 2,100,000 HK$0.10 -
-------------- ------
Balance at December 31, 2002 19,671,653,899 1,967
============== ======
RMB
equivalent 2,099
======
|
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY (CONTINUED)
SHARE CAPITAL (CONTINUED)
The Company was established in Hong Kong on September 3, 1997 as a limited company, with a registered share capital of HK$10,000 divided into 100,000 shares of HK$0.10 each, two of which were issued and credited as fully paid.
At an extraordinary general meeting of the Company held on September 27, 1997,
(i) the authorized share capital of the Company was increased from HK$10,000 to HK$1,600,000,000 by the creation of an additional 15,999,900,000 shares of HK$0.10 each; and
(ii) 9,009,999,998 shares were credited as fully paid and issued to CMHK (BVI) for the transfer of interests in Guangdong Mobile and Zhejiang Mobile to the Company.
Pursuant to the resolutions passed on October 21, 1997, the Company issued 2,600,000,000 shares of HK$0.10 each at HK$11.68 per share and the shares were listed on the New York Stock Exchange and The Stock Exchange of Hong Kong Limited on October 22, 1997 and October 23, 1997, respectively. On November 7, 1997, the Company issued 170,788,000 shares of HK$0.10 each at HK$11.68 per share by way of a placing among professional and institutional investors.
Pursuant to ordinary resolutions passed at directors' meetings held on November 1, 1999 and November 3, 1999 respectively, the Company issued 560,700,000 and 84,104,000 ordinary shares of HK$0.10 each to professional and institutional investors, at a consideration of HK$24.10 per share, for financing the acquisition of Fujian Mobile BVI, Henan Mobile BVI and Hainan Mobile BVI.
Pursuant to an ordinary resolution passed at an extraordinary general meeting held on November 11, 1999, 1,273,195,021 ordinary shares of HK$0.10 each were issued and credited as fully paid to CMHK (BVI), at a consideration of HK$24.10 per share as part of the consideration for the acquisition of Fujian Mobile BVI, Henan Mobile BVI and Hainan Mobile BVI.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY (CONTINUED)
SHARE CAPITAL (CONTINUED)
Pursuant to resolutions passed at directors' meetings held on November 2, 2000 and November 8, 2000 respectively, the Company issued 1,068,396,405 and 47,247,440 ordinary shares of HK$0.10 each to professional and institutional investors, at a consideration of HK$48 per share, for financing the acquisition of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI.
Pursuant to ordinary resolutions passed at an extraordinary general meeting held on November 10, 2000, the Company's authorized share capital was increased to HK$3,000,000,000 by the creation of an additional 14,000,000,000 ordinary shares of HK$0.10 each, ranking pari passu with the existing shares of the Company, and 3,779,407,375 ordinary shares of HK$0.10 each were issued and credited as fully paid to CMHK (BVI), at a consideration of HK$48 per share as part of the consideration for the acquisition of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI.
Pursuant to a resolution passed at a directors' meeting held on May 16, 2002, the Company issued 236,634,212 ordinary shares of HK$0.10 each to Vodafone Holdings (Jersey) Limited, at a consideration of HK$24.7217 per share, for financing the acquisition of Anhui Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI, Sichuan Mobile BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile BVI and Shanxi Mobile BVI.
Pursuant to an ordinary resolution passed at an extraordinary general meeting held on June 24, 2002, 827,514,446 ordinary shares of HK$0.10 each were issued and credited as fully paid to CMHK (BVI) at HK$24.7217 per share as part of the consideration of the acquisition of Anhui Mobile BVI, Jiangxi Mobile BVI, Chongqing Mobile BVI, Sichuan Mobile BVI, Hubei Mobile BVI, Hunan Mobile BVI, Shaanxi Mobile BVI and Shanxi Mobile BVI.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY (CONTINUED)
RESERVES
Capital reserve
As mentioned in Note 1, this amount represents the total of the following:
- the additional earnings of Guangdong Mobile and Zhejiang Mobile from June 1, 1997 to September 26, 1997, the completion date of the Restructuring (RMB1,132);
- goodwill arising on the acquisition of Jiangsu Mobile BVI and Jiangsu Mobile on June 3, 1998 (RMB15,622), which has been eliminated against capital reserve immediately upon acquisition;
- goodwill arising on the acquisition of Fujian Mobile BVI, Henan Mobile BVI, Hainan Mobile BVI, Fujian Mobile, Henan Mobile and Hainan Mobile on November 11, 1999 (RMB42,440), which has been eliminated against capital reserve immediately upon acquisition; and
- goodwill arising on the acquisition of Beijing Mobile BVI, Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong Mobile BVI, Guangxi Mobile BVI, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile on November 12, 2000 (RMB239,540), which has been eliminated against capital reserve immediately upon acquisition.
PRC statutory reserves
PRC statutory reserves include general reserve, enterprise expansion fund, statutory surplus reserve and statutory public welfare fund.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY (CONTINUED)
RESERVES (CONTINUED)
PRC statutory reserves (Continued)
In accordance with Accounting Regulations for Business Enterprises, foreign investment enterprises in the PRC are required to transfer at least 10% of their profit after taxation, as determined under accounting principles generally accepted in the PRC ("PRC GAAP") to the general reserve until the balance of the general reserve is equal to 50% of their registered capital. Moreover, they are required to transfer a certain percentage of their profit after taxation, as determined under PRC GAAP, to the enterprise expansion fund. During the year, appropriations were made by each of the above subsidiaries to the general reserve and the enterprise expansion fund each at 10% of their profit after taxation determined under PRC GAAP.
The general reserve can be used to make good losses and to increase the capital of the subsidiaries while the enterprise expansion fund can be used to increase the capital of the subsidiaries, to acquire fixed assets and to increase current assets.
At December 31, 2000, Shanghai Mobile has not yet registered as a wholly-foreign owned enterprise. As a result, appropriations were made by Shanghai Mobile, according to its Articles of Association to the statutory surplus reserve and the statutory public welfare fund both at 10% of its profit after taxation determined under PRC GAAP during the year ended December 31, 2000.
Statutory surplus reserve can be used to make good previous years' losses, if any, and may be converted into paid-up capital, provided that the balance after such conversion is not less than 25% of the registered capital of the subsidiaries. Statutory public welfare fund can only be utilized on capital items for the collective benefits of the employees such as the construction of staff quarters and other staff welfare facilities. This reserve is non-distributable other than in liquidation.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
27 SHAREHOLDERS' EQUITY (CONTINUED)
RESERVES (CONTINUED)
PRC statutory reserves (Continued)
At December 31, 2001 and 2002, the balances of the general reserve, enterprise expansion fund, statutory surplus reserve and statutory public welfare fund were RMB5,766 and RMB9,577, RMB11,590 and RMB14,905, RMB181 and RMB99 and RMB139 and RMB133, respectively.
Distributable reserves
At December 31, 2001 and 2002, the amount of distributable reserves of the Company amounted to RMB6,780 and RMB23,430.
28 EQUITY COMPENSATION BENEFITS
Pursuant to a resolution passed at an annual general meeting held on June 24, 2002, the share option scheme established on October 8, 1997 (the "Old Scheme") was terminated and a new share option scheme (the "New Scheme") was adopted.
Under the Old Scheme, the directors of the Company may, at their discretion, invite employees, including executive directors of the Company or any of its subsidiaries, to take up options to subscribe for shares of the Company. Under the New Scheme, the directors of the Company may, at their discretion, invite employees, including executive directors and non-executive directors of the Company, any of its holding companies and any of their respective subsidiaries and any entity in which the Company or any of its subsidiaries holds any equity interest, to take up options to subscribe for shares of the Company.
The maximum aggregate number of shares which can be subscribed pursuant to options that are or may be granted under the above schemes equals to 10% of the total issued share capital of the Company as at the date of adoption of the New Scheme. The consideration payable for the grant of each option is HK$1.00.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
28 EQUITY COMPENSATION BENEFITS (CONTINUED)
For options granted before September 1, 2001 under the Old Scheme, the exercise price of options was determined by the directors of the Company at their discretion provided that such price may not be set below a minimum price which is the higher of:
(i) the nominal value of a share; and
(ii) 80% of the average of the closing price of the share on The Stock Exchange of Hong Kong Limited (the "SEHK") on the five trading days immediately preceding the date on which the option was granted.
With effect from September 1, 2001, the SEHK requires that the exercise price of options to be at least the higher of the nominal value of a share, the closing price of the shares on the SEHK on the date on which the option was granted and the average closing price of the shares on the SEHK for the five trading days immediately preceding the date on which the option was granted.
For options granted under the New Scheme, the exercise price of options shall be determined by the directors of the Company at their discretion provided that such price may not be set below a minimum price which is the highest of:
(i) the nominal value of a share;
(ii) the closing price of the shares on the SEHK on the date on which the option was granted; and
(iii) the average closing price of the shares on the SEHK for the five trading days immediately preceding the date on which the option was granted.
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
28 EQUITY COMPENSATION BENEFITS (CONTINUED)
Under both the Old Scheme and the New Scheme, the term of the option is determined by the directors at their discretion, provided that all options shall be exercised within 10 years after the adoption of the scheme (in the case of the Old Scheme) and within 10 years after the date on which the option is granted (in the case of the New Scheme).
During the year ended December 31, 2001, share options involving a total number of 76,773,000 were granted under the Old Scheme to certain directors and employees of the Company. During the year ended December 31, 2002, share options involving a total number 150,476,500 ordinary shares were granted under the New Scheme to certain directors and employees of the Company and no options were granted under the Old Scheme.
During the year ended December 31, 2001 and 2002, options were exercised to subscribe for 93,000 and 2,100,000 ordinary shares of HK$0.10 each at a total consideration of HK$3.5 (RMB equivalent 3.7) and HK$23.3 (RMB equivalent 24.7).
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
28 EQUITY COMPENSATION BENEFITS (CONTINUED)
At December 31, 2001 and 2002, the outstanding options were as follows:
Price per
share to be
Normal period during paid on Number of shares
which options exercise of involved in the options
Date of options granted exercisable options outstanding at the year end
AT DECEMBER 31, 2002
November 26, 1999 November 26, 1999 HK$33.91 3,500,000
to October 7, 2007
November 26, 1999 November 26, 2002 HK$33.91 3,500,000
to October 7, 2007
April 25, 2000 April 25, 2002 to HK$45.04 15,161,000
October 7, 2007
April 25, 2000 April 25, 2005 to HK$45.04 15,161,000
October 7, 2007
June 22, 2001 June 22, 2003 HK$32.10 37,719,750
to October 7, 2007
June 22, 2001 June 22, 2006 HK$32.10 37,719,750
to October 7, 2007
July 3, 2002 July 3, 2004 HK$22.85 75,104,500
to July 2, 2012
July 3, 2002 July 3, 2007 HK$22.85 75,104,500
to July 2, 2012
|
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
28 EQUITY COMPENSATION BENEFITS (CONTINUED)
Price per
share to be
Normal period during paid on Number of shares
which options exercise of involved in the options
Date of options granted exercisable options outstanding at the year end
AT DECEMBER 31, 2001
March 9, 1998 March 9, 1998 HK$11.10 2,100,000
to March 8, 2006
November 26, 1999 November 26, 1999 HK$33.91 3,500,000
to October 7, 2007
November 26, 1999 November 26, 2002 HK$33.91 3,500,000
to October 7, 2007
April 25, 2000 April 25, 2002 to HK$45.04 15,264,000
October 7, 2007
April 25, 2000 April 25, 2005 to HK$45.04 15,264,000
October 7, 2007
June 22, 2001 June 22, 2003 HK$32.10 38,111,500
to October 7, 2007
June 22, 2001 June 22, 2006 HK$32.10 38,111,500
to October 7, 2007
|
China Mobile (Hong Kong) Limited Consolidated Financial Statements For the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
29 FOREIGN CURRENCY EXCHANGE
The Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must take place through the People's Bank of China or other institutions authorized to buy and sell foreign exchange or at a swap center.
Currently the Company's subsidiaries established in the PRC are able to purchase foreign exchange for settlement of "current account transactions" (as defined in the applicable regulations), including payment of dividends without the approval of the State Administration of Foreign Exchange ("SAFE"). However, there can be no assurance that the current authorization for foreign investment enterprises to retain their foreign exchange to satisfy foreign exchange liabilities or to pay dividends in the future will not be limited or eliminated or that the subsidiaries of the Company will be able to obtain sufficient foreign exchange to pay dividends or satisfy their foreign exchange requirements. Foreign exchange transactions under the capital account continue to be subject to limitations and require approvals of the SAFE, which could affect the ability of the Company's subsidiaries established in the PRC to obtain foreign exchange through debt or equity financing, including by means of loans or capital contribution from the Company.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
30 PRINCIPAL SUBSIDIARIES
Details of the Company's principal subsidiaries are as follows:
Place and
date of Attributable
incorporation/ Authorized, issued and equity
Name of company establishment paid up capital interest % Principal activities
---------------------------------------------------------------------------------------------------------------------------
Authorized Issued and paid up
Guangdong Mobile PRC - RMB 5,595 100% Cellular telephone
September operator
28, 1988
Zhejiang Mobile PRC - RMB 2,118 100% Cellular telephone
February 2, operator
1996
Jiangsu Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
March 6, 1998 at HK$1 company
Jiangsu Mobile PRC - RMB 2,800 100% Cellular telephone
December 10, operator
1992
Fujian Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
1999
Fujian Mobile PRC - RMB 5,247 100% Cellular telephone
September 7, operator
1999
Henan Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September at HK$1 company
1, 1999
Henan Mobile PRC - RMB 4,368 100% Cellular telephone
August 6, operator
1999
Hainan Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
1999
Hainan Mobile PRC - RMB 643 100% Cellular telephone
August 19, operator
1999
Beijing Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Beijing Mobile PRC - RMB6,125 100% Cellular telephone
July 26, operator
2000
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
30 PRINCIPAL SUBSIDIARIES (CONTINUED)
Details of the Company's Principal subsidiaries are as follows (Continued):
Place and
date of Attributable
incorporation/ Authorized, issued and equity
Name of company establishment paid up capital interest % Principal activities
---------------------------------------------------------------------------------------------------------------------------
Authorized Issued and paid up
Shanghai Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Shanghai Mobile PRC - RMB6,039 100% Cellular telephone
August 4, operator
2000
Tianjin Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Tianjin Mobile PRC - RMB2,151 100% Cellular telephone
July 24, operator
2000
Hebei Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Hebei Mobile PRC - RMB4,315 100% Cellular telephone
July 31, operator
2000
Liaoning Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Liaoning Mobile PRC - RMB5,140 100% Cellular telephone
August 7, operator
2000
Shandong Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Shandong Mobile PRC - RMB6,342 100% Cellular telephone
August 7, operator
2000
Guangxi Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
September 1, at HK$1 company
2000
Guangxi Mobile PRC - RMB2,341 100% Cellular telephone
August 3, operator
2000
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
30 PRINCIPAL SUBSIDIARIES (CONTINUED)
Details of the Company's principal subsidiaries are as follows (Continued):
Place and
date of Attributable
incorporation/ Authorized, issued and equity
Name of company establishment paid up capital interest % Principal activities
---------------------------------------------------------------------------------------------------------------------------
Authorized Issued and paid up
Anhui Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Anhui Mobile PRC - RMB4,099 100% Cellular telephone
January 29, operator
2002
Jiangxi Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Jiangxi Mobile PRC - RMB2,933 100% Cellular telephone
January 18, operator
2002
Chongqing Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Chongqing Mobile PRC - RMB3,030 100% Cellular telephone
January 28, operator
2002
Sichuan Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Sichuan Mobile PRC - RMB7,484 100% Cellular telephone
February 4, operator
2002
Hubei Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Hubei Mobile PRC - RMB3,961 100% Cellular telephone
February 1, operator
2002
Hunan Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
30 PRINCIPAL SUBSIDIARIES (CONTINUED)
Details of the Company's principal subsidiaries are as follows (Continued):
Place and
date of Attributable
incorporation/ Authorized, issued and equity
Name of company establishment paid up capital interest % Principal activities
----------------------------------------------------------------------------------------------------------------------------
Authorized Issued and paid up
Hunan Mobile PRC - RMB4,016 100% Cellular telephone
February 6, operator
2002
Shaanxi Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Shaanxi Mobile PRC - RMB3,171 100% Cellular telephone
February 3, operator
2002
Shanxi Mobile BVI BVI 10,000 shares 1 share at HK$1 100% Investment holding
May 10, 2002 at HK$1 company
Shanxi Mobile PRC - RMB2,773 100% Cellular telephone
February 4, operator
2002
China Mobile (Shenzhen) PRC - US$30 100% Corporate operation
Limited June 9, controller
2000
Aspire Holdings Limited Cayman 1,500,000,000 HK$94 66.41% Investment holding
Islands shares at company
June 5, HK$0.1
2000
Aspire (BVI) Limited BVI 50,000 shares US$0.001 66.41% Investment holding
June 7, at US$1 company
2000
Aspire Technologies PRC US$10 US$1.5 66.41% Technology
(Shenzhen) Limited December 1, platform
2000 development and
maintenance
Aspire Information PRC US$5 US$1.5 66.41% Provision of mobile
Network (Shenzhen) August 1, data solutions,
Limited 2001 system integration
and development
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
30 PRINCIPAL SUBSIDIARIES (CONTINUED)
Dividend declared in respect of previous financial year, approved and paid by the Company's subsidiaries for the financial years ended December 31, 2000, 2001 and 2002 amounting to RMB985, RMB4,863 and RMB18,000 respectively.
In prior years, dividend income from subsidiaries was recognized as income in the Company's statements of income in the period in which they related. With effect from January 1, 2001, in order to comply with Statement of Standard Accounting Practice No. 9 (revised) issued by the Hong Kong Society of Accountants, the Company recognizes dividend income as income in the accounting period in which the dividends are declared or proposed and approved by the shareholders of the relevant subsidiaries.
The new accounting policy has been adopted retrospectively, with the opening balance of retained earnings and the comparative information of the Company adjusted for the amounts relating to prior periods.
31 POST BALANCE SHEET EVENTS
After the balance sheet date the directors proposed a final dividend.
Further details are disclosed in Note 9.
32 COMPARATIVE FIGURES
The presentation and classification of items in the consolidated cash flow statement have been changed due to the adoption of the requirements of Statement of Standard Accounting Practice No. 15 (revised 2001) "Cash flow statements". As a result, cash flow items from taxation, returns on investments and servicing of finance have been classified into operating, investing and financing activities respectively and a detailed breakdown of cash flows from operating activities has been included on the face of the consolidated cash flow statement. Comparative figures have been reclassified to conform with the current year's presentation.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP
The Group's accounting policies conform with generally accepted accounting principles in Hong Kong ("HK GAAP") which differ in certain material respects from those applicable generally accepted accounting principles in the United States of America ("US GAAP").
The significant differences relate principally to the following items and the adjustments considered necessary to present the net profit and shareholders' equity in accordance with US GAAP are shown in the tables set out below:
(a) EFFECT OF COMBINATION OF ENTITIES UNDER COMMON CONTROL
Under HK GAAP, the Group adopted the purchase accounting method to account for the purchase of subsidiaries from the holding company. Under the purchase accounting method, the acquired results are included in the results of operations from the date of their acquisition. For acquisitions before January 1, 2001, goodwill arising on the acquisition, being the excess of the cost over the fair value of the Group's share of the separable net assets acquired, is eliminated against reserves immediately on acquisition. For acquisitions on or after January 1, 2001, goodwill arising on the acquisition is amortized to the consolidated statements of income on a straight-line basis over 20 years.
As a result of the Group and the acquired subsidiaries being under common control prior to the acquisition, such acquisitions under US GAAP are considered "combinations of entities under common control". Under US GAAP, combinations of entities under common control are accounted for under the "as if pooling-of-interests" method, whereby assets and liabilities are accounted for at historical cost and the financial statements of previously separate companies for periods prior to the combination are restated on a combined basis. The consideration paid and payable by the Group has been treated as an equity transaction in the year of acquisition. Goodwill arising on consolidation and the amortisation of goodwill which are recognized under HK GAAP has been reversed for US GAAP purposes.
(b) CAPITALIZATION OF INTEREST
Under HK GAAP, the Group capitalizes interest costs to the extent that the related borrowings are directly attributable to the acquisition or construction of an asset which necessarily takes a substantial period of time to get ready for its intended use.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(b) CAPITALIZATION OF INTEREST (CONTINUED)
Under US GAAP, interest costs capitalized are determined based on specific borrowings related to the acquisition or construction of an asset, if an entity's financing plans associate a specific new borrowing with a qualifying asset. If average accumulated expenditures for the asset exceed the amounts of specific new borrowings associated with an asset, additional interest costs capitalized are based on the weighted average interest rate applicable to other borrowings of the entity.
(c) REVALUATION AND IMPAIRMENT OF FIXED ASSETS
For certain periods prior to May 31, 1997, the fixed assets of the subsidiaries were revalued in compliance with PRC rules and regulations, resulting in an increase in shareholders' equity.
Additionally, the fixed assets of the subsidiaries were revalued as a result of the restructuring occurred in 1997 and the subsequent acquisitions. These fixed asset revaluations result in an increase in shareholders' equity with respect to the increase in carrying amount of certain fixed assets above their historical cost bases.
The carrying amount of fixed assets under HK GAAP is reviewed periodically in order to assess whether the recoverable amount has declined below the carrying amount. When such a decline occurs, the carrying amount is reduced to the recoverable amount based on the expected future cash flows generated by the fixed assets, discounted to their present values using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. A subsequent increase in the recoverable amount is written back to results of operations when circumstances and events that led to the write-down or write-off cease to exist.
Under US GAAP, fixed assets are stated at their historical cost, less accumulated depreciation. However, as a result of the tax deductibility of the revaluation reserve, a deferred tax asset related to the reversal of the revaluation reserve is created under US GAAP with a corresponding increase in shareholders' equity.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(c) REVALUATION AND IMPAIRMENT OF FIXED ASSETS (CONTINUED)
Under US GAAP, fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
For the years presented, there were no differences related to impairment charges under HK GAAP and US GAAP. The US GAAP difference as shown in the reconciliation represents the reversal of revaluation reserves and the related depreciation which are recognised under HK GAAP.
(d) EMPLOYEE HOUSING SCHEME
The Group provides staff quarters under its employee housing schemes at below market prices. Under HK GAAP, employee housing scheme costs borne by the corresponding PTAs and not charged to the subsidiaries are not recognized by the subsidiaries.
Under US GAAP, employee housing scheme costs borne by the corresponding PTAs and not charged to the subsidiaries are reflected as an expense in the statement of income and a corresponding capital contribution. Additionally, under US GAAP, the costs to be borne by the subsidiaries are accrued over the term of the program.
(e) DEFERRED TAXATION
Under HK GAAP, the Group provides for deferred tax liabilities only to the extent that there is a reasonable probability that such deferred tax liabilities will become payable in the foreseeable future. Deferred tax assets are not recognized unless their realization is assured beyond reasonable doubt.
Under US GAAP, provisions are made for all deferred taxes as they arise, except a valuation allowance is provided against deferred tax assets when realization of such amounts does not meet the criterion of "more likely than not".
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(f) SHARE OPTION SCHEME
The Group grants share options to directors and employees. Under HK GAAP, the proceeds received are recognized as an increase to capital upon the exercise of the share options.
Under US GAAP, the Group determines compensation expenses based upon the excess, if any, of the quoted market price of the shares on the date of grant over the exercise price of the options and amortizes this amount over the vesting period of the option concerned.
(g) REVENUE RECOGNITION
Until June 30, 1999, under both HK GAAP and US GAAP, connection fees revenue and telephone number selection fees were recognized as received. Under US GAAP, effective July 1, 1999, net connection fees and telephone number selection fees received in excess of direct costs were deferred and recognized over the estimated customer usage period for the related service.
Under US GAAP, effective January 1, 2000, the Group adopted the provisions of Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB101"). Under SAB 101, connection fees and telephone number selection fees received and incremental direct costs up to, but not exceeding such fees, are deferred and amortized over the estimated customer usage period for the related service. The cumulative effect from the adoption of SAB 101 was not material.
(h) INTERCONNECTION, ROAMING AND LEASED LINE AGREEMENTS
In May 2000, the Group entered into new agreements with China Mobile for inter-provincial interconnection and domestic and international roaming services, and inter-provincial long distance transmission leased line arrangement with retrospective effect from October 1, 1999 for Guangdong Mobile, Zhejiang Mobile and Jiangsu Mobile and from April 1, 1999 for Fujian Mobile, Henan Mobile and Hainan Mobile. Under HK GAAP, the net savings refunded to the Group as a result of the two agreements taking retrospective effect were recorded in operations for the year ended December 31, 2000. Under US GAAP, such net savings are deferred and amortized on a straight-line basis over seven years.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(i) RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS ("SFAS") NO. 145
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS No. 145 amends existing guidance on reporting gains and losses on the extinguishment of debt to prohibit the classification of the gain or loss as extraordinary, as the use of such extinguishments have become part of the risk management strategy of many companies. SFAS No. 145 also amends SFAS No. 13 to require sale-leaseback accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions. The provisions of the Statement related to the rescission of Statement No. 4 are applied in fiscal years beginning after May 15, 2002. Earlier application of these provisions is encouraged. The provisions of the Statement related to Statement No. 13 were effective for transactions occurring after May 15, 2002, with early application encouraged. The adoption of SFAS No. 145 is not expected to have a material effect on the Company's consolidated financial statements.
SFAS NO. 146
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity". The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS No. 146 is not expected to have a material effect on the Company's consolidated financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(i) RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
INTERPRETATION NO. 45
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34". This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on the Company's consolidated financial statements. The disclosure requirements are effective for financial statements of interim or annual reports ending after December 15, 2002.
SFAS NO. 148
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123". The Statement amends FASB Statement No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
(i) RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
INTERPRETATION 46
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51". This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation is not expected to have a material effect on the Company's consolidated financial statements.
(j) RELATED PARTY TRANSACTIONS
Under HK GAAP, transactions of the Group entered into with entities under the control by the MII prior to May 2000, and China Telecom Group are not disclosed as related party transactions.
Under US GAAP, transactions between the Group and the entities under the control by MII prior to May 2000, and China Telecom Group are also disclosed as related party transactions.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
The effect on net profit of significant differences between HK GAAP and US GAAP is as follows:
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Net profit under HK GAAP 18,027 28,015 32,742
Adjustments:
Effect of combination of entities
under common control 7,757 3,295 2,818
Capitalized interest 17 85 (100)
Revaluation of fixed assets 603 3,211 672
Employee housing scheme (180) - -
Deferred taxation (937) (623) (107)
Share option scheme (99) (277) (331)
Amortization of net connection fees and
telephone number selection fees (526) 764 853
Amortization of net savings from
interconnection, roaming and leased
line agreements (543) 86 85
Reversal of goodwill amortisation - - 936
Deferred tax effects of US GAAP adjustments 18 (320) (366)
------- ------- -------
Net profit under US GAAP 24,137 34,236 37,202
======= ======= =======
Basic net profit per share in
accordance with US GAAP 1.31 1.76 1.90
======= ======= =======
Diluted net profit per share in
accordance with US GAAP 1.30 1.76 1.90
======= ======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
The effect on shareholders' equity of significant differences between HK GAAP and US GAAP is as follows:
As of December 31,
--------------------
2001 2002
RMB RMB
Shareholders' equity under HK GAAP 111,779 172,202
Adjustments:
Effect of combination of entities under common control 30,663 -
Capitalized interest 576 476
Revaluation of fixed assets
- Cost (10,577) (10,577)
- Accumulated depreciation and other 7,265 7,937
Deferred tax adjustments on revaluations 1,135 849
Employee housing scheme (1,583) (1,583)
Deemed capital contribution for employee housing scheme 1,583 1,583
Deferral of net connection fees and telephone number selection fees (1,627) (774)
Deferral of net savings from interconnection, roaming and leased
line agreements (457) (372)
Recognition of deferred taxes 1,447 1,362
Reversal of goodwill - (36,522)
Deferred tax effects of US GAAP adjustments 96 (6)
-------- --------
Shareholders' equity under US GAAP 140,300 134,575
======== ========
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
The following are condensed consolidated balance sheets of the Group as of December 31, 2001 and 2002, and the related condensed consolidated statements of income, total shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2002, restated to reflect the impact of the differences between HK GAAP and US GAAP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
--------------------------------
2000 2001 2002
RMB RMB RMB
OPERATING REVENUE
Usage fees 79,218 92,478 104,373
Monthly fees 18,336 18,237 19,032
Connection fees 2,009 2,091 1,505
Other operating revenue 12,899 14,943 20,421
-------- -------- --------
TOTAL OPERATING REVENUE 112,462 127,749 145,331
-------- -------- --------
OPERATING EXPENSES
Leased lines 10,124 6,422 5,985
Interconnection 16,795 16,234 14,733
Depreciation 19,129 22,516 28,445
Personnel 6,520 7,129 7,832
Other operating expenses 19,222 26,297 34,045
Write-down and write-off of analog network equipment 5,499 - -
-------- -------- --------
TOTAL OPERATING EXPENSES 77,289 78,598 91,040
======== ======== ========
OPERATING PROFITS 35,173 49,151 54,291
OTHER NET INCOME 1,238 1,715 1,739
NON-OPERATING NET INCOME 230 322 632
INTEREST INCOME 1,112 947 732
FINANCE COSTS (2,287) (1,941) (1,976)
-------- -------- --------
PROFIT BEFORE TAX 35,466 50,194 55,418
INCOME TAX (11,328) (15,959) (18,214)
-------- -------- --------
PROFIT AFTER TAX 24,138 34,235 37,204
MINORITY INTERESTS (1) 1 (2)
-------- -------- --------
NET PROFIT 24,137 34,236 37,202
======== ======== ========
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
-----------------
2001 2002
RMB RMB
ASSETS
Current assets
Cash and cash equivalents 25,181 32,575
Deposits with banks 14,995 11,069
Accounts receivable 7,169 5,899
Other receivables 1,292 1,231
Deferred tax - current portion 624 3,116
Inventories 1,472 1,586
Prepayments and other current assets 2,061 2,059
Amount due from ultimate holding company 2,997 1,282
Amounts due from related parties 219 401
------- -------
Total current assets 56,010 59,218
Fixed assets 141,396 163,232
Construction in progress 31,004 23,026
Investment securities 77 77
Interest in associates 16 16
Deferred tax - long term portion 4,164 2,660
Deferred expenses 1,597 912
------- -------
TOTAL ASSETS 234,264 249,141
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
-----------------
2001 2002
RMB RMB
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 15,799 17,069
Bills payable 1,785 1,256
Bank loans and other interest-bearing borrowings 9,296 8,132
Obligation under capital lease - current portion 994 68
Taxes payable 6,089 6,568
Amounts due to related parties 2,700 2,414
Accrued expenses and other payables 13,741 16,228
Amount due to immediate holding company - 402
Amount due to ultimate holding company 659 1,217
Deferred revenue - current portion 824 6,760
------- -------
Total current liabilities 51,887 60,114
Bank loans and other interest-bearing borrowings 24,513 36,348
Deferred revenue - long term portion 7,970 2,737
Amount due to ultimate holding company 8,750 -
Amount due to immediate holding company - 15,176
Obligation under capital leases - long-term portion 812 -
------- -------
TOTAL LIABILITIES 93,932 114,375
Minority interests 32 191
SHAREHOLDERS' EQUITY 140,300 134,575
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 234,264 249,141
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF TOTAL SHAREHOLDERS' EQUITY FOR THE
FOLLOWING YEARS:
RMB
Shareholders' equity at January 1, 2000 87,373
Net profit for the year ended December 31, 2000 24,137
Issue of ordinary shares 248,181
Deemed capital distribution (271,485)
Distribution to owner (1,866)
Contribution by owner 6,500
Deemed capital contribution for employee housing scheme 264
Tax effect of revaluation 2,469
Stock-based compensation 99
Others (22)
--------
Shareholders' equity at December 31, 2000 95,650
Net profit for the year ended December 31, 2001 34,236
Issue of ordinary shares 4
Distribution to owner (794)
Contribution by owner 9,839
Tax effect of revaluation 1,088
Stock-based compensation 277
--------
Shareholders' equity at December 31, 2001 140,300
Net profit for the year ended December 31, 2002 37,202
Issue of ordinary shares 27,681
Deemed capital distribution (70,959)
Distribution to owner (28)
Contribution by owner 48
Stock-based compensation 331
--------
Shareholders' equity at December 31, 2002 134,575
========
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
The Group applies Hong Kong Statement of Standard Accounting Practice
No. 15 (revised 2001) "Cash Flow Statements" ("HK SSAP 15"). Its
objectives and principles are similar to those set out in Statement of
Financial Accounting Standards No. 95, "Statement of Cash Flows" ("SFAS
95"). The principal differences between the standards relate to
classification. Under HK SSAP 15, the Group presents its cash flows for
(a) operating activities; (b) investing activities; and (c) financing
activities. Dividend received and interest received under investing
activities and interest paid under financing activities shown under HK
SSAP 15 would be included as operating activities under SFAS 95, with
the exception of distributions, which under SFAS 95 would be classified
as financing activities. Summarized cash flow data by operating,
investing and financing activities in accordance with SFAS 95 are as
follows:
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Net cash inflow from
Operating activities 57,766 60,863 79,445
Investing activities (46,167) (69,166) (44,070)
Financing activities (8,232) 2,557 (27,981)
------- ------- -------
Increase/(decrease) in cash and cash equivalents 3,367 (5,746) 7,394
Cash and cash equivalents at beginning of year 27,560 30,927 25,181
------- ------- -------
Cash and cash equivalents at end of year 30,927 25,181 32,575
======= ======= =======
Interest paid (net of amounts capitalized) 2,420 2,541 1,740
======= ======= =======
Income taxes paid 7,406 14,104 18,723
======= ======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
33 SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)
SIGNIFICANT NON-CASH TRANSACTIONS
The Group incurred payables of RMB10,803 and RMB1,257 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2002.
The Group incurred payables of RMB14,005 and RMB1,337 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2001.
The Group incurred payables of RMB10,448 and RMB1,068 to equipment suppliers and banks respectively for additions of construction in progress during the year ended December 31, 2000.
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP
The following additional financial statement disclosures are required under US GAAP and are presented on a US GAAP basis.
WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT
Year ended December 31,
------------------------------------------
2000 2001 2002
RMB RMB RMB
Write-down of analog network equipment 4,718 - -
Write-off of analog network equipment 781 - -
-------- -------- -------
5,499 - -
======== ======== =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT (CONTINUED)
Due to the rapid change of technology, the Company re-assessed the recoverability of the carrying amount of the analog network equipment which was held for use at December 31, 2000. The Company determined the existence of impairment by comparing the carrying amount of these equipment to their future undiscounted net cash flows expected to be generated over the economic life of analog network in service at December 31, 2000. The Company has recognized write downs of RMB4,718 on these equipment in 2000. Such amount of loss was measured by the amount by which the carrying amounts of the individual analog network assets exceed their fair value determined based on the discounted net cash flow expected to be generated by each analog network. Additionally, the Company has written-off RMB781 of certain analog network equipment which have been removed from service at December 31, 2000. At December 31, 2001, all analog network equipment which were written down in previous years had been removed from service.
INCOME TAX
The Company is subject to Hong Kong profits tax at 16% for the years ended December 31, 2000, 2001 and 2002.
The Group's PRC subsidiaries are subject to the statutory income tax rate of 33%, except for certain subsidiaries of the Company and certain operations of the subsidiaries located within special economic zones in the PRC, which enjoys a preferential rate of 30% and 15%, respectively.
The components of income tax expense are as follows:
Year ended December 31,
----------------------------------------
2000 2001 2002
RMB RMB RMB
Current 9,371 12,826 19,202
Deferred 1,957 3,133 (988)
------ ------ ------
11,328 15,959 18,214
====== ====== ======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
INCOME TAX (CONTINUED)
The provision for income tax differs from the amount computed by applying the PRC statutory income tax rate of 33% to profit before tax and minority interests for the following reasons:
Year ended December 31,
-----------------------------
2000 2001 2002
RMB RMB RMB
Expected PRC taxation at statutory tax rates 11,704 16,564 18,288
Non-taxable items
- Connection fee (353) (171) (182)
- Surcharge (309) (5) -
- Interest income (74) (32) (25)
Non-deductible expenses 952 272 685
Rate differential on PRC operations (688) (1,095) (897)
Rate differential on Hong Kong operations 32 165 229
Reversal of deferred taxation due to
change of income tax rate - 27 (9)
Tax losses not recognized for deferred tax - 203 242
Others 64 31 (117)
------- ------- -------
Income tax 11,328 15,959 18,214
======= ======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
INCOME TAX (CONTINUED)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.
December 31,
----------------
2001 2002
RMB RMB
Deferred tax assets:
Provision for obsolete inventories 7 16
Provision for doubtful accounts 1,447 1,362
Revaluation of fixed assets 1,306 1,049
Amortization of deferred items 487 295
Income recognition on prepaid service fees 1,719 3,259
------ ------
Gross deferred tax assets 4,966 5,981
Deferred tax liabilities:
Capitalized interest (178) (205)
------ ------
Net deferred tax assets 4,788 5,776
Less: Current portion of net deferred tax assets (624) (3,116)
------ ------
4,164 2,660
====== ======
|
ACCOUNTS RECEIVABLE
December 31,
------------------
2001 2002
RMB RMB
Accounts receivable 11,959 10,200
Less: Allowance for doubtful accounts (4,790) (4,301)
------- -------
7,169 5,899
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
ACCOUNTS RECEIVABLE (CONTINUED)
Allowance for doubtful accounts is analyzed as follows:
RMB
At January 1, 2000 5,925
Provision for the year 2,584
Written-off (2,986)
------
At December 31, 2000 5,523
Provision for the year 2,236
Written-off (2,969)
------
At December 31, 2001 4,790
Provision for the year 1,857
Written-off (2,346)
------
At December 31, 2002 4,301
======
|
OTHER RECEIVABLES
December 31,
---------------------------
2001 2002
RMB RMB
Other receivables 1,292 1,356
Less: Allowance for doubtful accounts - (125)
----- -----
1,292 1,231
===== =====
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
OTHER RECEIVABLES (CONTINUED)
Allowance for doubtful accounts is analyzed as follows:
RMB
At January 1, 2000 -
Provision for the year -
Written-off -
---
At December 31, 2000 -
Provision for the year -
Written-off -
---
At December 31, 2001 -
Provision for the year 148
Written-off (23)
---
At December 31, 2002 125
===
|
FIXED ASSETS
December 31,
-----------------------------
2001 2002
RMB RMB
Land use rights and buildings 12,295 16,805
Telecommunications transceivers, switching
centers and other network equipment 180,500 223,642
Office equipment, furniture and fixtures and others 8,282 9,512
------- -------
201,077 249,959
Less: accumulated depreciation (59,681) (86,727)
------- --------
141,396 163,232
======= =======
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
DEFERRED REVENUE AND OTHER ITEMS
Year ended December 31,
-----------------------------
2001 2002
RMB RMB
Balance at beginning of year 8,930 8,794
Addition during the year 28,114 38,387
Recognized in the condensed consolidated statements
of income (28,250) (37,684)
------- -------
Balance at end of year 8,794 9,497
Less: Current portion (824) (6,760)
------- -------
7,970 2,737
======= =======
|
Deferred revenue comprises:
(i) the unamortized portion of proceeds received by Guangdong Mobile from certain distributors of telecommunications services which are amortized over a period of seven years;
(ii) the unamortized portion of connection fees and telephone number selection fees received which are recognized over the estimated subscriber usage period for the related services;
(iii) the prepaid services fee received from subscribers which is recognized as income when the cellular telephone services are rendered upon actual usage by subscribers; and
(iv) the unamortized portion of net savings attributable to the Group as a result of the provincial interconnection, roaming and leased line agreements.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
DEFERRED EXPENSES
Year ended December 31,
----------------------------
2001 2002
RMB RMB
Balance at beginning of year 2,153 1,597
Addition during the year 920 53
Recognized in the condensed consolidated statements
of income (1,476) (738)
------ -----
Balance at end of year 1,597 912
====== =====
|
Deferred expenses comprises:
(i) the unamortized portion of issuance costs in respect of the fixed rate notes, convertible notes and bonds; and
(ii) the unamortized portion of direct costs related to connection fees and telephone number selection fees received.
STOCK OPTION PLAN
Details of the Company's stock option plan and options granted under
the plan are contained in Note 28. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for grants:
expected dividend yield of 0%, 0% and 20% during 2000, 2001 and 2002;
expected volatility of 89.97%, 65.92% and 32.44% for the share option
granted during 2000, 2001 and 2002 respectively; risk-free interest
rate of 9.5%, 5.5% and 5.3% during 2000, 2001 and 2002 respectively;
and expected life of 8 years, 6 years and 10 years during 2000, 2001
and 2002 respectively. The per share fair value of stock options
granted during 2000, 2001 and 2002 were HK$48.92, HK$29.46 and HK$9.15
on the date of grant, respectively.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
STOCK OPTION PLAN (CONTINUED)
The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations including FASB Interpretation No.44, "Account for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25", issued in March 2000, to account for its plan. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123, "Accounting for Stock-Based Compensation", established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-valued-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The compensation cost that has been charged against income for US GAAP for the Company's stock option plan was RMB99 for 2000, RMB277 for 2001 and RMB331 for 2002. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period.
Year ended December 31,
2001 2002
RMB RMB
Net profit, as reported 34,236 37,202
Add stock-based employee compensation expense
included in net income 277 331
Deduct total stock-based employee compensation
expense determined under fair-value-based
method (1,078) (1,403)
------ ------
33,435 36,130
Pro forma net income ====== ======
Basic net profit per share As reported 1.76 1.90
Pro forma 1.72 1.85
Diluted net profit per share As reported 1.76 1.90
Pro forma 1.72 1.84
|
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
NET PROFIT PER SHARE
The following is a reconciliation of the numerators and denominators of the basic and diluted net profit per share computations prepared under US GAAP.
For the year ended December 31, 2000 For the year ended December 31, 2001
---------------------------------------- ---------------------------------------
Income Shares Per share Income Shares Per share
(Numerator) (Denominator) amount (Numerator) (Denominator) Amount
BASIC NET PROFIT
PER SHARE 24,137 18,494 1.31 34,236 19,433 1.76
==== ====
EFFECT OF DILUTIVE
SECURITIES
Convertible notes - - 129 91
Stock options - 16 - 2
------ ------ ------ ------
DILUTED NET PROFIT
PER SHARE 24,137 18,510 1.30 34,365 19,526 1.76
====== ====== ==== ====== ====== ====
|
For the year ended December 31, 2002
----------------------------------------
Income Shares Per share
(Numerator) (Denominator) Amount
BASIC NET PROFIT
PER SHARE 37,202 19,561 1.90
====
EFFECT OF DILUTIVE
SECURITIES
Convertible notes 129 91
Stock options - 1
------ ------
DILUTED NET PROFIT
PER SHARE 37,331 19,653 1.90
====== ====== ====
|
FAIR VALUE
Financial assets of the Group include cash and cash equivalents, deposits with banks, accounts receivable, other receivables and amounts due from related parties. Financial liabilities of the Group include accounts payable, bank and other loans, other payables and amounts due to related parties. It is not practicable to estimate the fair value of the amounts due from and due to related parties without incurring excessive cost.
The following table presents the carrying amounts and fair values of the Group's bank and other loans as of December 31, 2001 and 2002:
December 31, 2001 December 31, 2002
Carrying Fair Carrying Fair
amount Value amount value
RMB RMB RMB RMB
Fixed rate bank and other loans 9,746 9,706 4,769 4,762
Variable rate bank and other loans 8,399 8,399 16,039 16,039
Fixed rate notes 4,956 5,375 4,961 5,418
Convertible notes 5,708 5,400 5,711 5,576
Bonds 5,000 5,045 13,000 13,309
------ ------ ------ ------
Total 33,809 33,925 44,480 45,104
====== ====== ====== ======
|
The fair values of all other financial instruments approximate their carrying amounts due to the nature or short maturity of these instruments.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
RELATED PARTY TRANSACTIONS
Year ended December 31,
------------------------------------------
2000 2001 2002
RMB RMB RMB
Interconnection revenue 5,759 5,132 4,560
Interconnection charges 11,619 9,746 8,105
Leased line charges 10,277 5,839 5,926
Roaming revenue 4,968 5,945 6,629
Roaming expenses 4,486 5,803 6,735
Spectrum fees 35 26 226
Operating lease charges 666 527 527
Sales commission expenses 406 110 69
Debt collection service fees 226 135 74
Billing service fees 18 19 10
Roaming billing processing fees 150 201 225
Equipment maintenance service fees 8 48 55
Rental charges of synchronized clock ports 17 21 26
Construction and related service fees 498 2,523 345
Purchases of transmission tower and
transmission tower-related service
and antenna maintenance service fees 86 156 146
Prepaid card sales commission income 158 356 219
Prepaid card sales commission expenses 158 373 216
Technology platform development and
maintenance service income - - 39
Telecommunications lines maintenance
service fees 12 46 34
Interest paid/payable 28 41 821
Housing reform 6 4 -
Rental income 6 6 7
Capital contributions 6,222 9,838 -
Distributions 569 794 -
|
Descriptions of the nature of the related party transactions are set forth in Note 26.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
The Company's operating segments are comprised of its cellular businesses operated within the Guangdong, Zhejiang, Jiangsu, Fujian, Henan, Hainan, Hebei, Liaoning, Shandong, Anhui, Jiangxi, Sichuan, Hubei, Hunan, Shaanxi and Shanxi provinces, Beijing, Shanghai, Tianjin and Chongqing municipalities, and Guangxi Zhuang Autonomous Region of the PRC. The operating segments are managed separately because each operating segment represents a strategic business unit that serves different markets. All operating segments provide cellular services to individual customers within their geographic market. The Company's operating segments have been aggregated into a single operating segment as they are expected to exhibit similar future economic characteristics.
BUSINESS RISKS
The Group conducts its principal operations in the PRC and accordingly is subject to special considerations and significant risks not typically associated with investments in equity securities of United States and Western European companies. These include risks associated with, among others, the political, economic and legal environment, extensive government regulations and competition in the cellular telephone industry.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
NEW TELECOMMUNICATIONS LAW
In order to provide a uniform regulatory framework for the telecommunications industry in the PRC, the MII, pursuant to the direction of the PRC State Council, is currently preparing a draft of the Telecommunications Law of the PRC (the "Telecommunications Law"). The draft law, when formulated, will be submitted to the National People's Congress for review and adoption. It is unclear if and when the Telecommunications Law will be adopted, and the nature and scope of regulation envisaged by the Telecommunications Law are not fully known. There can be no assurance that the Telecommunications Law, if adopted, would not have a material adverse effect on the Group's business, financial condition and results of operations.
AMOUNT OF SPECTRUM AVAILABILITY
The Group's cellular system's subscriber capacity is limited by the amount of spectrum available for use by the system. The former State Radio Regulatory Commission, now a department within the MII, is responsible for the overall allocation of radio frequency spectrum in the PRC. There can be no assurance that the Group would be granted additional spectrum when and if required, and any resulting levels of system congestion could result in subscriber dissatisfaction, decreased system usage by subscribers and increased churn rate.
INTERCONNECTION ARRANGEMENT WITH NETWORKS OF OTHER OPERATORS
The Group's cellular services depend in large part upon access to the network of other operators. Any disruption of interconnection with the networks of operators could have a material adverse effect on the Group's results of operations.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
CHANGES IN TECHNOLOGY
The telecommunications industry is subject to rapid and significant changes in technology. Accordingly, the mobile telecommunications technologies that the Group currently employs may become obsolete or subject to competition from new technologies in the future, including new wireless telecommunications technologies. In addition, the new technologies the Group implements, such as wireless data applications, may not generate an acceptable rate of return.
NEW COMPETITION
Current Chinese government policy concerning the telecommunications sector is to encourage orderly competition. There can be no assurance that the State Council will not approve additional telecommunications service providers in the future, including providers of mobile telecommunications services, that may compete against the Group. In additions, China's accession into the WTO could lead to increased foreign investment in the telecommunications market in Mainland China, thereby increasing competition and foreign participation in the mobile telecommunications service sector in Mainland China. Increased competition and foreign participation may have a material adverse effect on the Group's financial conditions and result of operation.
SELF INSURANCE RISK
The Group does not maintain any insurance policies to cover its assets.
INTEREST RATE RISK
The interest rates and terms of repayment of the bank and other loans payable of the Group are disclosed in Note 20.
China Mobile (Hong Kong) Limited Consolidated financial statements for the year ended December 31, 2002
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)
34 ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)
FOREIGN CURRENCY RISK
The Group has foreign currency risk as certain loans and cash and cash equivalents are denominated in foreign currencies, principally US dollars and Hong Kong dollars. Depreciation or appreciation of the Renminbi against foreign currencies affects the Group's results of operations.
CREDIT RISK
Substantially all of the Group's cash and cash equivalents are deposited with Hong Kong and PRC financial institutions. The accounts receivable of the Group are spread among a number of customers.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
1.1 Memorandum and Articles of Association (as amended).(6)
2.1 We agree to provide the Securities and Exchange Commission, upon request, copies of instruments
defining the rights of holders of our long-term debt.
2.2 Guarantee from China Mobile Communications Corporation for the RMB 5 billion guaranteed bonds due
2011 issued by Guangdong Mobile.(6)
2.3 Letter of Guarantee from China Mobile Communications Corporation for the RMB 3 billion guaranteed
bonds due 2007 and RMB 5 billion guaranteed bonds due 2017, both issued by Guangdong Mobile in
2002 (with English translation).
4.1 Trademark License Agreement, dated July 18, 2002, between China Mobile Communications Corporation and
China Mobile (Hong Kong) Limited (with English translation).
4.2 Tax Indemnity dated July 1, 2002 between China Mobile Hong Kong (BVI) Limited, China Mobile (Hong
Kong) Limited and China Mobile Communications Corporation.
4.3 Amendment Letter dated June 18, 2002 between China Mobile (Hong Kong) Limited, Vodafone Group Plc
and Vodafone Holdings.
4.4 Supplemental Agreement relating to Frequency Spectrum/Numbering Resources Usage Agreement, Sharing
Agreement of Inter-provincial Long Distance Transmission Line Leasing Fee, Inter-provincial
Interconnection and Domestic and International Roaming Settlement Agreement, Agreement on
"Shenzhouxing" Roaming Settlement and Sharing of Revenue From Sales of Top-Off Cards From Network
Operators Other Than Their Home Network Operators, and Supplemental Agreement to Agreement on
"Shenzhouxing" Roaming Settlement and Sharing of Revenue from Sales And Value-Adding of Top-Off Cards
from Network Operators Other Than Their Home Network Operators dated April 29, 2002 between China
Mobile Communications Corporation, China Mobile (Hong Kong) Limited and the eight regional mobile
communications companies (Anhui Mobile Communication Company Limited, Jiangxi Mobile Communication
Company Limited, Chongqing Mobile Communication Company Limited, Sichuan Mobile Communication Company
Limited, Hubei Mobile Communication Company Limited, Hunan Mobile Communication Company Limited,
Shaanxi Mobile Communication Company Limited, and Shanxi Mobile Communication Company Limited) (with
English translation).
4.5 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Anhui
Mobile Communication Company Limited and Anhui Communication Service Company (with English
translation).
4.6 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Jiangxi Mobile Communication Company Limited and Jiangxi Communication Service Company (with
English translation).
4.7 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation,
Chongqing Mobile Communication Company Limited and Chongqing Communication Service Company (with
English translation).
4.8 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Sichuan
Mobile Communication Company Limited and Sichuan Communication Service Company (with English
translation).
4.9 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Hubei
Mobile Communication Company Limited and Hubei Communication Service Company (with English
translation).
|
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.10 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Hunan
Mobile Communication Company Limited and Hunan Communication Service Company (with English
translation).
4.11 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Shaanxi
Mobile Communication Company Limited and Shaanxi Communication Service Company (with English
translation).
4.12 Asset Injection Agreement dated May 15, 2002 among China Mobile Communications Corporation, Shanxi
Mobile Communication Company Limited and Shanxi Communication Service Company (with English
translation).
4.13 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Anhui Mobile
Communication Company Limited and Anhui Communication Service Company (with English translation).
4.14 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Jiangxi Mobile
Communication Company Limited and Jiangxi Communication Service Company (with English translation).
4.15 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Chongqing Mobile
Communication Company Limited and Chongqing Communication Service Company (with English translation).
4.16 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Sichuan Mobile
Communication Company Limited and Sichuan Communication Service Company (with English translation).
4.17 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Hubei Mobile
Communication Company Limited and Hubei Communication Service Company (with English translation).
4.18 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Hunan Mobile
Communication Company Limited and Hunan Communication Service Company (with English translation).
4.19 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Shaanxi Mobile
Communication Company Limited and Shaanxi Communication Service Company (with English translation).
4.20 Agreement on the Confirmation of Rights and Obligations dated May 15, 2002 between Shanxi Mobile
Communication Company Limited and Shanxi Communication Service Company (with English translation).
4.21 Telecommunications Services Agreement dated April 10, 2002 between Anhui Mobile Communication Company
Limited and Anhui Communication Service Company (with English translation).
4.22 Telecommunications Services Agreement dated April 10, 2002 between Jiangxi Mobile Communication
Company Limited and Jiangxi Communication Service Company (with English translation).
4.23 Telecommunications Services Agreement dated April 10, 2002 between Chongqing Mobile Communication
Company Limited and Chongqing Communication Service Company (with English translation).
4.24 Telecommunications Services Agreement dated April 27, 2002 between Sichuan Mobile Communication
Company Limited and Sichuan Communication Service Company (with English translation).
|
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.25 Telecommunications Services Agreement dated April 10, 2002 between Hubei Mobile Communication Company
Limited and Hubei Communication Service Company (with English translation).
4.26 Telecommunications Services Agreement dated April 10, 2002 between Hunan Mobile Communication Company
Limited and Hunan Communication Service Company (with English translation).
4.27 Telecommunications Services Agreement dated April 10, 2002 between Shaanxi Mobile Communication
Company Limited and Shaanxi Communication Service Company (with English translation).
4.28 Telecommunications Services Agreement dated April 10, 2002 between Shanxi Mobile Communication
Company Limited and Shanxi Communication Service Company (with English translation).
4.29 Service Agreement for Supply Installation and Maintenance of Steel Towers dated May 8, 2002 between
China Mobile (Hong Kong) Limited and Hubei Communication Services Company (with English translation).
4.30 Co-operation Framework Agreement in respect of Indirect Loan dated May 10, 2002 between China Mobile
Communications Corporation and China Mobile (Hong Kong) Limited (with English translation).
4.31 Trademark License Agreement, dated April 24, 2002, between China Mobile Communications Corporation
and China Mobile (Hong Kong) Limited. (7)
4.32 Conditional Sale and Purchase Agreement, dated May 16, 2002, among China Mobile Hong Kong (BVI)
Limited, China Mobile (Hong Kong) Limited and China Mobile Communications Corporation.(7)
4.33 Subscription Agreement, dated May 16, 2002, among Vodafone Group Plc, Vodafone Holdings (Jersey)
Limited and China Mobile (Hong Kong) Limited. (7)
4.34 Prepaid services agreement dated May 11, 2001, between China Mobile (Hong Kong) Limited and China
Mobile Communications Corporation.(6)
4.35 Inter-Provincial Long-Distance Transmission Leased Line Fee Sharing Agreement, dated May 5, 2000,
between China Mobile Communications Corporation and China Telecom (Hong Kong) Limited.(4)
4.36 Inter-Provincial Network Interconnection, Domestic and International Roaming and Settlement
Agreement, dated May 5, 2000, between China Mobile Communications Corporation and China Telecom
(Hong Kong) Limited.(4)
4.37 Tenancy Agreement, dated June 7, 2000, between Fu Hao Properties Limited and China Telecom (Hong
Kong) Limited.(4)
4.38 Agreement Regarding the Roaming Settlement of "Shenzhouxing" Prepaid Services "Shenzhouxing" and
Revenues Sharing for Sales of Stored Value for Stored Value Cards, dated October 4, 2000, between
China Mobile Communications Corporation and China Mobile (Hong Kong) Limited.(1)
4.39 Contract on Termination of the Trademark Licensing, dated September 15, 2000, between China
Telecommunications Corporation and China Mobile (Hong Kong) Limited.(1)
4.40 Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
Mobile and Beijing Communications Service Company ("Beijing Service").(1)
4.41 Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
Mobile and Beijing Service.(1)
|
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.42 Agreement on Mobile Communications Equipment Maintenance and Modulation, dated September 18, 2000,
between Beijing Mobile and Beijing Huarui Wireless Communications Equipment Installation Company
("Beijing Huarui").(1)
4.43 Agreement on Communications Projects Design and Construction, dated September 18, 2000, between
Beijing Mobile and Beijing Huarui.(1)
4.44 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
Corporation, Beijing Mobile and Beijing Service.(1)
4.45 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Beijing Mobile and Beijing Service.(1)
4.46 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Beijing Mobile and Beijing Service.(1)
4.47 Agreement on Mobile Communications Equipment Maintenance, dated September 20, 2000, between Shanghai
Mobile and Shanghai Long-distance Telecommunications Engineering Company ("Shanghai Engineering").(1)
4.48 Agreement on Contracting Mobile Communications Projects, dated September 20, 2000, between
Shanghai Mobile and Shanghai Engineering.(1)
4.49 Building Leasing and Property Management Agreement, dated September 20, 2000, between Shanghai
Mobile and Shanghai Communications Service Company ("Shanghai Service").(1)
4.50 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Shanghai Mobile and Shanghai Service. (1)
4.51 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Shanghai Mobile and Shanghai Service. (1)
4.52 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Shanghai Mobile and Shanghai Service.(1)
4.53 Building Leasing Agreement, dated August 1, 2000, between Tianjin Mobile and Tianjin Communications
Service Company ("Tianjin Service"). (1)
4.54 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Tianjin Mobile and Tianjin Service.(1)
4.55 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation, Tianjin
Mobile and Tianjin Service.(1)
4.56 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Tianjin Mobile and Tianjin Service.(1)
4.57 Building Leasing and Property Management Agreement, dated August 1, 2000, between Hebei Mobile and
Hebei Communications Service Company ("Hebei Service").(1)
4.58 Agreement on the Sales and Maintenance of Masts and Maintenance of Antennas and Feeder Lines, dated
August 1, 2000, between Hebei Mobile and Hebei Provincial Posts and Telecommunications Equipment and
Machinery Plant.(1)
4.59 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Hebei Mobile and Hebei Service.(1)
|
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.60 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation, Hebei
Mobile and Hebei Service.(1)
4.61 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Hebei Mobile and Hebei Service.(1)
4.62 Building Leasing and Property Management Agreement, dated August 10, 2000, between Liaoning Mobile
and Liaoning Communications Service Company ("Liaoning Service").(1)
4.63 Agreement on Communications Equipment Maintenance, dated September 8, 2000, between Liaoning Mobile
and Liaoning Provincial Posts and Telecommunications Engineering Bureau ("Liaoning Engineering").(1)
4.64 Agreement on Mobile Communications Projects Construction, dated September 8, 2000, between Liaoning
Mobile and Liaoning Engineering.(1)
4.65 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Liaoning Mobile and Liaoning Service.(1)
4.66 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Liaoning Mobile and Liaoning Service.(1)
4.67 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Liaoning Mobile and Liaoning Service.(1)
4.68 Building Leasing and Property Management Agreement, dated September 1, 2000, between Shandong Mobile
and Shandong Communications Service Company ("Shandong Service").(1)
4.69 Agreement on Contracting Mobile Communications Projects, dated September 1, 2000, between Shandong
Mobile and Shandong Mobile Communications Engineering Bureau.(1)
4.70 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Shandong Mobile and Shandong Service.(1)
4.71 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
Shandong Mobile and Shandong Service.(1)
4.72 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Shandong Mobile and Shandong Service.(1)
4.73 Building Lease Agreement, dated August 26, 2000, between Guangxi Mobile and Guangxi Communications
Service Company ("Guangxi Service").(1)
4.74 Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications Corporation,
Guangxi Mobile and Guangxi Service.(1)
4.75 Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
Communication Services, dated August 30, 2000, among China Mobile Communications Corporation, Guangxi
Mobile and Guangxi Service.(1)
4.76 Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
Rights and Obligations, dated August 30, 2000, between Guangxi Mobile and Guangxi Service.(1)
4.77 Strategic Investor Placing Agreement among China Mobile (Hong Kong) Limited, Vodafone Group Plc,
China International Capital Corporation, Goldman Sachs (Asia) L.L.C. and Merrill Lynch Far East
Limited.(1)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.78 Syndicated loan agreement for RMB 7,500,000,000 among China Mobile (Shenzhen) Limited, Construction
Bank of China, Bank of China, State Development Bank, Agriculture Bank of China, Industrial and
Commercial Bank of China, Bank of Communications, Hong Kong and Shanghai Banking Corporation Ltd.,
China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated October 7, 2000.(1)
4.79 Syndicated loan agreement for RMB 5,000,000,000 among China Mobile (Shenzhen) Limited, Construction
Bank of China, Bank of China, State Development Bank, Agriculture Bank of China, Industrial and
Commercial Bank of China, Bank of Communications, Hong Kong & Shanghai Banking Corporation Ltd.,
China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated October 7, 2000.(1)
4.80 Conditional Sale and Purchase Agreement, dated October 4, 2000, among China Mobile Communications
Corporation, China Mobile Hong Kong (BVI) Limited and China Mobile (Hong Kong) Limited.(1)
4.81 Conditional Sale and Purchase Agreement, dated October 4, 1999, among China Telecom Hong Kong (BVI)
Limited, China Telecom (Hong Kong) Group Limited and China Telecom (Hong Kong) Limited.(2)
4.82 Agreement Regarding Provincial Network Interconnection, Roaming and Settlement of Account, dated
October 8, 1999, between China Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited.(2)
4.83 Agreement Regarding the Use of Frequency/Number Resources, dated October 8, 1999, between China
Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited.(2)
4.84 Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999, between
Guangdong Mobile and Guangdong Posts and Telecommunications Administration ("PTA").(2)
4.85 Agreement Regarding Network Interconnection and Settlement of Account, dated October 5, 1999, between
Zhejiang Mobile and Zhejiang PTA.(2)
4.86 Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999, between
Jiangsu Mobile and Jiangsu PTA.(2)
4.87 Agreement Regarding Network Interconnection and Settlement of Account, dated August 30, 1999,
between Fujian Mobile Communication Bureau and Fujian PTA.(2)
4.88 Synchronous Clock Port Leasing Agreement, dated August 30, 1999, between Fujian Mobile Communication
Bureau and Fujian PTA.(2)
4.89 Building and Facilities Leasing Agreement, dated August 30, 1999, between Fujian Mobile and Fujian
PTA.(2)
4.90 Building and Facilities Leasing Agreement (leasing to PTA), dated August 30, 1999, between Fujian
Mobile Communication Bureau and Fujian PTA.(2)
4.91 Building and Facility Leasing Agreement, dated September 25, 1999, between Fujian Mobile and Fujian
Xunjie Communications Technical Services Company ("Xunjie").(2)
4.92 Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999, between
Henan Mobile and Henan PTA.(2)
4.93 Synchronous Clock Port Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
PTA.(2)
4.94 Building and Facilities Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
PTA.(2)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.95 Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999, between
Hainan Mobile and Hainan PTA.(2)
4.96 Building and Facilities Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
PTA.(2)
4.97 Real Estates Leasing Agreement, dated September 24, 1999, between Hainan Mobile and Hainan
Communication Service Company ("Hainan Service").(2)
8.1 List of major subsidiaries.
|
(2) Incorporated by reference to our Registration Statement on Form F-3 (File No. 333-10956), filed with the Securities and Exchange Commission on October 30, 1999.
(3) Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-7634), filed with the Securities and Exchange Commission on September 29, 1997.
(4) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 1999 (File No. 1-14696), filed with the Securities and Exchange Commission on June 20, 2000.
(5) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 1998 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 25, 1999.
(6) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2000 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 26, 2001.
(7) Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2001 (File No. 1-14696), filed with the U.S. Securities and Exchange Commission on June 13, 2002.
Exhibit 2.3
[English Translation]
LETTER OF GUARANTEE
Guarantor: China Mobile Communications Corporation
Address: 53A, Xi Bian Men Nei Da Jie, Xuan Wu Qu, Beijing
Postal Code: 100053
Legal Representative: Zhang Ligui
Correspondent Bank: Bank of China, Beijing Branch
Account No: 06484108091001
Guarantee: China Mobile (Hong Kong) Limited
Address: 60/F, The Center, No. 99, Queen's Road Central, Central, Hong Kong
Legal Representative: Wang Xiaochu
Telephone No.: 00852-31218888
Correspondent Bank: Bank of China, Hong Kong Branch
Account No: 01287511021122
WHEREAS:
1. In accordance with the provisions of the "Administrative Regulations for Corporate Bonds", and from the approval of the State Planning and Development Commission (Approval No. Jijingtiao1474), the bond issuer, Guangdong Mobile Communication Company Limited (the "Issuer"), has issued a total RMB8 billion of "China Mobile Communication Corporate Bond, 2002" (the "Bonds");
2. The Bonds are guaranteed by China Mobile (Hong Kong) Limited, a company established and in good standing in accordance with the relevant laws of the Hong Kong Special Administrative Region of the People's Republic of China, which is lawfully qualified to assume the duty of guarantor of the Bonds in accordance with the "Administrative Regulations for Corporate Bonds" and "Guarantee Law of the People's Republic of China" and other relevant laws and regulations, and to issue the guarantee letter (the "Guarantee Letter issued by China Mobile (Hong Kong) Limited for Guangdong Mobile Communication Company Limited") to the Issuer, irrevocably and jointly undertaking to guarantee the issuance of the Bonds;
3. China Mobile Communications Corporation is a legal entity under the laws of the People's Republic of China, lawfully qualified to provide this guarantee in accordance with the "Guarantee Law of the People's Republic of China", and other relevant laws and regulations;
4. Upon the issuance of this Letter of Guarantee, China Mobile Communications Corporation has provided full disclosure of all relevant information in accordance
5. with the requirements of the laws of the People's Republic of China, and is capable of performing its guarantee obligations under this Letter of Guarantee.
It is the true intention of China Mobile Communications Corporation to hereby unconditionally and irrevocably guarantee the due performance of the obligations recited in the "Guarantee Letter issued by China Mobile (Hong Kong) Limited for Guangdong Mobile Communication Company Limited":
1. Scope of Guarantee
The scope of the guarantee by China Mobile Communications Corporation is: obligations undertaken by China Mobile (Hong Kong) Limited for the issuance and payment of the Bonds in accordance with the "Guarantee Letter from China Mobile (Hong Kong) Limited to Guangdong Mobile Communication Company Limited".
2. Form of Guarantee
China Mobile Communications Corporation's guarantee undertaking shall be in the form of a joint guarantee.
3. Assumption of Guarantee Obligation
Within the guarantee period set forth in Article 4 hereunder, should the Issuer, Guangdong Mobile Communication Company Limited, be unable to pay the principal and any interest that is due and payable on the Bonds, in accordance with the issuing terms and conditions of the "Articles of Issuance of China Mobile Communication Corporate Bond, 2002" established for the issuance of the Bonds and approved by the State Planning and Development Commission; and if China Mobile (Hong Kong) Limited fails to fully perform or is incapable of fully performing its guarantee obligations in relation to the Bonds, then China Mobile Communications Corporation shall assume the guarantee obligation, in accordance with the relevant laws, regulations and provisions of this Letter of Guarantee.
After China Mobile Communications Corporation has performs its guarantee obligations as set in this Letter of Guarantee, China Mobile (Hong Kong) Limited shall seek recourse against the Issuer by pursuing all necessary means. China Mobile Communications Corporation shall have a first priority for repayment in relation to all monies or other assets recovered by China Mobile (Hong Kong) Limited from the Issuer. China Mobile Communications Corporation shall have rights to recourse directly against China Mobile (Hong Kong) Limited and the Issuer, whenever it may deem necessary.
4. Duration of Guarantee
The duration of China Mobile Communications Corporation's guarantee shall be identical to the duration of China Mobile (Hong Kong) Limited's guarantee as recited in the "Guarantee Letter issued by China Mobile (Hong Kong) Limited for Guangdong Mobile Communication Company Limited", i.e., as to the five-year bonds and fifteen-year bonds of the Bonds, each from the first interest payment date of the Bonds to one day before the expiry date of the Bonds in the next calendar year, respectively. If China Mobile (Hong Kong) Limited does not request China Mobile Communications Corporation to assume a guarantee obligation during this period, it will be deemed that China Mobile Communications Corporation has been released from its guarantee obligation.
5. Disclosure of Information
China Mobile Communications Corporation shall disclose all relevant information in accordance with the laws of the People's Republic of China.
6. Governing Law
China Mobile Communications Corporation hereby confirms that this Letter of Guarantee shall be governed by, and construed in accordance with, the laws of the People's Republic of China.
7. Amendment to Issuing Terms and Conditions of the Bonds
Applications by the Issuer seeking any amendment of the interest rate, maturity, or repayment terms for the principal and interest on the Bonds requires the prior written approval of China Mobile Communications Corporation. Upon the approval of such amendments by the relevant government authorities, China Mobile Communications Corporation's obligations under this Letter of Guarantee shall continue.
8. Effective Date of this Letter of Guarantee
Upon approval by relevant regulatory authorities, this Letter of Guarantee will be effective from the date of issuance of the Bonds. If the Bonds are not issued within six months after the execution of this Letter of Guarantee, this Letter of Guarantee will be revoked automatically. Except as hereinabove expressly set forth in this article, this Letter of Guarantee shall not be amended or revoked during the period of guarantee specified in Article 4 herein.
Guarantor: China Mobile Communications Corporation (seal)
Legal Representative
Or Authorized Representative: XUE Taohai
September 3, 2002
Exhibit 4.1
[English Translation]
CHINA MOBILE COMMUNICATIONS CORPORATION
AND
CHINA MOBILE (HONG KONG) LIMITED
TRADEMARK LICENSE AGREEMENT
JULY 18, 2002
LINKLATERS & ALLIANCE
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (this "Agreement") is entered into among the following parties as of July 18, 2002:
1. China Mobile Communications Corporation, a state-owned enterprise incorporated and duly existing in accordance with the PRC laws with its legal address at No. 53A, Xi Bian Men Nei Da Jie, Xuan Wu District, Beijing, the PRC (hereinafter referred to as "Party A");
2. China Mobile (Hong Kong) Limited, a limited liability company incorporated and duly existing in accordance with Hong Kong laws with its legal address at 60/F., The Center, 99 Queen's Road Central, Hong Kong (hereinafter referred to as "Party B");
3. Guangdong Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 208, Yue Xiu Nan Lu, Guangzhou, Guangdong Province, the PRC;
4. Zhejiang Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 406, Ti Yu Chang Lu, Hangzhou, Zhejiang Province, the PRC;
5. Jiangsu Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 81, Hu Ju Lu, Nanjing, Jiangsu Province, the PRC;
6. Fujian Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 59, Wu Shan Lu, Fuzhou, Fujian Province, the PRC;
7. Henan Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 10, Min Hang Lu, Zhengzhou, Henan Province, the PRC;
8. Hainan Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 88, Jin Long Lu, Jin Mao District, Haikou, Hainan Province, the PRC;
9. Beijing Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 58, Dong Zhong Jie, Dong Cheng District, Beijing, the PRC;
10. Shanghai Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at 29/F, Dong Lou, No. 668, Beijing Dong Lu, Shanghai, the PRC;
11. Tianjin Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 27, Xin Xing Lu, He Ping District, Tianjin, the PRC;
12. Shandong Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 77, Jing San Lu, Jinan, Shandong Province, the PRC;
13. Hebei Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 220, Qing Yuan Jie, Shijiazhuang, Hebei Province, the PRC;
14. Liaoning Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 128, Shi Yi Wei Lu, Chen He District, Shenyang, Liaoning Province, the PRC;
15. Guangxi Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 92, Min Zu Da Dao, Nanning, Guangxi (Zhuang nationality) Autonomous Region, the PRC;
16. China Mobile (Shenzhen) Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 9023, Bing He Da Dao, Futian District, Shenzhen, Guangdong Province, the PRC;
17. Anhui Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 303, You Dian Building, Huai He Lu, Hefei City, Anhui Province, the PRC;
18. Hunan Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 169, Fu Rong Nan Lu, Tian Xin District, Changsha City, Hunan Province, the PRC;
19. Hubei Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 10, Jiang Xing Lu, Jiang Han District, Wuhan City, Hubei Province, the PRC;
20. Jiangxi Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at Jin Yuan Building, Tao Yuan Xiao District, Nanchang City, Jiangxi Province, the PRC;
21. Sichuan Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 19, Qing Yang Zheng Jie, Chengdu City, Sichuan Province, the PRC;
22. Chongqing Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 134, Yu Zhou Lu, Jiu Long Po District, Chongqing City, the PRC;
23. Shaanxi Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 5, Nan Er Huan Xi Duan, Xian City, Shaanxi Province, the PRC; and
24. Shanxi Mobile Communication Company Limited, a limited liability company incorporated and duly existing in accordance with the PRC laws with its legal address at No. 39, Shuang Ta Xi Jie, Taiyuan City, Shanxi Province, the PRC.
The foregoing Guangdong Mobile Communication Company Limited, Zhejiang Mobile Communication Company Limited, Jiangsu Mobile Communication Company Limited, Fujian Mobile Communication Company Limited, Henan Mobile Communication Company Limited, Hainan Mobile Communication Company Limited, Beijing Mobile Communication Company Limited, Shanghai Mobile Communication Company Limited, Tianjin Mobile Communication Company Limited, Shandong Mobile Communication Company Limited, Hebei Mobile Communication Company Limited, Liaoning Mobile Communication Company Limited, Guangxi Mobile Communication Company Limited, and China Mobile (Shenzhen) Limited, Anhui Mobile Communication Company Limited, Hunan Mobile Communication Company Limited, Hubei Mobile Communication Company Limited, Jiangxi Mobile Communication Company Limited, Sichuan Mobile Communication Company Limited, Chongqing Mobile Communication Company Limited, Shaanxi Mobile Communication Company Limited, and Shanxi Mobile Communication Company Limited are all the directly or indirectly wholly owned subsidiaries of Party B, all located in Mainland China, collectively referred to as "Party B's Domestic Subsidiaries"
WHEREAS
A. Party A is the lawful owner of the Licensed Trademarks (as defined herein). Party A obtained a total of five Trademark Registration Certificates for the
Licensed Trademarks issued by the Trademark Bureau under the State Administration for Industry and Commerce of China (hereinafter referred to as the "State Trademarks Bureau") on October 14, 2000 and February 28, 2002;
B. Party B is a company whose common shares are listed on the Hong Kong Stock Exchange and the New York Stock Exchange, approximately 25% of its outstanding shares are owned by offshore investors, and Party A is the indirect controlling shareholder of Party B;
C. Party A and Party B entered into a Trademark License Agreement on October 8, 1999, and a Supplemental Agreement in Connection with the Spectrum/(Telephone) Number Resources Usage Agreement, Trademark License Agreement, the Sharing of Inter-Provincial Transmission Line Leasing Fees Agreement, and the Inter-Provincial Network Roaming, Domestic and International Roaming Settlement Agreement (hereinafter referred to as the "Supplemental Agreement") on September 19, 2000, to memorialize the agreement among and between the parties with respect to the authorization by Party A to Party B, Party B's Domestic Subsidiaries and all of its Affiliates governing their use of the Licensed Trademarks;
D. Party A, Party B and Party B's Domestic Subsidiaries entered into a Trademark License Agreement on April 24, 2002, under which Party A granted Party B and Party B's Domestic Subsidiaries the right to use the Licensed Trademarks in their respective operating regions and areas of operation in Mainland China and the right to authorize Third Parties engaging in related business activities to use the Licensed Trademarks in specific geographic and operating areas;
E. Party A, Party B and Party B's Domestic Subsidiaries hereby wish to reiterate the contents contained in the Trademark License Agreement executed on April 24, 2002, and agree to further extend the scope of the Licensed Trademarks.
After due consideration, in order to protect Party A's legal right in the Licensed Trademarks and the Licensee's legal rights in the use of the Licensed Trademarks, Party A and the Licensees agree as follows:
ARTICLE ONE DEFINITIONS
Except as otherwise provided herein, the following terms shall have the meanings set forth below:
1.1. Affiliates: with respect to any person, means any individual, company, partnership, community or other entity or organization that directly or indirectly controls, is controlled by, or under the common control of, such person.
1.2. Licensed Trademarks: The trademarks set forth in Appendix 1 hereto (including the trademarks in the Chinese language and the English language, the graphic
trademarks and the trademarks formed by a combination of each of the foregoing trademarks), including the registered and non-registered trademark rights enjoyed in Mainland China and abroad appertaining to such trademarks, and the "China Mobile" trademarks registered by Party A at the State Trademarks Bureau, with respect to which Party A was issued a Trademark Registration Certificate (Ref No.: 1459995) on October 14, 2000, and four Trademark Registration Certificates (Ref No.: 1723536, 1723537, 1723538 and 1723539, respectively) on February 28, 2002. The photocopies of the five copies of the Trademark Registration Certificates mentioned above are attached as Appendix 1 to this Agreement.
1.3. Licensees: means Party B, Party B's Domestic Subsidiaries and all the branches of Party B's Domestic Subsidiaries.
1.4. Third Parties: means any individuals, legal persons, companies, enterprises, governmental departments or other economic entities or organizations other than the parties to this Agreement.
1.5. Force Majeure: means all unforeseeable, unavoidable events or the effect of which are insurmountable, that materially affect a party's capability to perform its obligations under this Agreement, in whole or in part.
ARTICLE TWO GRANT OF LICENSE
2.1. Party A hereby agrees that it shall grant the Licensees the non-exclusive right to use the Licensed Trademarks in Mainland China and allow the Licensees to use the Licensed Trademarks in their respective operating regions and areas of operation in Mainland China in accordance with the terms and conditions of this Agreement. Therefore, the Licensees shall have the right to use the Licensed Trademarks in their respective operating regions and areas of operation in Mainland China in accordance with the terms and conditions hereof.
2.2. In addition, Party A hereby agrees that it shall grant Party B the non-exclusive right to use the Licensed Trademarks in Hong Kong Special Administrative Region and to use the Licensed Trademarks in its respective operating regions and areas of operation in Hong Kong Special Administrative Region in accordance with the terms and conditions hereof during the term of this Agreement. Therefore, Party B shall have the right to use the Licensed Trademarks in its respective operating regions and areas of operation in Hong Kong Special Administrative Region in accordance with the terms and conditions hereof.
2.3. The Licensees shall not assign any of their rights or obligations hereunder to any Third Parties without the written consent of Party A.
ARTICLE THREE GRANT OF THIRD PARTY LICENSE
3.1. Party A hereby agrees that it shall authorize the Licensees to separately enter into a China Mobile Communications Trademark License Agreement (hereinafter referred to as the "Third Party Agreement") with Third Parties engaging in the relevant business activities (including and limited to business activities such as sales, marketing, promotions, sales by authorized dealers of mobile phones and maintenance by authorized dealers) within the respective areas of operation and operating regions based on its own business development needs. The Third Party Agreement shall authorize Third Parties to reasonably use the Licensed Trademarks within the specific operating and geographic areas.
3.2. Third Party Agreement shall be jointly executed by Party A (in the capacity as the Licensor), the corresponding Licensee hereunder (in the capacity as the agent) and the Third Parties (in the capacity as the Authorized Licensees) engaging in the relevant business activities. The corresponding Licensee hereunder shall have the right and obligation to supervise the reasonable use of the Licensed Trademarks inside the specific operating and geographical areas specified by such Third Parties who engage in the relevant business activities.
3.3. Party A hereby authorizes the Licensees to file the Third Party Agreements with the State Trademark Bureau and relevant regulatory authorities in the name and on behalf of Party A.
3.4. The Licensees shall submit an estimated number of Third Party Agreements to be entered into with any local Third Parties for the next year in accordance with its own business development needs (hereinafter referred to as the "Annual Plans"). The Licensees shall only enter into a Third Party Agreement with any Third Party if Party A has examined and approved the Annual Plans. The Licensees shall file an executed copy of such agreements following its execution with Party A and be responsible for filing the Third Party Agreements with the State Trademark Bureau and the relevant regulatory authorities within the time limit as required by the relevant PRC laws and regulations.
3.5. If the Licensees have a genuine need to permit new Third Parties engaging in the relevant activities to use the Licensed Trademarks that were not included in the Annual Plans, the Licensees may file applications with Party A for a specific number of additional Third Party Agreements. Party A may approve such applications filed from time to time by the Licensees in its discretion.
ARTICLE FOUR REPRESENTATIONS AND WARRANTIES
4.1. Each party to this Agreement shall make the following representations and warranties to the other parties:
a. It is a legal person duly organized and existing under the PRC laws (in the case of Party A and Party B's Domestic Subsidiaries or Hong Kong laws (in the case of Party B);
b. It has the full power and authority to execute this Agreement, to perform all the obligations and to grant all the authorizations under this Agreement;
c. Its representative, who executes this Agreement, has been granted the right and power to execute this Agreement by valid power of attorney, resolutions of its Board of Directors, or any other valid authorizations; and
d. This Agreement and its appendix shall constitute legal, valid and binding obligations of each party to this Agreement upon execution.
4.2. Party B agrees that it will be responsible in supervising and monitoring each of Party B's Domestic Subsidiaries in performing their respective obligations under this Agreement in accordance with the terms and conditions hereof.
4.3. Party A undertakes to the Licensees that Party A has not created or allowed, and will not create or allow, the existence of any guarantee, pledge or encumbrance otherwise relating to the Licensed Trademarks prior to the execution of this Agreement and during the term of this Agreement. Party A further undertakes that in the event that any third party disputes or takes any legal actions against the Licensees in respect of its use of the Licensed Trademarks, it will perform its legal obligations in accordance with the terms and conditions hereof, including but not limited to, to appear before court, to defend and to indemnify. Party A agrees to compensate and indemnify the Licensees for and against any losses arising from its use of the disputed Licensed Trademarks.
4.4. Party A shall maintain and renew the registration of the Licensed Trademarks and pay the relevant costs as well as file all necessary applications so that the Licensees may lawfully use the Licensed Trademarks and become the legal licensee of the Licensed Trademarks.
4.5. Party A shall take all necessary actions to protect its proprietary right with respect to the registered Licensed Trademarks, and it agrees that it will not take any actions intentionally to harm such proprietary right. If Party A intentionally gives up its proprietary right or any part of the registered Licensed Trademarks or fails to register or renew the Licensed Trademarks in any way, Party A shall deliver a written notice to the Licensees with respect to its decision sixty days before the date of such decision and obtain the prior consent of the Licensees.
4.6. This Agreement shall not grant any other rights to any Licensee except for the right to use the Licensed Trademarks in accordance with the terms and conditions of this Agreement and Party A shall not be deemed to have sold or transferred the
Licensed Trademarks to the Licensees. Without affecting the use of the Licensed Trademarks by the Licensees in accordance with the terms and conditions of this Agreement, the Licensees acknowledge Party A's proprietary rights in the Licensed Trademarks (such rights includes but not limited to the rights with respect to the enjoyment, registration and renewal and all of the rights relevant to such rights). The Licensees shall not have the right to file any registration application for the Licensed Trademarks, any trademarks, service logos, other names, marks or languages, or any packages, commercial exteriors, color graphics or designs that bear resemblance to the Licensed Trademarks in any country or region without obtaining the prior written consent of Party A.
4.7. The Licensees agree to provide reasonable assistance to Party A (or to any Affiliates of Party A at the request of Party A) to protect the Licensed Trademarks, including providing any materials or documents and not taking actions that will prevent or adversely affect the registration or renewal of the Licensed Trademarks in China or other places.
4.8. Each party to this Agreement agrees to unconditionally execute any other legal documents and take any other actions required for consummating this Agreement, including but not limited to following the filing procedures at the State Trademark Bureau.
ARTICLE FIVE LICENSING FEE
5.1. Party A agrees that the Licensees shall have the right to use the Licensed Trademarks without compensation before October 13, 2005.
5.2. From October 14, 2005, a licensing fee for the Licensed Trademarks shall be negotiated by the parties and specified in a supplemental contract (hereinafter referred to as the "Supplemental Contract"), but in no event such licensing fee for using the Licensed Trademarks shall be more that the licensing fee paid by any other Affiliates of Party A at the same time. Each party to this Agreement agrees that the Supplemental Contract shall only come into effect upon the satisfaction of the following conditions:
a. If necessary, an exemption shall be obtained for Party B in connection with the Supplemental Contract from the Hong Kong Stock Exchange with respect to the connected transactions in accordance with the Listing Rules of the Hong Kong Stock Exchange; and
b. If necessary, the Supplemental Contract shall be approved by an independent shareholder of Party B who has no connected relationship with Party B pursuant to the Listing Rules of the Hong Kong Stock Exchange.
ARTICLE SIX SUPERVISION
6.1. The Licensees shall comply with all of the relevant applicable laws and regulations and obtain the relevant governmental approvals relating to the use of the Licensed Trademarks.
6.2. The Licensees shall not use the Licensed Trademarks in a way that will damage or adversely affect Party A, its business or its reputation nor combine the Licensed Trademarks with any trademarks of the Licensees or any third party or any other languages, marks or designs to create a new logo containing the Licensed Trademarks or bearing resemblance thereto.
6.3. Party A may supervise any products, packages, labels, advertisements or any promotional materials or marketing that use the Licensed Trademarks, provided or sponsored by the Licensees and shall have the right to withhold its permission for such promotional or marketing activities if it deems such use harmful to its business, reputation or brand. The Licensees agree to comply with all of Party A's requests in this regard in a timely manner.
The Licensees shall maintain the following files (for one year) so that Party A may be able to determine whether the Licensees have complied with the relevant requirements set forth in this Article Six:
a. Sample packages, labels, advertisements, or originals or photos of other literature for products containing the Licensed Trademarks that are used in promotional or marketing activities;
b. All of the files of any appeals or claims with respect to the Licensed Trademarks that have been filed by consumers, competitors, governmental departments, actual users or other entities; and
c. Form, letterheads or other samples or copies containing the Licensed Trademarks set forth in this Article Six.
6.4. Upon the execution of this Agreement Party A shall provide to the Licensees the most recent manual for identification of corporate system (and any updated or amended version) relevant to the use of the Licensed Trademarks by the Licensees in accordance with the terms and conditions hereof. The Licensees shall strictly implement the relevant standards set forth in the most recent manual for identification of corporate system provided by Party A.
ARTICLE SEVEN INFRINGEMENT AND DAMAGES
7.1. In the event of breach of any obligations, responsibilities, undertakings or covenants under this Agreement by Party A, Party A shall indemnify the Licensees against any financial loss incurred by the Licensees attributable to such
breaches. In the event of breach of any obligations, responsibilities, undertakings and covenants under this Agreement by the Licensees, the corresponding Licensee shall indemnify Party A against any financial loss incurred thereby attributable to such breaches.
7.2. In the event of the failure of any party to this Agreement to perform the obligations and duties under this Agreement due to [the events] of force majeure, the affected party shall not be held liable for any breach arising from such events.
7.3. If the Licensees know of any infringement or threatened infringement of Party A's right in the Licensed Trademarks, the Licensees shall immediately notify Party A and provide to Party A a report detailing all of its knowledge [about the foregoing matter]. Upon receipt of the foregoing notice and report from the Licensees, Party A shall take all appropriate actions, including instituting legal proceedings or otherwise stopping the actual or threatened infringement. The Licensees shall cooperate with Party A in connection with Party's actions, and their expenses incurred in connection with such cooperation shall be reasonably compensated out of the fees paid by the infringing person.
ARTICLE EIGHT TERM, EFFECTIVENESS AND TERMINATION OF CONTRACT
8.1. This Agreement shall come into effect on the date the authorized representatives or legal representatives of each party execute this Agreement and expire on October 7, 2007. Unless each party to this Agreement has executed the Supplemental Contract in accordance with Article 5.2 of this Agreement, each party may further negotiate whether to renew this Agreement after its expiration.
8.2. Party A shall have the right to terminate this Agreement in any of the following events:
a. The Licensees breach this Agreement or any of the representations and warranties and the Licensees fail to cure such breach within thirty days of receipt of a written notice from Party A with a detailed account of the Licensees' acts of breach;
b. Party A no longer directly or indirectly holds any interest in Party B; or
c. Party B goes bankrupt, becomes the subject under any liquidation and dissolution proceedings, discontinues its operations, or fails to pay its debts on schedule.
8.3. Party B shall have the right to terminate this Agreement in any of the following events:
a. Party A breaches this Agreement or any of the representations and warranties and the Licensees fail to cure such breach within thirty days of receipt of a written notice of Party B with a detailed account of the Licensees' acts of breach; or
b. Party A no longer has any proprietary right in the registered Licensed Trademarks.
8.4. If any party wishes to terminate this Agreement in accordance with Article 8.2 or Article 8.3 of this Agreement, it shall notify other parties in writing with a 60-day advance notice. Such notice shall provide its reasons for termination, and this Agreement will be terminated upon expiration of such 60-day period.
8.5. After the termination of this Agreement:
a. The right to use the Licensed Trademarks by the Licensees shall be immediately terminated and the Licensees shall not continue its use of the Licensed Trademarks and the Licensees shall not attempt to register or use trademarks, service logos, other names, marks, languages, package profiles, color, design or graphics same as or similar to the Licensed Trademarks;
b. The Licensees shall provide to Party A or its designated Affiliates any materials in its custody with respect to or containing a Licensed Trademark, or make alterations to such materials so that they no longer incorporate any Licensed Trademark; and
c. Each party to this Agreement shall notify all of the relevant local administration for industry and commerce and the Trademark Administration of the termination of this Agreement.
The provisions of this Article 8.5 shall survive the termination of this Agreement.
ARTICLE NINE DISPUTE RESOLUTIONS, APPLICABLE LAWS AND OTHERS
9.1. For any disputes between the parties that arise from the effect, interpretation or performance of this Agreement, each party shall endeavor to resolve in a friendly manner. In the event of any failure to resolve such disputes after consultation, any party may submit such disputes to the China International Economic and Trade Arbitration Committee for arbitration in Beijing in accordance with its arbitration rules then in effect. The arbitration award shall be final and binding on each party to this Agreement. Except for the matters under dispute submitted for arbitration, the remaining provisions of this Agreement shall remain in effect.
9.2. The PRC laws govern the making, effect, interpretation and implementation of this Agreement and the dispute resolutions.
9.3. This Agreement is severable. If any provision is rendered illegal or unable to be implemented by the competent arbitration committee but has no fundamental effect on the effectiveness of this Agreement, such provision shall not affect the validity and performance of the remaining provisions of this Agreement.
9.4. This Agreement is written in Chinese and the original of this Agreement will be prepared in sixty-three copies. Each party to this Agreement shall hold two originals and Party A shall hold the remaining originals for purposes of registration or filing. All the originals of this Agreement shall have equal force and effect.
9.5. This Agreement shall constitute the entire agreement between the parties with respect to the agreed matters relating to this Agreement and supercede any intentions or understanding of the parties with respect to such matters or any previously executed agreements, contracts or written documents, including but not limited to the Trademark License Agreement executed by Party A and Party B on October 8, 1999, the full contents in relation to the trademarks licensing set forth in the Supplemental Agreement executed by Party A and Party B on September 19, 2000, and the Trademark License Agreement executed by Party A, Party B and Party B's Domestic Subsidiaries on April 24, 2002. In connection with the granting of the right to use the Licensed Trademarks under this Agreement, the relevant parties are required to deliver to the State Trademarks Bureau and the relevant local administration for industry and commerce a copy of this Agreement for filing purposes, but not required to file any other agreements (including but not limited to the Trademark License Agreement executed by the relevant parties on April 24, 2002).
9.6. Any amendments to this Agreement shall only become effective upon the execution of a written agreement between the respective authorized representative of each party to this Agreement, and such amendments shall be filed with the State Trademarks Bureau and the relevant local administration for industry and commerce.
9.7. The failure of any party to exercise or postpone exercising its rights, powers or preemptive rights under this Agreement shall not be deemed that it has waived such rights, powers or preemptive rights and a partial exercise of such rights, powers or preemptive rights shall not preclude the future exercise of such rights, powers or preemptive rights.
9.8. This Agreement may be made in counterparts for execution by each party. Counterparts bearing respective signatures shall constitute a binding contract. In the event that this Agreement shall be executed in counterparts, the date each
party successfully exchanges its signed counterpart with the other party by facsimile shall be the date of execution.
9.9. Party A shall assist Party B in obtaining all approvals required for the effectiveness and performance of this Agreement. Party A shall submit a copy of this Agreement to the State Administration for Industry and Commerce and the State Trademarks Bureau for filings within three months upon execution of this Agreement. Each of Party B's Domestic Subsidiaries shall deliver a copy of this Agreement to its respective local administration for industry and commerce for filing purposes.
9.10. Any matters that are not addressed under this Agreement shall be dealt with by each of the Parties to this Agreement separately.
This Agreement is executed by the duly authorized representative of each party to this Agreement as of the date set forth in the first paragraph of this Agreement for faithful compliance.
SIGNATURE PAGE
China Mobile Communications Corporation China Mobile (Hong Kong) Limited
Authorized Representative Authorized Representative
/s/ XUE Taohai /s/ LI Zhenqun
------------------------------ ---------------------------
Guangdong Mobile Communication Zhejiang Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ LI Gang /s/ XU Long
------------------------------ --------------------------
Jiangsu Mobile Communication Fujian Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ HE Ning /s/ LIU Ping
------------------------------ ---------------------------
Henan Mobile Communication Hainan Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ YUAN Jianguo /s/ WEI Ping
------------------------------ --------------------------
Beijing Mobile Communication Shanghai Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ SHA Yuejia /s/ ZHENG Jie
------------------------------ --------------------------
Tianjin Mobile Communication Shandong Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ ZHANG Xuehong /s/ LIU Aili
------------------------------ --------------------------
Hebei Mobile Communication Liaoning Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ ZHANG Liande /s/ WANG Xueli
------------------------------ --------------------------
Guangxi Mobile Communication China Mobile (Shenzhen) Limited
Company Limited Authorized Representative
Authorized Representative
/s/ GAN Yuecai /s/ LI Zhenqun
------------------------------ --------------------------
Anhui Mobile Communication Hunan Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ ZHANG Daode /s/ WANG Jiangen
------------------------------ --------------------------
Hubei Mobile Communication Jiangxi Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ MENG Dali /s/ HUANG Rigao
------------------------------ --------------------------
Sichuan Mobile Communication Chongqing Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ LI Hua /s/ SHEN Changfu
------------------------------ --------------------------
Shaanxi Mobile Communication Shanxi Mobile Communication
Company Limited Company Limited
Authorized Representative Authorized Representative
/s/ HUO Zhicheng /s/ GAO Buwen
------------------------------ --------------------------
15
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APPENDIX I
|
TRADEMARKS OF CHINA MOBILE COMMUNICATIONS CORPORATION
EXHIBIT 4.2
[LINKLATERS & ALLIANCE LOGO]
Dated 1 July 2002
CHINA MOBILE HONG KONG (BVI) LIMITED
CHINA MOBILE (HONG KONG) LIMITED
CHINA MOBILE COMMUNICATIONS CORPORATION
TAX INDEMNITY
LINKLATERS
10th Floor, Alexandra House
Chater Road
Hong Kong
Telephone:(852)28424888
Facsmile: (852)28108133
Ref: PHMC/053801053
THIS DEED OF TAX INDEMNITY is made on 1 July 2002
BETWEEN:
(1) CHINA MOBILE HONG KONG (BVI) LIMITED a company incorporated under the laws of the British Virgin Islands whose registered office is at PO Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands (the "VENDOR");
(2) CHINA MOBILE (HONG KONG) LIMITED a company incorporated under the laws of Hong Kong whose registered office is at 60th Floor, The Center, 99 Queen's Road Central, Hong Kong (the "PURCHASER"); and
(3) CHINA MOBILE COMMUNICATIONS CORPORATION a company incorporated under the laws of the PRC whose registered office is at 53A Xibianmennei Dajie, Xuanwuqu, Beijing, PRC (the "WARRANTOR").
WHEREAS:
(A) By a Conditional Sale and Purchase Agreement dated 16 May 2002 (the "AGREEMENT") made between the Vendor, the Warrantor and the Purchaser, the Vendor has agreed to sell and the Purchaser has agreed to purchase the Target BVI Shares (as defined in the Agreement) on the terms and conditions therein contained.
(B) It is a term of the Agreement that the Vendor and the Warrantor deliver to the Purchaser this Deed of Tax Indemnity on Completion (as defined in the Agreement).
NOW THIS DEED WITNESSES as follows:
1 INTERPRETATION
1.1 In this Deed, unless the context requires otherwise:
(a) words and expressions and other rules of interpretation defined, used or set out in the Agreement have the same meanings and application in this Deed;
(b) "TAXATION" means and includes all forms of tax, levy, duty, charge, impost, fee, deduction or withholding of any nature now or hereafter imposed, levied, collected, withheld or assessed by any taxing or other authority in any part of the world and includes any interest, additional tax, penalty or other charge payable or claimed in respect thereof,
(c) "CLAIM" means any assessment, notice, demand, letter or other document issued or action taken by or on behalf of any person, authority or body whatsoever and of whatever country from which it appears that any member of the Target Companies Group is liable or is sought to be made liable to make any payment or is deprived or is sought to be deprived of any relief or allowance or credit or right to repayment of taxation;
(d) "EVENT" includes (without limitation) the death of any person, any action, omission or transaction whether or not any member of the Target Companies Group is a party thereto and includes completion of the sale of the Target BVI Shares to the Purchaser and references to the result of events on or before the date hereof shall include the combined result of two or more events one or more of which shall have taken place before the date hereof;
(e) references to income or profits or gains earned,
accrued or received shall include income or profits
or gains deemed to have been or treated as or
regarded as earned, accrued or received for the
purposes of any legislation;
(f) references to a Claim shall include any Claim whether
made before or after the date hereof and whether
satisfied or unsatisfied at the date hereof and shall
also include:
(i) the loss of any relief, allowance or credit
granted by or pursuant to any legislation or
otherwise for taxation purposes which could
but for the Claim in question have been
available to the Purchaser or any member of
the Target Companies Group whether or not
the said loss results in any taxation being
payable at the time of such loss; and
(ii) the nullifying or cancellation of a right to
repayment of taxation which would have been
so available or is at the date hereof
assumed by the Vendor, the Warrantor or the
Purchaser to be available;
and in such a case the amount of taxation which could
otherwise have been relieved, allowed or credited by
the relief, allowance or credit so lost or the amount
of repayment which would otherwise have been obtained
shall be treated as an amount of taxation for which a
liability has arisen;
(g) references to the Agreement shall be construed as
references to the Agreement as amended or
supplemented from time to time.
1.2 The expressions the VENDOR, THE WARRANTOR, the TARGET
COMPANIES GROUP and the PURCHASER shall, where the context
permits, include their respective successors and assigns.
2 INDEMNITY
Subject as hereinafter provided, each of the Vendor and the Warrantor
hereby jointly and severally undertakes to indemnify and keep
indemnified the Purchaser (for itself and as trustee for the Target
Companies Group) against any loss or liability suffered by the
Purchaser or any member of the Target Companies Group including, but
not limited to, any diminution in the value of the assets of or shares
in any member of the Target Companies Group, any payment made or
required to be made by the Purchaser or any member of the Target
Companies Group and any costs and expenses incurred as a result of or
in connection with any Claim falling on any member of the Target
Companies Group resulting from or by reference to any income, profits
or gains earned, accrued or received on or before the date hereof or
any event on or before the date hereof whether alone or in conjunction
with other circumstances and whether or not such taxation is chargeable
against or attributable to any other person, firm or company.
3 EXCEPTIONS
The indemnities given by this Deed do not cover any Claim to the extent
that provision or reserve in respect thereof has been made in the Last
Accounts or to the extent that payment or discharge of such Claim has
been taken into account therein.
- 2 -
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4 COSTS AND EXPENSES
The indemnities given by this Deed shall cover all costs and expenses
incurred by the Purchaser or any member of the Target Companies Group
in connection with any Claim, and any penalties, fines or interest
payable by the Purchaser or any member of the Target Companies Group
relating to any Claim for which the Vendor or the Warrantor is liable
under this Deed.
5 REIMBURSEMENT
In the event that any Claim which is the subject of an indemnity
hereunder is or has been discharged (whether by payment or by the loss
of any relief, allowance, credit or right to repayment of taxation) or
suffered by any member of the Target Companies Group, the indemnity
given hereunder shall take effect as a covenant by the Vendor and the
Warrantor forthwith to reimburse the relevant member of the Target
Companies Group (through the Purchaser) for any amount so paid or to
compensate the relevant member of Target Companies Group for any loss
of relief, allowance, credit or right to repayment so suffered.
6 CONDUCT OF CLAIMS
If the Purchaser becomes aware of a Claim relevant for the purposes of
this Deed, it shall as soon as reasonably practicable give notice
thereof to the Vendor and the Warrantor and shall (subject to the
Purchaser and the Target Companies Group being indemnified to the
Purchaser's satisfaction against any liability, costs, damages or
expenses which may be incurred thereby) take such action and procure
that the Target Companies Group shall take such action as the Vendor
and the Warrantor may reasonably request to avoid, resist, dispute,
defend, compromise or appeal against the Claim, provided that neither
the Purchaser nor any member of the Target Companies Group shall be
required to take any steps which would require any admission of guilt
or liability relating to matters connected with the Claim in question
or which would affect the future conduct of the business of the
Purchaser or any member of the Target Companies Group or affect the
rights or reputations of any of them nor shall they be required to take
any such action unless the Vendor and the Warrantor shall have produced
to them a leading barrister's opinion that such action is reasonable.
7 SET-OFF AND DEDUCTIONS
All payments to be made by the Vendor and the Warrantor under this Deed
shall be made in full without set-off or counterclaim or any
restriction or condition and free and clear of any present or future
taxes, duties, charges or other deductions or withholdings of any
nature. If any deduction or withholding is required to be made from any
such payment the Vendor and the Warrantor shall, together with such
payment, pay such additional amount as is necessary to ensure that the
recipient receives the full amount due hereunder.
8 WAIVER AND SEVERABILITY
No failure or delay by the Purchaser or any member of the Target
Companies Group in exercising any right, power or remedy under this
Deed shall operate as a waiver thereof, nor shall any single or partial
exercise of the same preclude any further exercise thereof or the
exercise of any other right, power or remedy. If at any time any
provision of this Deed is or becomes illegal, invalid or unenforceable
in any respect, the legality, validity and enforceability of the
remaining provisions of this Deed shall not be affected or impaired
thereby.
- 3 -
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9 ASSIGNMENT
The Purchaser and any member of the Target Companies Group may assign
its respective rights and benefits under this Deed.
10 NOTICES
Each notice, demand or other communication given or made hereunder
shall be in writing and delivered or sent to the relevant party at its
address or telex number or fax number set out in the Agreement. The
provisions of clause 21 of the Agreement shall apply to this Deed as
though they have been fully set out herein.
11 GOVERNING LAW AND JURISDICTION
11.1 This Deed shall be governed by and construed in accordance
with the laws of Hong Kong.
11.2 Any dispute arising out of or in connection with this Deed
shall be resolved by arbitration in Hong Kong International
Arbitration Centre by a single arbitrator in accordance with
the UNCITRAL Arbitration Rules in force from time to time. The
parties agree that the arbitral award will be final and
binding.
|
IN WITNESS WHEREOF this Deed has been executed on the day and year first above written.
THE COMMON SEAL OF )
CHINA MOBILE HONG KONG (BVI) LIMITED ) (Common Seal of China Mobile
was affixed hereto in the presence of: ) Hong Kong (BVI) Limited)
/s/ Wang Xiaochu)
---------------------------------
Director
THE COMMON SEAL OF )
CHINA MOBILE (HONG KONG) LIMITED ) (Common Seal of China Mobile
was affixed hereto in the presence of: ) (Hong Kong) Limited)
/s/ Wang Xiaochu)
---------------------------------
Director
- 4 -
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SIGNED, SEALED AND DELIVERED ) BY ) (/s/ Xue Taohai) |
a duly authorised representative on behalf of )
CHINA MOBILE COMMUNICATIONS CORPORATION )
Exhibit 4.3
VODAFONE GROUP PLC VODAFONE HOLDINGS (JERSEY) LIMITED
The Courtyard P.O. Box 404
2-4 London Road Whiteley Chambers
Newbury, Berkshire Don Street, St Helier
RG14 1JX England JE4 9WG Jersey
China Mobile (Hong Kong) Limited
60th Floor, The Center
99 Queen's Road Central
Hong Kong
18 June 2002
|
Dear Sirs,
NAME OF THE ALLOTTEE FOR THE NEW SHARES IN CHINA MOBILE (HONG KONG) LIMITED TO BE ISSUED UPON COMPLETION OF THE VODAFONE SUBSCRIPTION AGREEMENT.
We refer to the subscription agreement (the "VODAFONE SUBSCRIPTION AGREEMENT") dated 16 May 2002 and entered into between China Mobile (Hong Kong) Limited, Vodafone Group Plc and Vodafone Holdings (Jersey) Limited. Terms used in the Vodafone Subscription Agreement shall have the same meanings in this letter.
Notwithstanding the terms of clause 4.3(c) of the Vodafone Subscription Agreement, each of Vodafone Group Plc and Vodafone Holdings (Jersey) Limited hereby confirms that at Completion:
(a) the allotment of the New Shares to, and the issue of a share certificate in respect of the New Shares in the name of, Vodafone Holdings (Jersey) Limited;
(b) the registration of Vodafone Holdings (Jersey) Limited as a member of China Mobile (Hong Kong) Limited in its register of members in respect of the New Shares; and
(c) the delivery to Freshfields Bruckhaus Deringer of the share certificate referred to in paragraph (a) and a copy of the list of top ten shareholders of China Mobile (Hong Kong) Limited reflecting the registration referred to in paragraph (b),
shall constitute full and effective discharge of the obligations of China Mobile (Hong Kong) Limited under clause 4.3(c) of the Vodafone Subscription Agreement.
Your faithfully /s/ Stephen Scott /s/ John Alcock ----------------------------------- ---------------------------------- Vodafone Group Plc Vodafone Holdings (Jersey) Limited Name: Stephen Scott Name: John Alcock Designation: Company Secretary Designation: Director |
Acknowledged and Agreed
/s/ Li Zhenqun
------------------------------------
China Mobile (Hong Kong) Limited
Name: Li Zhenqun
Designation: Vice Chairman and
Chief Operating Officer
|
Exhibit 4.4
[English Translation]
SUPPLEMENTAL AGREEMENT
DATED AS OF 29 April 2002
RELATING TO
Frequency Spectrum/Numbering Resources Usage Agreement, Sharing Agreement of Inter-provincial Long Distance Transmission Line Leasing Fee, Inter-provincial Interconnection and Domestic and International Roaming Settlement Agreement, Agreement on "Shenzhouxing" Roaming Settlement and Sharing of Revenue From Sales of Top-Off Cards From Network Operators Other Than Their Home Network Operators, and Supplemental Agreement to Agreement on "Shenzhouxing" Roaming Settlement and Sharing of Revenue from Sales And Value-Adding of Top-Off Cards from Network Operators Other Than Their Home Network Operators
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement is entered into between and by the following parties on 29 April 2002, in Beijing, the People's Republic of China ("China" or the "PRC"):
1. China Mobile Communications Corporation, a state-owned enterprise duly established and in good standing under PRC law with its legal address at No. 53A, Xi Bian Men Nei Da Jie, Xuan Wu District, Beijing, the PRC (hereinafter referred to as "Party A");
2. China Mobile (Hong Kong) Limited, a limited liability company duly established and in good standing under Hong Kong law with its legal address at 60/F., The Center, 99 Queen's Road Central, Hong Kong (hereinafter referred to as "Party B");
3. Anhui Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 303, You Dian Building, Huai He Lu, Hefei City, Anhui Province, the PRC;
4. Jiangxi Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at Jin Yuan Building, Tao Yuan Xiao District, Nanchang City, Jiangxi Province, the PRC;
5. Chongqing Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 134, Yu Zhou Lu, Jiu Long Po District, Chongqing City, the PRC;
6. Sichuan Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 19, Qing Yang Zheng Jie, Chengdu City, Sichuan Province, the PRC;
7. Hubei Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 10, Jiang Xing Lu, Jiang Han District, Wuhan City, Hubei Province, the PRC;
8. Hunan Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 169, Fu Rong Nan Lu, Tian Xin District, Changsha City, Hunan Province, the PRC;
9. Shaanxi Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 5, Nan Er Huan Xi Duan, Xian City, Shaanxi Province, the PRC; and
10. Shanxi Mobile Communication Company Limited, a limited liability company duly established and in good standing under PRC law with its legal address at No. 39, Shuang Ta Xi Jie, Taiyuan City, Shanxi Province, the PRC.
(The foregoing parties from 3 through 10 are hereinafter referred to as the "Target Companies".)
WHEREAS,
1. Party A is the indirect controlling shareholder of Party B, and holds the entire equity interests in the Target Companies;
2. Party B is a company whose common shares are listed on the Stock Exchange of Hong Kong Limited ("SEHK") and the New York Stock Exchange. At present, Party B wholly owns the following operating subsidiaries in Mainland China: Guangdong Mobile Communication Company Limited, Zhejiang Mobile Communication Company Limited, Jiangsu Mobile Communication Company Limited, Hainan Mobile Communication Company Limited, Fujian Mobile Communication Company Limited, Henan Mobile Communication Company Limited, Beijing Mobile Communication Company Limited, Tianjin Mobile Communication Company Limited, Shanghai Mobile Communication Company Limited, Liaoning Mobile Communication Company Limited, Shandong Mobile Communication Company Limited, Hebei Mobile Communication Company Limited and Guangxi Mobile Communication Company Limited (collectively as "Operating Subsidiaries of Party B");
3. Part A and Part B entered into Frequency Spectrum/Numbering Resources Usage Agreement on 8 October 1999; and Sharing Agreement of Inter-provincial Long Distance Transmission Line Leasing Fees and Inter-provincial Interconnection and Domestic and International Roaming Settlement Agreement on May 5, 2000, Agreement On "Shenzhouxing" Roaming Settlement And Sharing Of Revenue From Sales of Top-Off Cards From Network Operators Other Than Their Home Network Operators on October 4, 2000, and Supplemental Agreement to Agreement on "Shenzhouxing" Roaming Settlement and Sharing of Revenue From Sales And Value-Adding of Top-Off Cards From Network Operators Other Than Their Home Network Operators on May 11, 2001 (all the foregoing agreements collectively as the "Original Agreements" hereinafter), and both parties had reached agreements on, among other things, frequency spectrum/number resource sharing, sharing of inter-provincial long distance leasing line fee, inter-provincial interconnection, domestic/international roaming settlement, "Shenzhouxing" Roaming Settlement and Sharing of Revenue from Sales of Top-Off Cards From Network Operators Other Than Their Home Network Operators in relation to the mobile operations of subsidiaries of Party B. At present, the Original Agreements apply to Operating Subsidiaries of Party B.
4. With the approval from the relevant PRC regulatory authorities, Party A intends to sell to Party B, and Party B intends to purchase from Party A, the entire equity interest of Party A in the Target Companies;
5. Party B and the Target Companies have the intention, and Party A agrees, that the Target Companies shall enjoy all rights and benefits and bear all liabilities under
the Original Agreements, upon becoming directly or indirectly wholly-owned subsidiaries of Party B.
THEREFORE, following amicable consultation, Party A and Party B have concluded the following supplemental agreements:
1. All parties agree that each of the Target Companies shall have and bear the same rights and liabilities under the Original Agreements as the other Operating Subsidiaries of Party B, effective from the date when it has become a directly or indirectly wholly-owned subsidiary of Party B (the "Effective Date").
2. Party B will be responsible in supervising and monitoring each of the Target Companies in performing its respective obligations under the Original Agreements in accordance with the terms and conditions under the Frequency Spectrum/Numbering Resources Usage Agreement; and Sharing Agreement of Inter-provincial Long Distance Transmission Line Leasing Fee, Inter-provincial Interconnection and Domestic and International Roaming Settlement Agreement, Agreement On "Shenzhouxing" Roaming Settlement And Sharing Of Revenue From Sales of Top-Off Cards From Network Operators Other Than Their Home Network Operators, and Supplemental Agreement to Agreement On "Shenzhouxing" Roaming Settlement And Sharing Of Revenue From Sales And Value-Adding Of Top-Off Cards From Network Operators Other Than Their Home Network Operators.
3. This Supplemental Agreement shall come into effect on the Effective Date. All Target Companies should perform the Original Agreements starting from the Effective Date.
4. PRC law shall apply to the execution, effectiveness, performance, interpretation and settlement of dispute of this Supplemental Agreement and the Original Agreements.
Should any disputes between the parties arise from the effectiveness, interpretation or performance of this Supplemental Agreement and the Original Agreements, each party shall endeavor to resolve the same in an amicable manner. In the event of any failure to resolve such disputes after consultation, any party may submit such disputes to the China International Economic and Trade Arbitration Committee for arbitration in Beijing in accordance with its then effective arbitration rules. The arbitration award shall be final and binding on each party to this Agreement. The arbitration fees shall be borne by the losing party.
5. This effectiveness of this Supplemental Agreement is subject to the satisfaction of the following conditions:
(1) Party B obtains the relevant connected transaction waiver from the SEHK in relation to the transactions in accordance with the Listing Rules of the SEHK;
(2) Independent shareholders of Party B, who are not connected parties under the Listing Rules of the SEHK, approve the transactions in this Supplemental Agreement; and
(3) Party B completes the acquisition of the Target Companies.
6. This Supplemental Agreement shall be executed by legal persons or the duly authorized representatives of each of the parties, and be affixed with the official seals.
7. This Supplemental Agreement shall be executed in eleven (11) counterparts with one to each party and an extra copy to Party B for its use in completing necessary registrations or filings. All the originals of this Agreement shall have equal force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Agreement to be duly executed as of the day and year first above written.
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/ LU Xiangdong
---------------------------------
CHINA MOBILE (HONG KONG) LIMITED
By: /s/ LI Zhenqun
---------------------------------
Anhui Mobile Communication Company Limited
By: /s/ ZHANG Daode
---------------------------------
Jiangxi Mobile Communication Company Limited
By: /s/ HUANG Rigao
--------------------------------
Chongqing Mobile Communication Company Limited
By: /s/ Shen Changfu
--------------------------------
Sichuan Mobile Communication Company Limited
By: /s/ LI Hua
--------------------------------
|
Hubei Mobile Communication Company Limited
By: /s/ MENG Dali
--------------------------------
Hunan Mobile Communication Company Limited
By: /s/ QUAN Mingfu
--------------------------------
Shaanxi Mobile Communication Company Limited
By: /s/ HUO Zhicheng
---------------------------------
Shanxi Mobile Communication Company Limited
By: /s/ GAO Buwen
---------------------------------
|
Exhibit 4.5
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Anhui, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xi Bian Men Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) ANHUI COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at Post and Telecommunication Building, 303 Huai He Road, Hefei, Anhui Province, the PRC (the "Service Company"); and
(3) ANHUI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at Post and Telecommunication Building, 303 Huai He Road, Hefei, Anhui Province, the PRC ("Anhui Mobile").
WHEREAS:
1. Both Anhui Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Anhui Province into Anhui Mobile, which will be operated and managed by Anhui Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Anhui Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Anhui Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 2,094 employees engaged in mobile communication services and employed by the Anhui Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Anhui Mobile Communication Company (the predecessor of the Service Company) in Anhui and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Anhui Mobile.
2.2 Upon the Effective Date, Anhui Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB4,089,495,497.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Anhui Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Anhui Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Anhui Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Anhui Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Anhui Mobile that, as of the Effective Date, Anhui Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Anhui Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Anhui Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
|
ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
4
|
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
|
ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
|
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/XUE Taohai ------------------------- Legal Representative or Authorized Representative |
ANHUI COMMUNICATION SERVICE COMPANY
By: /s/WU Chong'An ------------------------- Legal Representative or Authorized Representative |
ANHUI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ZHANG Daode ------------------------- Legal Representative or Authorized Representative |
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED BY CHINA
MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 3
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN ANHUI MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
-----------------------------------------------------------------------------------------------------------
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------------
Current assets 116048 116048 114394.19 -1653.80 -1.43
-----------------------------------------------------------------------------------------------------------
Fixed Assets 499679.47 499679.47 507694.58 8015.11 1.60
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Construction in progress 67448.91 67448.91 67328.19 -120.72 -0.18
-----------------------------------------------------------------------------------------------------------
Building 19995.56 19995.56 22740.18 2744.61 13.73
-----------------------------------------------------------------------------------------------------------
Machinery 410675.83 410675.83 397952.10 -12723.73 -3.10
-----------------------------------------------------------------------------------------------------------
Land 1534.25 1534.25 19534.65 18000.40 1173.24
-----------------------------------------------------------------------------------------------------------
Intangible assets 2986.00 2986.00 3043.90 57.90 1.94
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Land use rights 66.35 66.35 0 -66.35 -100
-----------------------------------------------------------------------------------------------------------
Other assets 107.47 107.47 28.30 -79.17 -73.67
-----------------------------------------------------------------------------------------------------------
Total assets 618820.93 618820.93 625160.96 6340.03 1.02
-----------------------------------------------------------------------------------------------------------
Current liabilities 216211.41 216211.41 216211.41 - -
-----------------------------------------------------------------------------------------------------------
Long-term liabilities - - - - -
-----------------------------------------------------------------------------------------------------------
Total liabilities 216211.41 216211.41 216211.41 - -
-----------------------------------------------------------------------------------------------------------
Net assets 402609.52 402609.52 408949.55 6340.03 1.57
-----------------------------------------------------------------------------------------------------------
|
Exhibit 4.6
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Jiangxi, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) JIANGXI COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at Jin Yuan Building, Tao Yuan Xiao Qu, Nanchang, Jiangxi Province, the PRC (the "Service Company"); and
(3) JIANGXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at Jin Yuan Building, Tao Yuan Xiao Qu, Nanchang, Jiangxi Province, the PRC ("Jiangxi Mobile").
WHEREAS:
1. Both Jiangxi Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Jiangxi Province into Jiangxi Mobile, which will be operated and managed by Jiangxi Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Jiangxi Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and
approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Jiangxi Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 2,088 employees engaged in mobile communication services and employed by the Jiangxi Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Jiangxi Mobile Communication Company (the predecessor of the Service Company) in Jiangxi and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Jiangxi Mobile.
2.2 Upon the Effective Date, Jiangxi Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB2,922,824,235.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Jiangxi Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Jiangxi Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Jiangxi Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Jiangxi Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Jiangxi Mobile that, as of the Effective Date, Jiangxi Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Jiangxi Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Jiangxi Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach
of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
|
ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
|
ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
|
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/ XUE Taohai ------------------------------------------------- Legal Representative or Authorized Representative |
JIANGXI COMMUNICATION SERVICE COMPANY
By: /s/ TU Yuqing ------------------------------------------------- Legal Representative or Authorized Representative |
JIANGXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ JIAN Qin ------------------------------------------------- Legal Representative or Authorized Representative |
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 5
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN JIANGXI MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
-----------------------------------------------------------------------------------------------------------
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------------
Current assets 93476.34 93476.34 93291.70 -184.63 -0.20
-----------------------------------------------------------------------------------------------------------
Fixed Assets 478037.33 478037.33 468551.46 -9485.88 -1.98
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Construction in progress 41288.25 41288.25 39585.95 -1702.30 -4.12
-----------------------------------------------------------------------------------------------------------
Building 30781.76 30781.76 31861.73 1079.97 3.51
-----------------------------------------------------------------------------------------------------------
Machinery 404952.95 404952.95 384538.31 -20414.63 -5.04
-----------------------------------------------------------------------------------------------------------
Land 988.00 988.00 12551.41 11563.41 1170.38
-----------------------------------------------------------------------------------------------------------
Intangible assets 4044.75 4044.75 9910.95 5866.20 145.03
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Land use rights 3576.10 3576.10 9876.94 6300.84 176.19
-----------------------------------------------------------------------------------------------------------
Other assets 1137.89 1137.89 801.76 -336.13 -29.54
-----------------------------------------------------------------------------------------------------------
Total assets 576696.31 576696.31 572555.87 -4140.45 -0.72
-----------------------------------------------------------------------------------------------------------
Current liabilities 260818.44 260818.44 260818.44 - -
-----------------------------------------------------------------------------------------------------------
-Long-term liabilities 19455.00 19455.00 19455.00 - -
-----------------------------------------------------------------------------------------------------------
Total liabilities 280273.44 280273.44 280273.44 - -
-----------------------------------------------------------------------------------------------------------
Net assets 296422.87 296422.87 292282.42 -4140.45 -1.40
-----------------------------------------------------------------------------------------------------------
|
Exhibit 4.7
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Chongqing, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) CHONGQING COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 134 Yu Zhou Road, Jiu Long Po District, Chongqing, the PRC (the "Service Company"); and
(3) CHONGQING MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 134 Yu Zhou Road, Jiu Long Po District, Chongqing, the PRC ("Chongqing Mobile").
WHEREAS:
1. Both Chongqing Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Chongqing Province into Chongqing Mobile, which will be operated and managed by Chongqing Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Chongqing Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Chongqing Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 1,366 employees engaged in mobile communication services and employed by the Chongqing Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Chongqing Mobile Communication Company (the predecessor of the Service Company) in Chongqing and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Chongqing Mobile.
2.2 Upon the Effective Date, Chongqing Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB3,019,645,401.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Chongqing Mobile shall enjoy and assume any and all
assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Chongqing Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Chongqing Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Chongqing Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Chongqing Mobile that, as of the Effective Date, Chongqing Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Chongqing Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Chongqing Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
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ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
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ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
|
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/ XUE Taohai ------------------------------------------------- Legal Representative or Authorized Representative |
CHONGQING COMMUNICATION SERVICE COMPANY
By: /s/ LIU Zizhang ------------------------------------------------- Legal Representative or Authorized Representative |
CHONGQING MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ SHEN Changfu ------------------------------------------------- Legal Representative or Authorized Representative |
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 13
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN CHONGQING MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
-----------------------------------------------------------------------------------------------------------
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------------
Current assets 49500.39 49500.39 49355.71 -144.68 -0.29
-----------------------------------------------------------------------------------------------------------
Fixed Assets 474866.30 474866.30 454118.25 -20748.05 -4.37
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Construction in progress 35159.76 35159.76 34806.12 -353.64 -1.01
-----------------------------------------------------------------------------------------------------------
Building 19897.55 19897.55 18071.78 -1825.76 -9.18
-----------------------------------------------------------------------------------------------------------
Machinery 419145.59 419145.59 397308.57 -21837.03 -5.21
-----------------------------------------------------------------------------------------------------------
Land 661.06 661.06 3931.78 3270.72 494.77
-----------------------------------------------------------------------------------------------------------
Intangible assets 2901.70 2901.70 6561.95 3660.25 126.14
-----------------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------------
Land use rights 2901.70 2901.70 6561.95 3660.25 126.14
-----------------------------------------------------------------------------------------------------------
Deferred assets 234.38 234.38 262.48 28.10 11.90
-----------------------------------------------------------------------------------------------------------
Total assets 527501.76 527501.76 510298.38 -17204.38 -3.26
-----------------------------------------------------------------------------------------------------------
Current liabilities 208961.37 208961.37 208333.84 -627.53 -0.30
-----------------------------------------------------------------------------------------------------------
Long-term liabilities - - - - -
-----------------------------------------------------------------------------------------------------------
Total liabilities 208961.37 208961.37 208333.84 -627.53 -0.30
-----------------------------------------------------------------------------------------------------------
Net assets 318541.39 318541.39 301964.54 -16576.85 -5.20
-----------------------------------------------------------------------------------------------------------
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Exhibit 4.8
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Sichuan, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) SICHUAN COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at Qing Yang Zheng Jie, Chengdu, Sichuan Province, the PRC (the "Service Company"); and
(3) SICHUAN MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 19 Qing Yang Zheng Jie, Chengdu, Sichuan Province, the PRC ("Sichuan Mobile").
WHEREAS:
1. Both Sichuan Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Sichuan Province into Sichuan Mobile, which will be operated and managed by Sichuan Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Sichuan Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Sichuan Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 3,290 employees engaged in mobile communication services and employed by the Sichuan Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Sichuan Mobile Communication Company (the predecessor of the Service Company) in Sichuan and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Sichuan Mobile.
2.2 Upon the Effective Date, Sichuan Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB7,473,625,572.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Sichuan Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Sichuan Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Sichuan Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Sichuan Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Sichuan Mobile that, as of the Effective Date, Sichuan Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Sichuan Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Sichuan Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
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ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
4
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12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
|
ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
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CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/ XUE Taohai
-------------------------------------------------
Legal Representative or Authorized Representative
|
SICHUAN COMMUNICATION SERVICE COMPANY
By: /s/ FENG Siyi
-------------------------------------------------
Legal Representative or Authorized Representative
|
SICHUAN MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ LI Hua
-------------------------------------------------
Legal Representative or Authorized Representative
|
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 11
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN SICHUAN MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
-----------------------------------------------------------------------------------------------------
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------
Current assets 108778.27 108778.27 108700.63 -77.64 -0.07
-----------------------------------------------------------------------------------------------------
Fixed Assets 1107374.12 1107374.12 1101285.30 -6088.82 -0.55
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Construction in progress 358052.74 358052.74 359058.75 1006.01 0.28
-----------------------------------------------------------------------------------------------------
Building 50514.96 50514.96 49746.33 -768.63 -1.52
-----------------------------------------------------------------------------------------------------
Machinery 694646.47 694646.47 661066.29 -33580.18 -4.83
-----------------------------------------------------------------------------------------------------
Land 4152.98 4152.98 31406.96 27253.98 656.25
-----------------------------------------------------------------------------------------------------
Intangible assets 446.63 446.63 518.27 71.64 16.04
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Land use rights - - - - -
-----------------------------------------------------------------------------------------------------
Total assets 1216599.02 1216599.02 1210504.20 -6094.82 -0.50
-----------------------------------------------------------------------------------------------------
Current liabilities 360060.09 360060.90 360039.96 -20.13 -0.01
-----------------------------------------------------------------------------------------------------
Long-term liabilities 103101.68 103101.68 103101.68 - -
-----------------------------------------------------------------------------------------------------
Total liabilities 463161.78 463161.78 463141.65 -20.13 -
-----------------------------------------------------------------------------------------------------
Net assets 753437.25 753437.25 747362.56 -6074.69 -0.81
-----------------------------------------------------------------------------------------------------
|
Exhibit 4.9
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Hubei, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) HUBEI COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 10 Jiang Xin Road, Jiang Han Po District, Wuhan, Hubei Province, the PRC (the "Service Company"); and
(3) HUBEI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 10 Jiang Xin Road, Jiang Han Po District, Wuhan, Hubei Province, the PRC ("Hubei Mobile").
WHEREAS:
1. Both Hubei Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Hubei Province into Hubei Mobile, which will be operated and managed by Hubei Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Hubei Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Hubei Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 3,223 employees engaged in mobile communication services and employed by the Hubei Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Hubei Mobile Communication Company (the predecessor of the Service Company) in Hubei and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Hubei Mobile.
2.2 Upon the Effective Date, Hubei Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB3,951,279,556.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Hubei Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Hubei Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Hubei Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Hubei Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Hubei Mobile that, as of the Effective Date, Hubei Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Hubei Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Hubei Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
|
ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
4
|
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
|
ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
|
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/ XUE Taohai
-------------------------------------------------
Legal Representative or Authorized Representative
|
HUBEI COMMUNICATION SERVICE COMPANY
By: /s/ MAO Xinping
-------------------------------------------------
Legal Representative or Authorized Representative
|
HUBEI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ CHEN Nanjian
-------------------------------------------------
Legal Representative or Authorized Representative
|
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 9
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN HUBEI MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
-----------------------------------------------------------------------------------------------------
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------
Current assets 162677.80 162677.80 162190.75 -487.05 -0.30
-----------------------------------------------------------------------------------------------------
Fixed Assets 665640.97 665640.97 687476.88 21835.91 3.28
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Construction in progress 271189.53 271189.53 270271.18 -918.35 -0.34
-----------------------------------------------------------------------------------------------------
Building 12370.08 12370.08 14136.74 1766.65 14.28
-----------------------------------------------------------------------------------------------------
Machinery 380328.92 380328.92 392044.69 11715.77 3.08
-----------------------------------------------------------------------------------------------------
Land 1752.43 1752.43 11024.27 9271.84 529.08
-----------------------------------------------------------------------------------------------------
Intangible assets 3572.17 3572.17 426.42 -3145.75 -88.06
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Land use rights 3572.17 3572.17 426.42 -3145.75 -88.06
-----------------------------------------------------------------------------------------------------
Total assets 831890.94 831890.94 850094.05 18203.11 2.19
-----------------------------------------------------------------------------------------------------
Current liabilities 413087.51 413087.51 - -
-----------------------------------------------------------------------------------------------------
Long-term liabilities 41941.31 41941.31 41878.58 -62.74 -0.15
-----------------------------------------------------------------------------------------------------
Total liabilities 455028.83 455028.83 454966.09 -62.74 -0.01
-----------------------------------------------------------------------------------------------------
Net assets 376862.11 376862.11 395127.96 18265.84 4.85
-----------------------------------------------------------------------------------------------------
|
Exhibit 4.10
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Hunan, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) HUNAN COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in valid existence under the laws of China, with its legal address at 169 Fu Rong Nan Road, Changsha, Hunan Province, China (the "Service Company"); and
(3) HUNAN MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in valid existence under the laws of China, with its legal address at 169 Fu Rong Nan Road, Tian Xin District, Changsha, Hunan Province, Hunan Province, China ("Hunan Mobile").
WHEREAS:
1. Both Hunan Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile telecommunication businesses and related assets operated and managed by the Service Company in Hunan Province into Hunan Mobile, which will be operated and managed by Hunan Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Hunan Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile telecommunication businesses in Hunan Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 3,100 employees engaged in mobile telecommunication services and employed by the Hunan Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile telecommunication businesses (and other telecommunication businesses) operated by Hunan Mobile Communication Company (the predecessor of the Service Company) in Hunan and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Hunan Mobile.
2.2 Upon the Effective Date, Hunan Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB4,005,668,593.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Hunan Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Hunan Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Hunan Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite authority, power and ability to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its Articles of Association, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Hunan Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Hunan Mobile that, as of the Effective Date, Hunan Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Hunan Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Hunan Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
|
ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
4
|
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
|
ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
PARTY A: CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/XUE Taohai
-------------------------------------------------
Legal representative or authorized representative
|
PARTY B: HUNAN COMMUNICATION SERVICE COMPANY
By: /s/WANG Dehou
-------------------------------------------------
Legal representative or authorized representative
|
PARTY C: HUNAN MOBILE COMMUNICATION COMPANY LIMITED
By: /s/WANG Jiangen
-------------------------------------------------
Legal representative or authorized representative
|
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 7
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN HUNAN MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
-----------------------------------------------------------------------------------------------------
Current assets 135392.11 135392.11 135300.37 -91.74 -0.07
-----------------------------------------------------------------------------------------------------
Fixed Assets 834194.49 834194.49 804432.97 -29761.52 -3.57
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Construction in progress 140399.39 140399.39 143904.34 3504.95 2.50
-----------------------------------------------------------------------------------------------------
Building 53413.58 53413.58 48576.65 -4836.93 -9.06
-----------------------------------------------------------------------------------------------------
Machinery 638919.48 638919.48 591487.35 -47432.13 -7.42
-----------------------------------------------------------------------------------------------------
Land 1371.67 1371.67 20374.24 19002.57 1385.36
-----------------------------------------------------------------------------------------------------
Intangible assets 13978.49 13978.49 16444.54 2466.05 17.64
-----------------------------------------------------------------------------------------------------
Including:
-----------------------------------------------------------------------------------------------------
Land use rights 13784.43 13784.43 16285.88 2501.45 18.15
-----------------------------------------------------------------------------------------------------
Other assets 102.83 102.83 0 -102.83 -100
-----------------------------------------------------------------------------------------------------
Total assets 983667.92 983667.92 956177.88 -27490.04 -2.79
-----------------------------------------------------------------------------------------------------
Current liabilities 555611.01 555611.01 555611.01 - -
-----------------------------------------------------------------------------------------------------
Long-term liabilities - - - - -
-----------------------------------------------------------------------------------------------------
Total liabilities 555611.01 555611.01 555611.01 - -
-----------------------------------------------------------------------------------------------------
Net assets 428056.91 428056.91 400566.87 -27490.04 -6.42
-----------------------------------------------------------------------------------------------------
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Exhibit 4.11
[English Translation]
ASSET INJECTION AGREEMENT
This Capital Contribution Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Shaanxi, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) SHAANXI COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 52 Gao Xin Road, Gao Xin District, Xi'an, Shaanxi Province, the PRC (the "Service Company"); and
(3) SHAANXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 5 Nan Er Huan West, Xi'an, Shaanxi Province, the PRC ("Shannxi Mobile").
WHEREAS:
1. Both Shaanxi Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Shaanxi Province into Shaanxi Mobile, which will be operated and managed by Shaanxi Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Shaanxi Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date
being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Shaanxi Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 1,742 employees engaged in mobile communication services and employed by the Shaanxi Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Shaanxi Mobile Communication Company (the predecessor of the Service Company) in Shaanxi and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Shaanxi Mobile.
2.2 Upon the Effective Date, Shaanxi Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB3,161,267,431.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Shaanxi Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in contribution Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Shaanxi Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Shaanxi Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Shaanxi Mobile that, as of the Effective Date, Shaanxi Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Shaanxi Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Shaanxi Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach
of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
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ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
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ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
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CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/XUE Taohai
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHAANXI COMMUNICATION COMPANY
By: /s/MI Lirong
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHAANXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/HUO Zhicheng
-------------------------------------------------
Legal Representative or Authorized Representative
|
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 17
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN SHAANXI MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
--------------------------------------------------------------------------------------------
Current assets 174373.00 174373.00 174386.44 13.44 0.01
--------------------------------------------------------------------------------------------
Fixed Assets 524719.29 524719.29 491630.36 -33088.92 -6.31
--------------------------------------------------------------------------------------------
Including:
--------------------------------------------------------------------------------------------
Construction in progress 72379.92 72379.92 71976.52 -403.39 -0.56
--------------------------------------------------------------------------------------------
Building 17355.79 17355.79 14541.29 -2814.50 -16.22
--------------------------------------------------------------------------------------------
Machinery 434215.50 434215.50 403848.57 -30366.93 -6.99
--------------------------------------------------------------------------------------------
Land 468.55 468.55 1010.73 542.18 115.71
--------------------------------------------------------------------------------------------
Intangible assets 9006.37 9006.37 12529.87 3523.50 39.12
--------------------------------------------------------------------------------------------
Including:
--------------------------------------------------------------------------------------------
Land use rights 8524.97 8524.97 12041.47 3516.50 41.25
--------------------------------------------------------------------------------------------
Other assets 699.61 699.61 687.64 -11.97 -1.71
--------------------------------------------------------------------------------------------
Total assets 708798.26 708798.26 679234.31 -29563.95 -4.17
--------------------------------------------------------------------------------------------
Current liabilities 235287.57 235287.57 235287.57 - -
--------------------------------------------------------------------------------------------
Long-term liabilities 127820.00 127820.00 127820.00 - -
--------------------------------------------------------------------------------------------
Total liabilities 363107.57 363107.57 363107.57 - -
--------------------------------------------------------------------------------------------
Net assets 345690.70 345690.70 316126.74 -29563.95 -8.55
--------------------------------------------------------------------------------------------
|
Exhibit 4.12
[English Translation]
ASSET INJECTION AGREEMENT
This Asset Injection Agreement (the "Agreement") is executed by the following three parties on May 15, 2002 in Shanxi, the People's Republic of China (the "PRC"):
(1) China Mobile Communications Corporation, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 53 A, Xibianmen Nei Da Jie, Xuanwu District, Beijing, the PRC ("CMCC");
(2) SHANXI COMMUNICATION SERVICE COMPANY, a wholly state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 39 Shuang Ta Xi Jie, Taiyuan, Shanxi Province, the PRC (the "Service Company"); and
(3) SHANXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 39 Shuang Ta Xi Jie, Taiyuan, Shanxi Province, the PRC ("Shanxi Mobile").
WHEREAS:
1. Both Shanxi Mobile and the Service Company are enterprise legal persons wholly owned by CMCC;
2. Pursuant to the relevant laws and regulations, the "Articles of Association of CMCC" agreed in principle by the State Council and published by the Ministry of Information Industry and the State Economy & Trade Commission, and approvals from relevant government authorities, CMCC has decided to, in the name of CMCC, inject and contribute the mobile communication businesses and related assets operated and managed by the Service Company in Shanxi Province into Shanxi Mobile, which will be operated and managed by Shanxi Mobile.
NOW, THEREFORE, the three parties, namely CMCC, the Service Company and Shanxi Mobile, have reached the following agreement:
ARTICLE ONE DEFINITIONS
1.1 Unless the context indicates otherwise, the following terms shall have the meanings as defined below:
"ASSET APPRAISAL REPORT" shall mean the asset appraisal report, with the Base Date being December 31, 2001, prepared by Zhong Qi Hua Asset Appraisal Company Limited and approved by the Ministry of Finance with regard to the assets and liabilities of the mobile communication businesses in Shanxi Province (see Appendix A of the Agreement).
"RELATED ASSETS" shall mean all assets, the contracts, agreements, certificates, business and operational data, documents and files in relation to the said assets and all rights and interests under the above said documentation, as well as any profits and benefits from such rights, interest and assets accrued thereon after December 31, 2001.
"RELATED LIABILITIES" shall mean all liabilities set out in the Liability List in Appendix A of the Agreement and the contracts, agreements, certificates, business and operational data, documents and files in connection with such liabilities.
"RELATED PERSONNEL" shall mean 2,200 employees engaged in mobile communication services and employed by the Shanxi Mobile Communication Company (the predecessor of the Service Company).
"RELATED SERVICES" shall mean the mobile communication businesses (and other telecommunication businesses) operated by Shanxi Mobile Communication Company (the predecessor of the Service Company) in Shanxi and all the telecommunication business licenses, spectrum use permits, telecommunication networks number resources use approvals, mobile telecommunication base station licenses and all other related authorizations held by it.
"EFFECTIVE DATE" shall mean the date when the Agreement is executed.
1.2 Unless the Agreement specifies otherwise, the articles and appendixes mentioned herein shall mean the articles and appendixes of the Agreement. All appendixes constitute an integral part of the Agreement.
ARTICLE TWO INJECTION OF ASSETS AND SERVICES
2.1 CMCC shall, on the Effective Date, inject all the Related Assets, the Related Liabilities and the Related Services into Shanxi Mobile.
2.2 Upon the Effective Date, Shanxi Mobile shall own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests, and shall assume the Related Liabilities.
2.3 Pursuant to the Asset Appraisal Report, the total value of such Related Asset, Related Liabilities and Related Services is RMB2,763,448,313.
2.4 The Base Date of the Asset Appraisal Report is December 31, 2001. During the period from the Base Date to the Effective Date, Shanxi Mobile shall enjoy and assume any and all assets, interests, rights and liabilities arising from the Related Assets, the Related Liabilities and Related Services.
2.5 The Service Company should notify the other party to any relevant contract regarding the transfer of the Related Asset, the Related Liabilities and the Related Services, and obtain such party's consent to such transfer.
ARTICLE THREE EQUITY INTERESTS AFTER CAPITAL CONTRIBUTION
3.1 After the capital contribution, CMCC will still hold 100% of the equity interests in Shanxi Mobile.
ARTICLE FOUR RELATED PERSONNEL
4.1 From the Effective Date, the Related Personnel shall be employed by Shanxi Mobile.
ARTICLE FIVE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 Each party hereto represents, warrants and undertakes to the other parties that:
(1) it is an independent legal person duly established and in good standing under the laws of China;
(2) it has all requisite right, authority and power to execute the Agreement and perform the responsibilities and obligations under the Agreement;
(3) Any and all terms and conditions under the Agreement comply with its incorporation and charter documents, laws and regulations of China, and any agreement entered into with any third party;
(4) The representative to sign the Agreement has been duly authorized. The Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each of CMCC, the Service Company and Shanxi Mobile.
5.2 Each of CMCC and the Service Company hereby represents and warrants to Shanxi Mobile that, as of the Effective Date, Shanxi Mobile will own the Related Assets and the Related Services, clear and free of any encumbrance, pledge or any other third-party interests.
5.3 Shanxi Mobile hereby represents and warrants to CMCC and the Service Company that, as of the Effective Date, Shanxi Mobile will undertake the Related Liabilities, including payment of construction in progress due after the Effective Date.
ARTICLE SIX LIABILITIES ARISING FROM BREACH OF CONTRACT
6.1 In case of any breach of the provisions or representations, warranties and undertakings under the Agreement, the party that breaches the Agreement shall compensate the other parties to the Agreement or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other parties, including, but not limited to, the relevant litigation or arbitration costs and attorney fees.
ARTICLE SEVEN CONFIDENTIALITY
7.1 Unless stipulated or required by the law or relevant regulatory body, any party to the Agreement shall not provide or disclose any information in relation to the business and finance of the other parties to any institute or individual without the prior written consent of the other parties.
ARTICLE EIGHT FORCE MAJEURE
8.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable to its happening and consequences, resulting in any inability on any party to perform the related obligations hereunder, the affected party shall immediately notify the other parties of such event, and provide the other parties within fifteen (15) days valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay to perform all or part of such obligations under the Agreement. Upon the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the matter.
ARTICLE NINE SETTLEMENT OF DISPUTES
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 The Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NO WAIVER
11.1 Unless the law states otherwise, any failure to exercise or delay in
exercising its rights or powers by one party hereunder shall not be
construed as a waiver of such rights or powers. Any one time or partial
exercise of such rights or powers by one party shall not affect any
further or complete exercise of such rights or powers.
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ARTICLE TWELVE NOTICES
12.1 Any notice to be given under the Agreement shall be made in writing and
sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of the Agreement or to any other
address as such party may designate in writing from time to time.
4
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12.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; if delivered by mail, on the date of
the receipt; if delivered by telex, at the time of taking back the
receipt; if transmitted by facsimile, upon delivery.
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ARTICLE THIRTEEN EFFECTIVENESS AND MISCELLANEOUS
13.1 The Agreement shall come into effect upon the date when it is executed
by the legal representatives or authorized representatives of the
parties.
13.2 Upon the unanimous agreement of the parties hereto, the Agreement may
be amended or supplemented and any of such amendment or supplementary
to the Agreement shall be effective only if they are in writing and
executed by the legal representatives or authorized representatives of
the parties.
13.3 The Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
13.4 The Agreement is executed in Chinese in four (4) original counterparts,
three of which shall be retained by each party hereto, one shall be
filed with the government authority in administering industry and
commerce. Each counterpart is equally effective.
|
CHINA MOBILE COMMUNICATIONS CORPORATION
By: /s/XUE Taohai
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHANXI COMMUNICATION SERVICE COMPANY
By: /s/WEI Dong
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHANXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/GAO Buwen
-------------------------------------------------
Legal Representative or Authorized Representative
|
APPENDIX A URGENT
MINISTRY OF FINANCE DOCUMENT
Cai Qi [2002] No. 153
LETTER REGARDING VERIFICATION AND APPROVAL OF ASSET APPRAISAL
OF INCREASE OF CAPITAL IN MOBILE COMMUNICATION COMPANIES LIMITED
IN ANHUI AND OTHER SEVEN MUNICIPALITIES/PROVINCES
AND OF CAPITAL CONTRIBUTION IN CHINA MOBILE (HONG KONG) GROUP LIMITED
BY CHINA MOBILE COMMUNICATIONS CORPORATION
China Mobile Communications Corporation:
We acknowledge receipt from your company of the "Application for Confirmation of Asset Appraisal Results of Increase of Capital in Mobile Communication Companies Limited in Anhui and Other Seven Provinces/Municipalities and of Capital Contribution in China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation" (Zhong Yi Cai [2002] No.152), the Asset Appraisal Reports of Increase of Capital in the Mobile Communication Companies Limited in the Eight Provinces/Municipalities by China Mobile Communications Corporation, and the Asset Appraisal Reports of China Mobile Communications Corporation's Contribution of the entire Interests of the Eight provincial Mobile Operations into China Mobile (Hong Kong) Group Limited (Zhong Qi Hua Ping Bao Zi [2002] No.018-1-1 to 8 & No.018-2-1 to 8), prepared by Zhong Qi Hua Asset Appraisal Company Limited. After examination and verification, we hereby reply as follows:
1. The corresponding economic actions of this project have been approved by the State Council.
2. Zhong Qi Hua Asset Appraisal Company Limited, the appraisal institution undertaking the asset appraisal in this project, possesses the securities business asset appraisal qualifications duly issued by the relevant department(s) of the State, and that the relevant appraisal personnel signing all the asset appraisal reports possesses qualifications required for practicing as certified asset appraisers.
3. The format and content of the asset appraisal report basically comply with the specified requirements. The base date of such appraisals is December 31, 2001. The appraisal conclusions in the appraisal reports are valid only in respect of the increase of capital by China Mobile Communications Corporation in the Mobile Communications Companies Limited in Anhui and other seven provinces/municipalities, and of the asset injection by China Mobile Communications Corporation into China Mobile (Hong Kong) Group Limited. Such conclusions shall become invalid from December 31, 2002.
4. Users of such appraisal reports shall pay attention to the special items disclosed therein and the legal validity of the appraisal reports, etc.
5. Legal liabilities of such appraisal reports shall be borne jointly by the appraisal institution engaged to undertake such appraisals and the certified asset appraisers signing such appraisal reports, and such liabilities shall not be displaced by reason of the verification and approval from the appraisal administrative department.
EXHIBITS:
1. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in the eight provincial/municipality Mobile Communication Companies Limited by China Mobile Communications Corporation.
2. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of the eight provincial/municipality Mobile Communication Companies Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
3. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Anhui Mobile Communication Company Limited by China Mobile Communications Corporation.
4. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Anhui Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
5. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Jiangxi Mobile Communication Company Limited by China Mobile Communications Corporation.
6. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Jiangxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
7. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hunan Mobile Communication Company Limited by China Mobile Communications Corporation.
8. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hunan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
9. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Hubei Mobile Communication Company Limited by China Mobile Communications Corporation.
10. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Hubei Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
11. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Sichuan Mobile Communication Company Limited by China Mobile Communications Corporation.
12. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Sichuan Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
13. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Chongqing Mobile Communication Company Limited by China Mobile Communications Corporation.
14. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Chongqing Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
15. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
16. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
17. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the increase of capital in Shaanxi Mobile Communication Company Limited by China Mobile Communications Corporation.
18. Summary statement of the asset appraisal results issued by Zhong Qi Hua Asset Appraisal Company Limited regarding the capital contribution of the entire interests of Shaanxi Mobile Communication Company Limited into China Mobile (Hong Kong) Group Limited by China Mobile Communications Corporation.
May 15, 2002
(official seal of the Ministry of Finance)
Key Terms: Assets, appraisal, Letter
Copy to: Anhui Mobile Communication Company, Jiangxi Mobile Communication Company, Hunan Mobile Communication Company, Hubei Mobile Communication Company, Sichuan Mobile Communication Company, Chongqing Mobile Communication Company, Shanxi Mobile Communication Company, Shaanxi Mobile Communication Company
EXHIBIT 15
SUMMARY STATEMENT OF THE ASSET APPRAISAL RESULTS
ISSUED BY ZHONG QI HUA ASSET APPRAISAL COMPANY LIMITED
REGARDING THE INCREASE OF CAPITAL
IN SHAANXI MOBILE COMMUNICATION COMPANY LIMITED BY CHINA MOBILE
COMMUNICATIONS CORPORATION
Appraisal base date: December 31, 2001 in RMB Ten Thousands
BOOK VALUE INCREASE/
BOOK AFTER APPRAISAL INCREASE/ DECREASE
ITEM VALUE ADJUSTMENT VALUE DECREASE RATIO (%)
--------------------------------------------------------------------------------------------
Current assets 80372.71 80372.71 79036.71 -1336.00 -1.66
--------------------------------------------------------------------------------------------
Fixed Assets 429275.15 429275.15 415548.50 -13726.65 -3.20
--------------------------------------------------------------------------------------------
Including:
--------------------------------------------------------------------------------------------
Construction in progress 45480.09 45480.09 44416.26 -1063.84 -2.34
--------------------------------------------------------------------------------------------
Building 23372.30 23372.30 22706.04 -666.27 -2.85
--------------------------------------------------------------------------------------------
Machinery 356570.46 356570.46 336825.68 -19744.78 -5.54
--------------------------------------------------------------------------------------------
Land 1717.70 1717.70 9507.22 7789.52 453.49
--------------------------------------------------------------------------------------------
Intangible assets 2179.01 2179.01 9007.00 6827.99 313.35
--------------------------------------------------------------------------------------------
Including:
--------------------------------------------------------------------------------------------
Land use rights 2164.75 2164.75 8993.69 6828.94 315.46
--------------------------------------------------------------------------------------------
Other assets 978.98 978.98 659.13 -319.84 -32.67
--------------------------------------------------------------------------------------------
Total assets 512805.84 512805.84 504251.34 -8554.50 -1.67
--------------------------------------------------------------------------------------------
Current liabilities 228620.84 228620.84 227906.50 -714.34 -0.31
--------------------------------------------------------------------------------------------
Long-term liabilities - - - - -
--------------------------------------------------------------------------------------------
Total liabilities 228620.84 228620.84 227906.50 -714.34 -0.31
--------------------------------------------------------------------------------------------
Net assets 284185.00 284185.00 276344.84 -7840.16 -2.76
--------------------------------------------------------------------------------------------
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Exhibit 4.13
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Anhui, the People's Republic of China (the "PRC"):
1. ANHUI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at Post and Telecommunication Building, 303 Huai He Road, Hefei, Anhui Province, the PRC ("Anhui Mobile"); and
2. ANHUI COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at Post and Telecommunication Building, 303 Huai He Road, Hefei, Anhui Province, the PRC (the "Service Company").
WHEREAS:
1. Anhui Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Anhui Province formerly operated and managed by the Service Company into Anhui Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Anhui Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Anhui Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Anhui Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Anhui Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Anhui Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Anhui Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Anhui Mobile, and that such interests are owned by Anhui Mobile. Upon demand, the Service Company shall deliver such interests to Anhui Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Anhui Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Anhui Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Anhui Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Anhui Mobile under this Agreement, Anhui Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Anhui Mobile for such losses; and
2.5 If there arises such a need that the rights of Anhui Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Anhui Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or
powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
|
ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
|
ANHUI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ZHANG Daode
-------------------------------------------------
Legal Representative or Authorized Representative
|
ANHUI COMMUNICATION SERVICE COMPANY
By: /s/WU Chong'en
-------------------------------------------------
Legal Representative or Authorized Representative
|
` 5
Exhibit 4.14
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Jiangxi, the People's Republic of China (the "PRC"):
1. JIANGXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 134 Yuzhou Road, Jiu Long Po District, Jiangxi, the PRC ("Jiangxi Mobile"); and
2. JIANGXI COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at Jin Yuan Building, Tao Yuan Xiao Qu, Nanchang, Jiangxi Province, the PRC (the "Service Company").
WHEREAS:
1. Jiangxi Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Jiangxi Province formerly operated and managed by the Service Company into Jiangxi Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Jiangxi Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Jiangxi Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Jiangxi Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Jiangxi Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Jiangxi Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Jiangxi Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Jiangxi Mobile, and that such interests are owned by Jiangxi Mobile. Upon demand, the Service Company shall deliver such interests to Jiangxi Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Jiangxi Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Jiangxi Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Jiangxi Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Jiangxi Mobile under this Agreement, Jiangxi Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Jiangxi Mobile for such losses; and
2.5 If there arises such a need that the rights of Jiangxi Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Jiangxi Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
|
ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
|
JIANGXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ JIAN Qin
-------------------------------------------------
Legal Representative or Authorized Representative
|
JIANGXI COMMUNICATION SERVICE COMPANY
By: /s/ TU Yuqing
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.15
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Chongqing, the People's Republic of China (the "PRC"):
1. CHONGQING MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 134 Yuzhou Road, Jiu Long Po District, Chongqing, the PRC ("Chongqing Mobile"); and
2. CHONGQING COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 134 Yuzhou Road, Jiu Long Po District, Chongqing, the PRC (the "Service Company").
WHEREAS:
1. Chongqing Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Chongqing Province formerly operated and managed by the Service Company into Chongqing Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Chongqing Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Chongqing Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Chongqing Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Chongqing Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Chongqing Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Chongqing Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Chongqing Mobile, and that such interests are owned by Chongqing Mobile. Upon demand, the Service Company shall deliver such interests to Chongqing Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Chongqing Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Chongqing Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Chongqing Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Chongqing Mobile under this Agreement, Chongqing Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Chongqing Mobile for such losses; and
2.5 If there arises such a need that the rights of Chongqing Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Chongqing Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its articles of association and other organizational documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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CHONGQING MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ SHEN Changfu
-------------------------------------------------
Legal Representative or Authorized Representative
|
CHONGQING COMMUNICATION SERVICE COMPANY
By: /s/ LIU Zizhang
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.16
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Sichuan, the People's Republic of China (the "PRC"):
1. SICHUAN MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 19 Qing Yang Zheng Jie, Chengdu, Sichuan Province, the PRC ("Sichuan Mobile"); and
2. SICHUAN COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 19 Qing Yang Zheng Jie, Chengdu, Sichuan Province, the PRC (the "Service Company").
WHEREAS:
1. Sichuan Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Sichuan Province formerly operated and managed by the Service Company into Sichuan Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Sichuan Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Sichuan Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Sichuan Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Sichuan Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Sichuan Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Sichuan Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Sichuan Mobile, and that such interests are owned by Sichuan Mobile. Upon demand, the Service Company shall deliver such interests to Sichuan Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Sichuan Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Sichuan Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Sichuan Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Sichuan Mobile under this Agreement, Sichuan Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Sichuan Mobile for such losses; and
2.5 If there arises such a need that the rights of Sichuan Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Sichuan Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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SICHUAN MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ LI Hua
-------------------------------------------------
Legal Representative or Authorized Representative
|
SICHUAN COMMUNICATION SERVICE COMPANY
By: /s/ FENG Siyi
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.17
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Hubei, the People's Republic of China (the "PRC"):
1. HUBEI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 10 Jiang Xin Road, Jiang Han District, Wuhan, Hubei Province, the PRC ("Hubei Mobile"); and
2. HUBEI COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 10 Jiang Xin Road, Jiang Han District, Wuhan, Hubei Province, the PRC (the "Service Company").
WHEREAS:
1. Hubei Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Hubei Province formerly operated and managed by the Service Company into Hubei Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Hubei Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Hubei Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Hubei Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Hubei Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Hubei Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Hubei Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Hubei Mobile, and that such interests are owned by Hubei Mobile. Upon demand, the Service Company shall deliver such interests to Hubei Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Hubei Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Hubei Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Hubei Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Hubei Mobile under this Agreement, Hubei Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Hubei Mobile for such losses; and
2.5 If there arises such a need that the rights of Hubei Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Hubei Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporation and charter documents laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or
powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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HUBEI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/ CHEN Nanjian
-------------------------------------------------
Legal Representative or Authorized Representative
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HUBEI COMMUNICATION SERVICE COMPANY
By: /s/ MAO Xinping
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.18
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Hunan, the People's Republic of China (the "PRC"):
1. HUNAN MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 169 Fu Rong Nan Road, Tian Xin District, Changsha, Hunan Province, the PRC ("Hunan Mobile"); and
2. HUNAN COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 169 Fu Rong Nan Road, Tian Xin District, Changsha, Hunan Province, the PRC (the "Service Company").
WHEREAS:
1. Hunan Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Hunan Province formerly operated and managed by the Service Company into Hunan Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Hunan Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Hunan Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Hunan Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Hunan Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Hunan Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Hunan Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Hunan Mobile, and that such interests are owned by Hunan Mobile. Upon demand, the Service Company shall deliver such interests to Hunan Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Hunan Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Hunan Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Hunan Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Hunan Mobile under this Agreement, Hunan Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Hunan Mobile for such losses; and
2.5 If there arises such a need that the rights of Hunan Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Hunan Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or
powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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HUNAN MOBILE COMMUNICATION COMPANY LIMITED
By: /s/WANG Jiangen
-------------------------------------------------
Legal Representative or Authorized Representative
|
HUNAN COMMUNICATION SERVICE COMPANY
By: /s/WANG Dehou
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.19
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Shaanxi, the People's Republic of China (the "PRC"):
1. SHANNXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 5 Nan Er Huan West, Xi'an, Shaanxi Province, the PRC ("Shaanxi Mobile"); and
2. SHAANXI COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 5 Nan Er Huan West, Xi'an, Shaanxi Province, the PRC (the "Service Company").
WHEREAS:
1. Shaanxi Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Shaanxi Province formerly operated and managed by the Service Company into Shaanxi Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Shaanxi Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Shaanxi Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Shaanxi Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Shaanxi Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Shaanxi Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Shaanxi Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Shaanxi Mobile, and that such interests are owned by Shaanxi Mobile. Upon demand, the Service Company shall deliver such interests to Shaanxi Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Shaanxi Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Shaanxi Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Shaanxi Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Shaanxi Mobile under this Agreement, Shaanxi Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Shaanxi Mobile for such losses; and
2.5 If there arises such a need that the rights of Shaanxi Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Shaanxi Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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SHAANXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/HUO Zhicheng
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHAANXI COMMUNICATION SERVICE COMPANY
By: /s/MI Lirong
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.20
[English Translation]
AGREEMENT ON THE CONFIRMATION OF RIGHTS AND OBLIGATIONS
This Agreement on the Confirmation of Rights and Obligations (the "Agreement") is entered into by and between the following two parties on May 15, 2002 in Shanxi, the People's Republic of China (the "PRC"):
1. SHANXI MOBILE COMMUNICATION COMPANY LIMITED, a limited liability company duly established and in good standing under the laws of the PRC, with its legal address at 39 Shuang Ta Xi Jie, Taiyuan, Shanxi Province, the PRC ("Shanxi Mobile"); and
2. SHANXI COMMUNICATION SERVICE COMPANY, a state-owned enterprise duly established and in good standing under the laws of the PRC, with its legal address at 39 Shuang Ta Xi Jie, Taiyuan, Shanxi Province, the PRC (the "Service Company").
WHEREAS:
1. Shanxi Mobile and the Service Company entered into the Assets Injection Agreement with China Mobile Communications Corporation ("CMCC") on May 15, 2002.
2. In accordance with the Asset Injection Agreement, CMCC will, in the name of CMCC, inject the mobile communication business and related assets in Shanxi Province formerly operated and managed by the Service Company into Shanxi Mobile.
THEREFORE, in order to confirm the ownership of the interests, assets, liabilities, personnel and services under the Asset Injection Agreement, the parties have reached the following agreement:
ARTICLE ONE CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO THE
ASSETS INJECTION
1.1 Each party hereby confirms to the other party that all the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement (defined in the Asset Injection Agreement,) shall be owned or assumed by Shanxi Mobile; accordingly, the Service Company enjoys no rights, undertakes no liability and bears no expense with regard to the same (unless otherwise agreed upon in this Agreement).
1.2 Each party hereby confirms to the other party that, except the Related Assets, Related Liabilities, Related Personnel and Related Services under the Asset Injection Agreement, all the other services, assets, liabilities and personnel (including, but not limited to, all the real estate, non-mobile assets and personnel, non-mobile communications long-term investments and non-mobile communications liabilities) formerly operated and managed by the Service Company shall still be owned or assumed by the Service Company; and accordingly, Shanxi Mobile enjoys no rights, undertakes no liability and bears no expense with regard to the same.
ARTICLE TWO CONFIRMATION OF RIGHTS AND OBLIGATIONS RELATED TO
CONTRACTS
Each party hereby confirms to the other party that all the contracts in relation to the Related Assets, the Related Liabilities, the Related Personnel and the Related Services under the Asset Injection Agreement shall be transferred to Shanxi Mobile. However, due to the time limit and the enormous amount involved, the official transfer of certain contracts to Shanxi Mobile may have not been approved by the other party/parties thereto (the "Non-Transferred Contracts"). For such Non-Transferred Contracts, the parties hereby agree and confirm as follows:
2.1 As of the Effective Date (as defined in the Asset Injection Agreement), the rights and liabilities, as well as the gains and losses of the Service Company generated from the Non-Transferred Contracts shall belong to Shanxi Mobile (unless otherwise stipulated in this Agreement ), notwithstanding the fact that such Non-Transferred Contracts are still held by and performed in the name of the Service Company. The Service Company agrees to act as the trustee of Shanxi Mobile to receive or hold any interests generated from the Non-Transferred Contracts (including but not limited to certain goods and loans) on behalf of Shanxi Mobile, and that such interests are owned by Shanxi Mobile. Upon demand, the Service Company shall deliver such interests to Shanxi Mobile;
2.2 The Service Company shall exercise or perform the rights and liabilities under the Non-Transferred Contracts strictly in accordance with the instructions given by Shanxi Mobile from time to time, and shall not amend any terms of the Non-Transferred Contracts or terminate the same without Shanxi Mobile's prior written consent thereto;
2.3 The reasonable expenses incurred by the Service Company for the purpose of performing the obligations under the paragraph 2.1 above shall be reimbursed by Shanxi Mobile, except expenses incurred as a result of negligence or misconduct on the part of, or other reasons caused by, the Service Company;
2.4 If, as a result of the Service Company's negligence, misconduct or other reasons caused by the Service Company in connection with its holding or performing the Non-Transferred Contracts in its name and on behalf of Shanxi Mobile under this Agreement, Shanxi Mobile sustains any losses therefrom (including but not limited to litigation expenses and damages), the Service Company shall sufficiently and timely compensate Shanxi Mobile for such losses; and
2.5 If there arises such a need that the rights of Shanxi Mobile under the Non-Transferred Contracts (including the rights to initiate legal proceedings or arbitration, or to take other necessary actions) be exercised by the Service Company in its name, the Service Company shall assist Shanxi Mobile by exercising such rights in the Service Company's name.
ARTICLE THREE REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
3.1 Each party hereto represents, warrants and undertakes to the other party that:
(1) it is an independent legal person duly established and in good standing under the laws of the PRC;
(2) it has all requisite right, authority and power to execute this Agreement and perform the responsibilities and obligations under this Agreement;
(3) Any and all terms and conditions under this Agreement comply with its incorporated and charter documents, laws and regulations of PRC, and any agreement entered into with any third party;
(4) The representative to sign this Agreement has been duly authorized. This Agreement, upon execution, will constitute legal, valid, binding and enforceable obligations of each party.
ARTICLE FOUR LIABILITIES ARISING FROM BREACH OF CONTRACT
4.1 In case of any breach of the provisions or representations, warranties and undertakings under this Agreement, the party that breaches this Agreement shall compensate the other party hereto or undertake any and all losses, expenses and liabilities arising from the breach of contract of the other party, including, but not limited to, the relevant legal proceedings or arbitration fees and attorney fees.
ARTICLE FIVE CONFIDENTIALITY
5.1 Unless stipulated or required by the law or relevant regulatory body, any party hereto shall not provide or disclose any information in relation to the business and finance of the other party to any entity or individual without the prior written consent of the other party.
ARTICLE SIX FORCE MAJEURE
6.1 In any event of force majeure which is unforeseeable, unavoidable and insurmountable as to its happening and consequences, resulting in any inability of any party to perform the related obligations hereunder in accordance with the agreed conditions of this Agreement, the affected party shall immediately notify the other party of such event, and provide the other party within fifteen (15) days with valid documents of proof evidencing the detailed occurrence of such event, and reasons for its inability or delay in performing all or part of such obligations under this Agreement. Depending on the extent to which an event of force majeure affects the performance of such obligations, the parties hereto shall consult each other so as to work out fair and reasonable remedies and endeavour to solve the problem.
ARTICLE SEVEN ASSIGNMENT
7.1 Unless agreed otherwise by the parties, any party shall not assign all or part of its rights and obligation hereunder without the prior written consent of the other party.
ARTICLE EIGHT NO WAIVER
8.1 Unless the law states otherwise, any failure to exercise or delay in exercising its rights or
powers by one party hereunder shall not be construed as a waiver of such rights or powers. Any one time or partial exercise of such rights or powers by one party shall not affect any further or complete exercise of such rights or powers.
ARTICLE NINE SETTLEMENT OF DISPUTE
9.1 Any dispute arising from or in connection with the interpretation or performance of this Agreement shall be settled by the parties through friendly negotiations conducted among representatives appointed by the parties for this purpose. In the case that no resolution is reached through consultations within 60 days after the occurrence of such dispute, any party may bring an action to a competent people's court for its judgment.
ARTICLE TEN GOVERNING LAW
10.1 This Agreement shall be governed by and interpreted in accordance with the laws of the PRC.
ARTICLE ELEVEN NOTICES
11.1 Any notice to be given under this Agreement shall be made in writing
and sent by mail, telex, telegraph or facsimile to the other party's
address set out in the front page of this Agreement or to any other
address as such party may designate in writing from time to time.
11.2 Any notice shall be deemed as having been received at the time of
delivery if delivered in person; on the date of the receipt if
delivered by mail; at the time of taking back the receipt if delivered
by telex; upon delivery if transmitted by facsimile.
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ARTICLE TWELVE EFFECTIVENESS AND MISCELLANEOUS
12.1 This Agreement shall come into effect upon the date when it is executed
and stamped by the legal persons or authorized representatives of the
parties.
12.2 Upon the unanimous agreement of the parties hereto, this Agreement may
be amended or supplemented and any of such amendment or supplement to
this Agreement shall be effective only if they are in writing and
executed and stamped by the legal representatives or authorized
representatives of the parties.
12.3 This Agreement is severable. Should any provision hereof for any reason
at any time be declared invalid or unenforceable by a competent court,
the validity and enforceability of the remaining provisions herein
shall remain intact. Under such circumstances, the parties hereto
shall, on the principle of honesty and trust, consult each other to
conclude a replacement provision, so as to materialize the purpose of
the severed provision.
12.4 This Agreement is executed in Chinese in two (2) original counterparts,
each of which shall be retained by each party hereto. Each counterpart
is equally effective.
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SHANXI MOBILE COMMUNICATION COMPANY LIMITED
By: /s/GAO Buwen
-------------------------------------------------
Legal Representative or Authorized Representative
|
SHANXI COMMUNICATION SERVICE COMPANY
By: /s/WEI Dong
-------------------------------------------------
Legal Representative or Authorized Representative
|
Exhibit 4.21
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Hefei City, Anhui Province, the People's Republic of China (hereinafter the "PRC") by and between:
Anhui Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: You Dian Building, 303 Huai He Road, Hefei City
And
Anhui Communications Service Company (hereinafter referred to as "PARTY B"), Address: You Dian Building, 303 Huai He Road, Hefei City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The consultation of the planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) The maintenance of telecommunication lines,
(4) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any
partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow: Anhui Mobile Communication Company Anhui Communications Service Company Limited Recipient: WU Chong'en Recipient: ZHANG Daode Correspondence address: You Dian Correspondence address: You Dian Building, 303 Huai He Road, Hefei City Building, 303 Huai He Road, Hefei City Post code: 230001 Post code: 230001 Telephone: 0551-2681533 Telephone: 0551-2681612 Facsimile: 0551-2681533 Facsimile: 0551-2681613 |
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to Hefei
City Arbitration Commission for arbitration in accordance with the then
effective arbitration rules of that Commission. The arbitration award
shall be final and binding on both parties. Except for the matter of
dispute that is submitted for arbitration, all the remaining parts of
this Agreement shall remain valid and effective during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
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11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by such conversion of Party
A. Party B will recognize the legal standing of the wholly
foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Anhui Mobile Communication Company Limited
/s/ ZHANG Daode ------------------------------- Legal Representative or his/her |
Authorized Representative
Anhui Communications Service Company
/s/ WU Chong'en ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
APPENDIX I
THE CONSULTATION OF THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
2.5 The amount and the payment of other consulting services except for the designing services provided by Party B to Party A shall be determined by both parties in the specific services agreement(s) in accordance with the preceding provision 2.1.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s) and ask Party B for refund.
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as
scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
APPENDIX II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
3.5 Party B shall bear all responsibilities in the event of any injury to any third party or construction workers caused by Party B's construction problems.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 5 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 15 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
THE MAINTENANCE OF TELECOMMUNICATION LINES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide telecommunication lines maintenance services to Party A in accordance with the terms and conditions under this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to specific telecommunication lines as appendices to this Agreement. In such services agreement(s), both parties shall specifically agree on matters such as the category, quantity, scope, maintaining areas of the telecommunication lines, etc.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 The telecommunication lines maintenance services provided by Party B shall conform with the relevant regulations and standards in relation to manufacturing safety and technology quality stipulated by the relevant authorities.
1.5 Party A shall provide reasonable and necessary assistance for Party B to perform the relevant maintenance services under the appendices of this Agreement.
2. MAINTENANCE SERVICE CHARGES AND PAYMENT
2.1 The basis for the pricing of the maintenance services and the pricing standard shall be performed in accordance with the relevant provisions of the Tariff Manual of Posts and Telecommunications issued in 1999 by the Ministry of Information Industry. If the above pricing document is superceded by other government documents, then both parties shall use the newly issued government documents as the basis for pricing.
2.2 The maintenance fees shall be paid monthly. The payment time is the 15th day of each month. The amount of advance payment for the maintenance fees shall be calculated based on the relevant standards stated in the preceding section 2.1 and depend on the numbers of telecommunication lines that Party B is responsible for maintaining.
2.3 Party B shall bear the relevant expenses for low-value and easily-worn items, tools, vehicles, transportation fees and personnel fee incurred in providing the maintenance services, while Party A shall bear the relevant expenses for back-up
items, spare parts, fees for emergency repair main material and manufacturers supporting fees.
2.4 Both parties shall verify the settlement of maintenance service charges every 3 months, that is to say, within fifteen (15) working days after the end of each quarter, the verification for the settlement of maintenance service charges for that period shall be conducted. After the confirmation of settlement of the maintenance service charges, any surplus shall be refunded and any shortfall made good.
3. QUALITY ASSURANCE
3.1 Both parties shall jointly test, inspect, confirm, and record and file, the quality status of the telecommunication lines before the commencement of the maintenance services.
3.2 Party B shall maintain the telecommunication lines according to the relevant maintenance procedures and maintenance areas of the telecommunication lines specified under this Appendix, and ensure that the quality conforms with relevant standards and regulations, ensure normal operation of the telecommunication lines, satisfy Party A's reasonable demands, and timely provide Party A with the relevant statements and data.
3.3 Party A has the right to regularly or irregularly inspect the quality of Party B's maintenance services. If Party B fails to complete the maintenance services in accordance with the relevant maintenance procedures of the State and the provisions under this Appendix, and the quality of the maintenance does not conform with Party A's requirements, the maintenance fees for the current period may be deducted at Party A's discretion. If Party B fails to provide Party A with the relevant statements and data in a timely manner or the said statements and data are inaccurate and incomplete, the maintenance fees for the current period may be deducted at Party A's discretion.
3.4 If mismanagement or improper maintenance of Party B or third parties entrusted by Party B causes damage to telecommunication lines equipment or causes the equipment to be unusable or causes the equipment to be working abnormally, then Party B shall bear all direct losses of the damaged equipment, and Party A has the right to deduct from the maintenance service charges that is payable by Party A a sum of money equivalent to the losses as confirmed by both parties.
3.5 Party B shall bear full responsibility for any loss to third parties or to the maintenance personnel resulting from Party B's maintenance problems.
APPENDIX IV
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
3.3 Party B warrants to carry out inspection and repair to the property provided to Party A for use, and if Party B's mismanagement causes losses to Party A's property, Party B will compensate Party A for all the direct monetary losses that are thereby caused to Party A.
Exhibit 4.22
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Nanchang City, Jiangxi Province, the People's Republic of China (hereinafter the "PRC") by and between:
Jiangxi Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: Jin Yuan Building, Tao Yuan Xiao Qu, Nanchang City
And
Jiangxi Communications Service Company (hereinafter referred to as "PARTY B"), Address: Jin Yuan Building, Tao Yuan Xiao Qu, Nanchang City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) The maintenance of telecommunication lines;
(4) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 Service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any
partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow:
Jiangxi Mobile Communication Company Limited Jiangxi Communications Service
Company
Recipient: Recipient:
Correspondence address: Correspondence address:
Post code: Post code:
Telephone: Telephone:
Facsimile: Facsimile:
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to
Nanchang City Arbitration Commission for arbitration in accordance with
the then effective arbitration rules of that Commission. The
arbitration award shall be final and binding on both parties. Except
for the matter of dispute that is submitted for arbitration, all the
remaining parts of this Agreement shall remain valid and effective
during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent
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or confirmation from Party B before or after the conversion, and the
rights and liabilities of Party A under this Agreement will not be
affected or changed by such conversion of Party A. Party B will
recognize the legal standing of the wholly foreign-owned enterprise to
perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Jiangxi Mobile Communication Company Limited
/s/ ZHOU Guang ------------------------------- Legal Representative or his/her Authorized Representative |
Jiangxi Communications Service Company
/s/ TU Yuqing ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
Appendix I
THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s).
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
Appendix II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 20 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 5 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
THE MAINTENANCE OF TELECOMMUNICATION LINES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide telecommunication lines maintenance services to Party A in accordance with the terms and conditions under this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to specific telecommunication lines as appendices to this Agreement. In such services agreement(s), both parties shall specifically agree on matters such as the category, quantity, scope, maintaining areas of the telecommunication lines, etc.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 The telecommunication lines maintenance services provided by Party B shall conform with the relevant regulations and standards in relation to manufacturing safety and technology quality stipulated by the relevant authorities.
1.5 Party A shall provide reasonable and necessary assistance for Party B to perform the relevant maintenance services under the appendices of this Agreement.
2. MAINTENANCE SERVICE CHARGES AND PAYMENT
2.1 The basis for the pricing of the maintenance services and the pricing standard shall be performed in accordance with the relevant provisions of the Tariff Manual of Posts and Telecommunications issued in 1999 by the Ministry of Information Industry. If the above pricing document is superceded by other government documents, then both parties shall use the newly issued government documents as the basis for pricing.
2.2 The maintenance fees shall be paid monthly. The payment time is the 10th day of each month. The amount of advance payment for the maintenance fees shall be calculated based on the relevant standards stated in the preceding section 2.1 and depend on the numbers of telecommunication lines that Party B is responsible for maintaining.
2.3 Party B shall bear the relevant expenses for low-value and easily-worn items, tools, vehicles, transportation fees and personnel fee incurred in providing the maintenance services, while Party A shall bear the relevant expenses for back-up
items, spare parts, fees for emergency repair main material and manufacturers supporting fees.
2.4 Both parties shall verify the settlement of maintenance service charges every month, that is to say, within fifteen (15) working days after the end of each month, the verification for the settlement of maintenance service charges for that period shall be conducted. After the confirmation of settlement of the maintenance service charges, any surplus shall be refunded and any shortfall made good.
3. QUALITY ASSURANCE
3.1 Both parties shall jointly test, inspect, confirm, and record and file, the quality status of the telecommunication lines before the commencement of the maintenance services.
3.2 Party B shall maintain the telecommunication lines according to the relevant maintenance procedures and maintenance areas of the telecommunication lines specified under this Appendix, and ensure that the quality conforms with relevant standards and regulations, ensure normal operation of the telecommunication lines, satisfy Party A's reasonable demands, and timely provide Party A with the relevant statements and data.
3.3 Party A has the right to regularly or irregularly inspect the quality of Party B's maintenance services. If Party B fails to complete the maintenance services in accordance with the relevant maintenance procedures of the State and the provisions under this Appendix, and the quality of the maintenance does not conform with Party A's requirements, the maintenance fees for the current period may be deducted at Party A's discretion. If Party B fails to provide Party A with the relevant statements and data in a timely manner or the said statements and data are inaccurate and incomplete, the maintenance fees for the current period may be deducted at Party A's discretion.
3.4 If mismanagement or improper maintenance of Party B or third parties entrusted by Party B causes damage to telecommunication lines equipment or causes the equipment to be unusable or causes the equipment to be working abnormally, then Party B shall bear all direct losses of the damaged equipment, and Party A has the right to deduct from the maintenance service charges that is payable by Party A a sum of money equivalent to the losses as confirmed by both parties.
3.5 Party B shall bear full responsibility for any loss to third parties or to the maintenance personnel resulting from Party B's maintenance problems.
APPENDIX IV
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.23
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Chongqing, the People's Republic of China (hereinafter the "PRC") by and between:
Chongqing Mobile Communication Company Limited (hereinafter referred to as "PARTY A"),
Address: 134 Yuzhou Road, Jiu Long Po District
And
Chongqing Communications Service Company (hereinafter referred to as "PARTY B"), Address: 134 Yuzhou Road, Jiu Long Po District
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(2) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no
harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow:
Chongqing Mobile Communication Chongqing Communications Service
Company Limited Company
Recipient: Recipient:
Correspondence address: Correspondence address:
Post code: Post code:
Telephone: Telephone:
Facsimile: Facsimile:
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to
Chongqing City Arbitration Commission for arbitration in accordance
with the then effective arbitration rules of that Commission. The
arbitration award shall be final and binding on both parties. Except
for the matter of dispute that is submitted for arbitration, all the
remaining parts of this Agreement shall remain valid and effective
during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by
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such conversion of Party A. Party B will recognize the legal standing
of the wholly foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Chongqing Mobile Communication Company Limited
/s/ SHEN Changfu ------------------------------- Legal Representative or his/her Authorized Representative |
Chongqing Communications Service Company
/s/ LIU Zizhang ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
Appendix I
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or irregularly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 10 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 10 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX II
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.24
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 27 April 2002 in Chengdu City, Sichuan Province, the People's Republic of China (hereinafter the "PRC") by and between:
Sichuan Mobile Communication Company Limited (hereinafter referred to as "PARTY
A"),
Address: 19 Qing Yang Zheng Jie, Chengdu City
And
Sichuan Communications Service Company (hereinafter referred to as "PARTY B"), Address: Qing Yang Zheng Jie, Chengdu City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) Telecommunication lines and ducts construction;
(4) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 Service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any
partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow: Sichuan Mobile Communication Company Sichuan Communications Service Company Limited Recipient: Recipient: Corporate Affairs Department Correspondence address: Correspondence address: 19 Qing Yang Post code: Zheng Jie Telephone: Post code: 610072 Facsimile: Telephone: 8779 4666 Facsimile: 8779 7778 |
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to Chengdu
City Arbitration Commission for arbitration in accordance with the then
effective arbitration rules of that Commission. The arbitration award
shall be final and binding on both parties. Except for the matter of
dispute that is submitted for arbitration, all the remaining parts of
this Agreement shall remain valid and effective during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
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11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by such conversion of Party
A. Party B will recognize the legal standing of the wholly
foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
|
Sichuan Mobile Communication Company Limited
/s/ LI Hua ------------------------------- Legal Representative or his/her Authorized Representative |
Sichuan Communications Service Company
/s/ FENG Siyi ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
APPENDIX I
THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s).
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
APPENDIX II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within [ ] working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within [ ] working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services concerning telecommunication lines and pipelines to Party A in accordance with the terms and conditions under this Agreement.
1.2 Both parties shall separately sign services agreements as appendices to this Agreement concerning the particular construction project according to the relevant laws, regulations and the procedure provisions of the relevant government authorities. The title of the project, starting and completing time, number and length of pipelines, term of project and others shall be specified in such services agreement(s).
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the particular services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the construction fees of telecommunication lines and pipelines and the pricing standard shall be performed in accordance with the provisions of the following documents: (1) Machinery Quota of Telecommunication construction Project, Summary Budget and Supplemental Quota of Telecommunication Construction Projects, promulgated by the Ministry of Information Industry in December 2001; (2) the Estimation, Budget Compilation and Expenses Quota of Telecommunications Construction Works, Telecommunications Construction Works in relation to issuing the notice on Estimation, Budget Compilation and Expenses Quota of Telecommunications Construction Works and Other Standards, Second Volume (Telecommunications Lines Works) (YouBu [1995] No. 626), by the former Ministry of Post and Telecommunications; (3) Type Classification Criteria of Telecommunications Construction Works, (YouBu [1995] No. 945), by the former Ministry of Post and Telecommunications. If the above documents are superceded by other government documents, then both parties shall use the newly promulgated government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall advance a payment equivalent to 10% of the total service charges to Party B within seven (7) working days after both parties has executed the specific services agreement(s). The advance payment shall solely be used on the particular project. Party A shall have the right to require Party B for a refund if Party B uses the payment on any other uses.
(2) Party A shall regularly make payments in accordance with the construction process after the advance payment has been made. However, Party A is not required to make work progress payments when the paid construction fees have reached 75% of the total service charges.
(3) After the project has been completed and passed the final audit, within 10 working days upon receipt of the original invoice and settlement form of expenses from Party B, the final payment of the balance indicated in such documents with deduction of warranty fees equivalent to 2% of the total service charges, shall be paid in a lump sum. The agreement of settlement of the warranty fees deducted by Party A shall be reached and stipulated in the specific services agreement(s).
3. VERIFICATION
3.1 Party A shall arrange for the verification of the particular construction work within five (5) working days upon receipt of the written notice of the completion of such particular construction work from Party B. Such verification of the completion of construction works shall be conducted in accordance with the relevant regulations of the State.
4. LIABILITY OF PARTY B
4.1 Party B shall complete the relevant telecommunication pipelines construction within the terms of the project as agreed by both parties. A penalty payment equivalent to 0.2% of the total services charges for each day of delay shall be paid by Party B to Party A.
4.2 Within one week upon the execution of the specific services agreement(s) by both parties, Party B shall organize for entry into the construction sites. Before construction begins, construction designs for technologies and structures and shall be compiled, and there shall be measures such as working plans, technology assurance, etc.
4.3 Party B's workload and the relevant compensation expenses shall conform with the requirements of the relevant laws, regulation and responsible authorities of the government, and can be used by Party B as basis for the final settlement only after an authorized representative of Party A has signed and endorsed it.
4.4 The telecommunication pipeline construction conducted by Party B shall conform with the relevant standards required by the laws and regulations and the relevant telecommunications and planning construction authorities of the State. The telecommunication pipeline construction shall be evaluated by the construction quality supervisory department; if the construction quality does not meet the requirements, Party B shall rework on it without any conditions, and the delay in completion due to such reworking shall result in a penalty payment equivalent to 0.2% of the total service charges for each day of delay payable by Party B to Party A. Party B shall bear the liability to maintain each telecommunication pipeline construction during its life. During the duration of warranty, warranty work shall be performed according to the relevant provisions of the State.
4.5 Party B shall finish the compilation of the construction settlement and the information on work completion pursuant to Party A's requirements.
APPENDIX IV
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.25
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Wuhan City, Hubei Province, the People's Republic of China (hereinafter the "PRC") by and between:
Hubei Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: 10 Jiangxin Road, Jianghan District, Wuhan City
And
Hubei Communications Service Company (hereinafter referred to as "PARTY B"), Address: 10 Jiangxin Road, Jianghan District, Wuhan City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 Service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no
harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow: Hubei Mobile Communication Company Hubei Communications Service Company Limited Recipient: Recipient: Correspondence address: 10 Jiangxin Correspondence address: 10 Jiangxin Road, Road, Jianghan District, Wuhan City Jianghan District, Wuhan City Post code:430013 Post code:430013 Telephone:83519136 Telephone:83560185 Facsimile: 83519772 Facsimile: 83560183 |
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to Wuhan
City Arbitration Commission for arbitration in accordance with the then
effective arbitration rules of that Commission. The arbitration award
shall be final and binding on both parties. Except for the matter of
dispute that is submitted for arbitration, all the remaining parts of
this Agreement shall remain valid and effective during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by
-5-
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such conversion of Party A. Party B will recognize the legal standing
of the wholly foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Hubei Mobile Communication Company Limited
/s/ CHEN Nanjian ------------------------------- Legal Representative or his/her Authorized Representative |
Hubei Communications Service Company
/s/ MAO Xinping ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
Appendix I
THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s).
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
Appendix II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 15 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 15 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.26
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Changsha City, Hunan Province, the People's Republic of China (hereinafter the "PRC") by and between:
Hunan Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: #169, Furong Road (S), Tianxin District, Changsha City
And
Hunan Communications Service Company (hereinafter referred to as "PARTY B"), Address: #169, Furong Road (S), Changsha City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no
harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow: Hunan Mobile Communication Company Hunan Communications Service Company Limited Recipient: Recipient: Correspondence address: Correspondence address: Post code: Post code: Telephone: Telephone: Facsimile: |
Facsimile:
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to
Changsha City Arbitration Commission for arbitration in accordance with
the then effective arbitration rules of that Commission. The
arbitration award shall be final and binding on both parties. Except
for the matter of dispute that is submitted for arbitration, all the
remaining parts of this Agreement shall remain valid and effective
during the arbitration.
|
ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by
-5-
|
such conversion of Party A. Party B will recognize the legal standing
of the wholly foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
|
Hunan Mobile Communication Company Limited
/s/ HUANG Liwei ------------------------------- Legal Representative or his/her Authorized Representative |
Hunan Communications Service Company
/s/ WANG Dehou ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
Appendix I
THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s).
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
Appendix II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 10 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 10 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.27
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Xi'an City, Shaanxi Province, the People's Republic of China (hereinafter the "PRC") by and between:
Shaanxi Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: 5 Nan Er Huan Xi Duan, Xi'an City
And
Shaanxi Communications Service Company (hereinafter referred to as "PARTY B"), Address: 52 Gao Xin Road, Gao Xin District, Xi'an City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The planning and design of telecommunications facilities;
(2) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(3) The maintenance of telecommunication lines,
(4) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any
partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow:
Shaanxi Mobile Communication Company Shaanxi Communications Company Limited Recipient: TONG Xiaoxia Recipient: ZHANG Yan Correspondence address: 2/F., Yong An Correspondence address: 21/F., Jie Rui Zhi Bldg., 9 Nan Er Huan Xi Duan, Xi'an, Neng Bldg., 5 Nan Er Huan Xi Duan, Shaanxi Xi'an, Shaanxi Post code: 710068 Post code: 710068 Telephone: 13609168811 / (029) 8378033 Telephone: (029) 8378802 Facsimile: (029) 8378033 Facsimile: (029) 8378822 |
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to Xi'an
Arbitration Commission for arbitration in accordance with the then
effective arbitration rules of that Commission. The arbitration award
shall be final and binding on both parties. Except for the matter of
dispute that is submitted for arbitration, all the remaining parts of
this Agreement shall remain valid and effective during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
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11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by such conversion of Party
A. Party B will recognize the legal standing of the wholly
foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Shaanxi Mobile Communication Company Limited
/s/ HUO Zhicheng ------------------------------- Legal Representative or his/her Authorized Representative |
Shaanxi Communications Company
/s/ MI Lirong ------------------------------- Legal Representative or his/her Authorized Representative |
Appendices
Appendix I
THE PLANNING AND DESIGN OF TELECOMMUNICATIONS FACILITIES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide planning and design and other relevant services for the telecommunications engineering projects of Party A (including new construction works and extension works) under the terms and conditions of this Agreement, including, but not limited to, project specific research, compilation of project proposals, feasibility study report and engineering design documentation.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the regulatory authorities of the industry, separately execute specific services agreement(s) in relation to the concrete project, whereby such agreements will be incorporated into this agreement as appendices. In the specific services agreements, both parties shall specifically agree on the work title, location, size, and the estimated amount of investment of the work, and other matters.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
2. STANDARD AND PAYMENT OF DESIGN FEES
2.1 The basis for the pricing of the design fees and the pricing standard shall be determined in accordance with the provisions of the following documents: (1) Circular in relation to the Promulgation of the Administrative Provisions on Works Survey Design Fees, (JiJiaGe [2002] No. 10), by the State Development and Planning Commission and the Ministry of Construction; (2) Interim Provisions on Consultation Fees in Early Stage of Construction Project, (JiJiaGe [1999] No. 1283), printed and issued by the State Development and Planning Commission on September 10, 1999. If the above documents are superceded by other government documents, both parties shall use the newly issued government documents as the basis for pricing.
2.2 Party A shall pay Party B a deposit equivalent to 10% of the estimated design fees within 7 working days after the specific services agreement(s) take effect. The deposit will be used as the design fees after the performance of the Agreement. If Party A fails to perform the specific services agreement(s), then Party A has not right to demand the return of the deposit. If Party B fails to perform the specific services agreement(s), Party B shall return twice the amount of the deposit.
2.3 Depending on the provision of the specific services agreement(s), design fees may be paid in installments according to the stages of progress of the submission of the design documents, or may be paid in a lump sum upon final submission of the works.
2.4 The actual design fees shall be verified and confirmed against the estimation cost of the preliminary design, with a refund for over payment or an additional payment for any deficiency, as the case may be.
3. RESPONSIBILITIES OF BOTH PARTIES
3.1 Party A's responsibilities
(1) Party A shall be responsible for timely providing Party B with basic information and documents, which are complete and accurate. Party A may not require Party B to design in violation of the relevant national standards.
(2) If Party A is late in providing the abovementioned information and documents and such a delay is not more than 15 working days, the delivery date of design documents by Party B shall be extended by the same number of days accordingly; if the delay in submission of the information and documents by Party A exceeds 15 working days, Party B has the right to reset the delivery date of the design documents.
(3) If the design is reworked by Party B due to Party A's changing the assigned design project, or the size or the conditions of the project, or due to errors in the submitted information or subsequent material change to the submitted information, Party A shall compensate Party B with the rework expenses based on the actual work expended by Party B, unless the relevant provisions have been revised and confirmed afresh after the consultation and execution of supplementary agreement(s).
(4) Party A may terminate or cancel the agreement during the term of this Agreement, and if Party B has not yet commenced the design work, the deposit will not be refunded; if Party B has commenced the design work, and if less than half of the quantities for that phase is completed, then half of design charge payable at that phase shall be paid; and if more than half of the quantities for that phase is completed, then full design charge payable at that phase shall be paid. Party B shall hand over the completed work results (design documents) to Party A in the circumstances where the Agreement is terminated or cancelled under this section.
(5) Party A's request of early delivery of design documents ahead of schedule shall be subject to Party B's consent, and shall not substantially deviate from reasonable design cycles. Party A shall pay extra charge for such early delivery.
(6) For employees that Party B sends to station in Party A's site, Party A shall provide them with convenient conditions on working, living and moving about and also with necessary labor protection equipment.
3.2 Party B's responsibilities
(1) Party B shall design in accordance with the relevant regulations and technical specifications and standards agreed upon in the specific services agreement(s). Party B shall deliver design documents to Party A in accordance with the contents, timing and number of copies as stipulated in the specific services agreement(s), and Party B shall be responsible for the quality of the submitted design documents.
(2) The design shall accommodate the reasonable anticipated lifespan of use as shall be agreed by the parties.
(3) Party B is responsible for supplementing or correcting omissions or errors in the design documents. For any losses relating to work quality matters caused by design errors of Party B, apart from the responsibility to take remedial measures, Party B shall not receive payment of the design fees in connection to the part of work incurring such losses, and Party B shall compensate Party A based on the actual extent of losses.
(4) If delay in delivery of design documents is attributable to Party B, for each day withheld, 0.3% of the design fees shall be deducted from the design fees payable to Party B. For delay exceeding 30 working days, Party A has the right to terminate the specific services agreement(s).
(5) After delivery of design documents, Party B shall, in accordance with the requirement, undergo design examination and checking by the relevant authority. Party B shall be responsible for making the necessary adjustments and/or additions (based on the conclusion of examination and checking) to the contents that are not beyond the original scope (of work). If the construction commences within one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall have the obligation to inform Party A and the construction team of the design basis, deal with relevant design issues and participate in work completion verification and acceptance. If the construction commences more than one year after the delivery date of the design documents as scheduled under the Agreement, Party B shall be responsible for the abovementioned work and charge Party A for consultation services as appropriate, according to actual quantities of work. Such fees shall be separately agreed upon by both parties.
Appendix II
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 7 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 10 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX III
THE MAINTENANCE OF TELECOMMUNICATION LINES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide telecommunication lines maintenance services to Party A in accordance with the terms and conditions under this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to specific telecommunication lines as appendices to this Agreement. In such services agreement(s), both parties shall specifically agree on matters such as the category, quantity, scope, maintaining areas of the telecommunication lines, etc.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 The telecommunication lines maintenance services provided by Party B shall conform with the relevant regulations and standards in relation to manufacturing safety and technology quality stipulated by the relevant authorities.
1.5 Party A shall provide reasonable and necessary assistance for Party B to perform the relevant maintenance services under the appendices of this Agreement.
2. MAINTENANCE SERVICE CHARGES AND PAYMENT
2.1 The basis for the pricing of the maintenance services and the pricing standard shall be performed in accordance with the relevant provisions of the Tariff Manual of Posts and Telecommunications issued in 1999 by the Ministry of Information Industry. If the above pricing document is superceded by other government documents, then both parties shall use the newly issued government documents as the basis for pricing.
2.2 The maintenance fees shall be paid every 3 months. The payment time is the end of each quarter. The amount of advance payment for the maintenance fees shall be calculated based on the relevant standards stated in the preceding section 2.1 and depend on the numbers of telecommunication lines that Party B is responsible for maintaining.
2.3 Party B shall bear the relevant expenses for low-value and easily-worn items, tools, vehicles, transportation fees and personnel fee incurred in providing the maintenance services, while Party A shall bear the relevant expenses for back-up
items, spare parts, fees for emergency repair main material and manufacturers supporting fees.
2.4 Both parties shall verify the settlement of maintenance service charges every month, that is to say, within five (5) working days after the end of each month, the verification for the settlement of maintenance service charges for that period shall be conducted. After the confirmation of settlement of the maintenance service charges, any surplus shall be refunded and any shortfall made good.
3. QUALITY ASSURANCE
3.1 Both parties shall jointly test, inspect, confirm, and record and file, the quality status of the telecommunication lines before the commencement of the maintenance services.
3.2 Party B shall maintain the telecommunication lines according to the relevant maintenance procedures and maintenance areas of the telecommunication lines specified under this Appendix, and ensure that the quality conforms with relevant standards and regulations, ensure normal operation of the telecommunication lines, satisfy Party A's reasonable demands, and timely provide Party A with the relevant statements and data.
3.3 Party A has the right to regularly or irregularly inspect the quality of Party B's maintenance services. If Party B fails to complete the maintenance services in accordance with the relevant maintenance procedures of the State and the provisions under this Appendix, and the quality of the maintenance does not conform with Party A's requirements, the maintenance fees for the current period may be deducted at Party A's discretion. If Party B fails to provide Party A with the relevant statements and data in a timely manner or the said statements and data are inaccurate and incomplete, the maintenance fees for the current period may be deducted at Party A's discretion.
3.4 If mismanagement or improper maintenance of Party B or third parties entrusted by Party B causes damage to telecommunication lines equipment or causes the equipment to be unusable or causes the equipment to be working abnormally, then Party B shall bear all direct losses of the damaged equipment, and Party A has the right to deduct from the maintenance service charges that is payable by Party A a sum of money equivalent to the losses as confirmed by both parties.
3.5 Party B shall bear full responsibility for any loss to third parties or to the maintenance personnel resulting from Party B's maintenance problems.
Appendix IV
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
EXHIBIT 4.28
[English Translation]
TELECOMMUNICATIONS SERVICES AGREEMENT
This Agreement was entered into on 10 April 2002 in Taiyuan City, Shanxi Province, the People's Republic of China (hereinafter the "PRC") by and between:
Shanxi Mobile Communication Company Limited (hereinafter referred to as "PARTY A"), Address: 39 Shuan Ta Xi Jie, Taiyuan City
And
Shanxi Communications Service Company (hereinafter referred to as "PARTY B"), Address: 39 Shuan Ta Xi Jie, Taiyuan City
WHEREAS:
1. Party A, a limited liability company duly established and in good standing under the laws of the PRC, has the legal right to engage in the construction of and investment in mobile telecommunications networks and operate mobile telecommunications and other telecommunications businesses;
2. Party B, a state-owned enterprise duly established and in good standing under the laws of the PRC, has the legal right to engage in telecommunications services and other related services;
3. To facilitate the development of its mobile telecommunications business and engage in standard production and operating activities, Party A requires certain telecommunications services from Party B;
4. Both parties wish to conclude fair and reasonable arrangements whereby
Party B will render the relevant telecommunications services to Party
A.
THEREFORE, this Agreement was concluded by and between Party A and Party B, on the basis of mutual and equitable benefit and after amicable consultation, on the following terms and conditions:
ARTICLE 1. SERVICES SPECIFICATIONS AND BASIC PRINCIPLES
1.1 For the purpose of this Agreement, the "Telecommunications Services" means part or all of the following services rendered by Party B to Party A:
(1) The construction of telecommunications facilities (exclusive of telecommunication lines and ducts construction);
(2) The maintenance of telecommunication lines;
(3) The utilization of supplied assets and materials.
1.2 As the Telecommunications Services are to be rendered by Party B to Party A for a consideration, Party B may charge reasonably on the basis of fair market principles for its services, and Party A shall make payment accordingly.
1.3 The terms on which Party B renders the Telecommunications Services to Party A shall not be inferior to those extended by Party B to any third party for the same or similar services.
1.4 If, without Party B's fault, Party B is unable to provide, or is unable to completely provide, the Telecommunications Services, Party B shall give notice to Party A in a timely manner, and shall use its best efforts to assist Party A to obtain the same or similar services from other channels.
1.5 The Telecommunications Services shall be rendered for such intended purposes as both parties may specify and shall conform to relevant state-mandated standards (if any).
1.6 Party B may delegate a third party (including its subsidiaries) to provide certain of the Telecommunications services specified under this agreement to Party A on behalf of Party B, subject to obtaining the prior written consent of Party A.
1.7 Should a breach of this Agreement by any party cause a loss to the other party, the breaching party shall be responsible for the payment of damages to the other party to compensate for the full amount of such loss. However, neither party shall be liable for any loss caused from force majeure.
1.8 Each party shall provide all reasonable and necessary further assistance to the other party during the course of the performance of this Agreement.
1.9 Additional terms of agreement on the Telecommunications Services are contained in the various appendices attached to this Agreement.
ARTICLE 2 PRICING PRINCIPLES AND PAYMENT
2.1 Service charges shall be determined according to the following principles:
(1) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), such prices shall apply, or;
(2) If there are any prevailing state-mandated or local prices fixed by the state or local governments (as amended from time to time), market prices negotiated and agreed upon by both parties shall apply.
On basis of the above principles, the particular pricing and/or charging criteria hereunder are enclosed in the relevant appendices hereinto; the prices of the Telecommunications Services stipulated in the relevant official pricing documents as enclosed on the appendices hereinto are upper limits, and both parties shall sign the relevant services agreements on basis of market prices that do not exceed such upper limits.
2.2 The particular sum of the service charges hereunder shall be calculated according to such relevant PRC accounting standards as are applicable from time to time.
2.3 Party A shall make timely payment for the relevant services obtained from Party B, according to the pricing principles and standards provided for in this Agreement and its appendices.
2.4 Unless otherwise provided in the appendices to this Agreement, if Party A fails to make payment to Party B within such period as has been agreed upon by both parties, then Party A shall pay Party B a late payment penalty calculated at 0.05% of the unpaid amount, for each day of the late payment; if the late payment exceeds 60 days, Party B may give Party A written notice to terminate further services. If after 30 days of Party A's receipt of the written notice, Party A still has not paid the said service charges, then Party B may, without prejudice to any other rights and obligations already accrued or incurred to it under this Agreement, terminate the said services.
ARTICLE 3 TERM OF THIS AGREEMENT
3.1 This Agreement is valid until 31 December 2002.
3.2 Subject to compliance with applicable laws and regulations, this Agreement shall automatically be extended for a further year upon the expiration of this Agreement or the expiry of any extension hereof, unless Party A gives written notice to terminate this Agreement 60 days before such expiration.
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
4.1 Party A and Party B separately represent and warrant that this Agreement is valid and binding on both parties.
4.2 Party B shall ensure the recruitment of sufficient qualified employees to provide satisfactory telecommunications services stipulated under this Agreement.
4.3 Party B shall ensure that its employees are prepared to receive and provide sufficient instructions and explanations relating to the Telecommunications Services, and that the services are rendered with reasonable care and skill, such that the services can meet the standards required by Party A, and warrants that no harm will be caused to Party A by the acts or omissions of the Party B employees responsible for rendering the services.
4.4 Party A warrants that it will, in accordance with the provisions of this Agreement, accept the Telecommunications Services rendered by Party B and pay various charges, and that no harm will be caused to Party B by the acts or omissions of Party A.
ARTICLE 5 FORCE MAJEURE
5.1 If, due to a force majeure event, the occurrence of which is unpredictable and the consequences of which are unavoidable and insurmountable, either party is prevented from performing this Agreement or the relevant obligations under its appendices in accordance with the agreed provisions, the affected party shall immediately give notice to the other party, and shall, within 15 days, provide the relevant detailed information and valid documents of proof evidencing the grounds for non-performance, partial performance, or withheld performance of the relevant obligations under this Agreement or its appendices. Depending upon the extent to which the performance may be affected by the force majeure event, both parties shall discuss and agree whether or not to terminate, partially excuse, or delay the performance of the obligations concerned.
ARTICLE 6 CONFIDENTIALITY
6.1 Unless otherwise required by the relevant laws or supervisory and regulatory authorities, neither party shall provide or divulge to any other company, enterprise, organization or individual any information or data concerning the contents of this Agreement or relating to the business of the other party, unless the prior written consent of the other party has been obtained (and such consent shall not be unreasonably refused or withheld).
ARTICLE 7 ASSIGNMENT
7.1 Without the prior written consent of the other party, neither party may assign or delegate any right or obligation accruing to it under this Agreement.
ARTICLE 8 NO WAIVER
8.1 Unless otherwise provided by law, any failure to exercise, or delay in exercising any right, power or privilege to which a party is entitled under this Agreement shall not be construed as a waiver of such right, power, or privilege, and any
partial exercise of such right, power, or privilege shall not prejudice the future exercise of such right, power, or privilege.
ARTICLE 9 NOTICE
9.1 Any notice related to this Agreement shall be made in writing and delivered in person, or by facsimile or post. Any notice shall be deemed to have been delivered at the time of handing over of the notice, if delivered in person; or at the time when the facsimile machine indicates that the facsimile has been sent, if delivered by facsimile; or on the fifth working day (not accounting statutory holidays) if delivered by post. Any notice is effective upon delivery.
9.2 The addresses for notices for both parties hereto are as follow:
Shanxi Mobile Communication Company Shanxi Communications Service Company Limited Recipient: HAO Mengru Recipient: LIU Ri Qi Correspondence address: 205 Bin Zhou Bei Correspondence address: 39 Shuan Ta Xi Road, Taiyuan City Jie, Taiyuan City Post code: 030012 Post code: 030012 Telephone: 13903510085 Telephone: 4093815 Facsimile: Facsimile: 4093805 |
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with the laws of the PRC.
10.2 Any dispute between the parties relative to the validity,
interpretation or performance of this Agreement shall be settled
through amicable consultation. Should the parties fail to resolve the
dispute within 30 days from the date of the occurrence of the dispute,
then both parties agree that such dispute shall be submitted to Taiyuan
City Arbitration Commission for arbitration in accordance with the then
effective arbitration rules of that Commission. The arbitration award
shall be final and binding on both parties. Except for the matter of
dispute that is submitted for arbitration, all the remaining parts of
this Agreement shall remain valid and effective during the arbitration.
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ARTICLE 11 EFFECTIVENESS OF THE AGREEMENT AND MISCELLANEOUS
11.1 This Agreement shall be effective upon due execution by the legal
persons or their authorized representatives of both parties and the
affixation of their official seals.
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11.2 Party B hereby confirms that Party A may convert into a wholly
foreign-owned enterprise during the term of this Agreement without the
need to seek the consent or confirmation from Party B before or after
the conversion, and the rights and liabilities of Party A under this
Agreement will not be affected or changed by such conversion of Party
A. Party B will recognize the legal standing of the wholly
foreign-owned enterprise to perform this Agreement.
11.3 Party A may terminate this Agreement if the following conditions are
not satisfied. Upon the termination of this Agreement, with the
exception of any rights and obligations accrued prior to such
termination, the parties shall enjoy no further rights or bear any
further obligation in relation to the Agreement or the termination
thereof:
(1) China Mobile (Hong Kong) Limited (hereinafter "CMHK") obtained
waivers from the Stock Exchange of Hong Kong Limited
(hereinafter the "SEHK") for transactions to be carried out
under this Agreement which constitute "connected transactions"
in accordance with the Listing Rules of the SEHK; and
(2) the independent shareholders of CMHK, who are determined not
to be "connected parties" in accordance with the Listing Rules
of the SEHK, approve the relevant transactions.
11.4 The various appendices to this Agreement are constituent parts of this
Agreement, and have equal effect as the main text of this Agreement. In
the event of any discrepancy between the provisions of this Agreement's
appendices and those of the main text of this Agreement, the former
shall prevail.
11.5 Following discussion and agreement by both parties, this Agreement and
its appendices may be amended or supplemented by both parties, and any
amendment or supplement shall take effect after execution by the legal
persons or their authorized representatives of both parties and after
the affixation of the official seals.
11.6 This Agreement is severable. If any provision of this Agreement or its
appendices are determined to be unlawful or unenforceable, the validity
and enforcement of other provisions shall not be affected.
11.7 This Agreement is written in Chinese and executed in four (4) original
counterparts, two of which shall be retained by each party. Each
original counterpart has equal legal validity.
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Shanxi Mobile Communication Company Limited
/s/ GAO Buwen ------------------------------- Legal Representative or his/her Authorized Representative |
Shanxi Communications Service Company
/s/ WEI Dong ------------------------------- Legal Representative or his/her Authorized Representative |
Appendix I: The Construction of Telecommunications Facilities (Exclusive of Telecommunication Lines and Ducts Construction); Appendix II: The Maintenance of Telecommunications Lines; Appendix III: The Utilization of Supplied Assets and Materials.
APPENDIX I
THE CONSTRUCTION OF TELECOMMUNICATIONS FACILITIES
(EXCLUSIVE OF TELECOMMUNICATION LINES AND DUCTS CONSTRUCTION)
1. BASIC PRINCIPLES
1.1 Party B agrees to provide construction services (exclusive of lines and telecommunications ducts construction; same below) for the telecommunications works of Party A (including new construction works and extension works) under the terms and conditions of this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to the construction project and the number of projects, whereby such agreements will be incorporated into this Agreement as appendices.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 Party A shall ensure that the particular construction project commissioned to Party B has obtained approval for project handling and that it timely collects the approval for commencement of work.
2. STANDARD AND PAYMENT OF CHARGES
2.1 The basis for the pricing of the design fees and the pricing standard
shall be performed in accordance with the provisions of the following
documents: (1) Budget Quota of Integrated Wiring System for Buildings
and Building Clusters and Budget Quota of Installation of Mobile
Telecommunications Equipment (amended), (XinBuGui [2000] No. 904),
promulgated in September 2000 by the Ministry of Information Industry;
(2) Estimation, Budget Compilation and Expenses Quota of
Telecommunications Construction Works, Budget Quota of
Telecommunications Construction Works, First Volume (Telecommunications
Equipment Works) (YouBu [1995] No. 626), by the former Ministry of Post
and Telecommunications; (3) Type Classification Criteria of
Telecommunications Construction Works, (YouBu [1995] No. 945), by the
former Ministry of Post and Telecommunications. If the above documents
are superceded by other government documents, then both parties shall
use the newly issued government documents as the basis for pricing.
2.2 Both parties agree that, based on the service charges stipulated in the abovementioned section 2.1, such service charges are to be paid in the following manner:
(1) Party A shall pay Party B a sum equivalent to 10% of the total service charges within 7 working days after both parties agree on each particular item of services and sign the specific services agreement(s) under the abovementioned section 1.2.
(2) Party B shall, in accordance with the specific services agreement(s), regularly provide Party A with a statement on amount of work completed; Party A shall pay Party B a sum equivalent to 70% of the total service charges within 10 working days upon the completion of all works and after examination and verification that there is no error;
(3) After the completion and verification and acceptance of the works, Party B shall, based on the time limit stipulated under the specific service agreement(s), provide Party A with works settlement documents; within 20 working days upon receipt of the works settlement documents and after undergoing auditing, Party A shall pay Party B the balance of the service charges in accordance with the results of the auditing.
2.3 After the execution of the specific services agreement(s), if the amount of the construction increases or decreases due to a change in the works project's design, then based on the actual amount of work actually provided by Party B, the service charge shall be adjusted in accordance with the pricing principles and criteria stipulated under this Agreement and the specific services agreement(s).
3. QUALITY ASSURANCE
3.1 Both parties shall jointly study and discuss the construction project before the commencement of the various specific services. Before construction begins, Party B shall organize its staff to learn and get acquainted with the blueprints of the works design, and Party B shall develop construction proposals satisfactory to Party A, finish preparatory work for the commencement of construction, and document the process.
3.2 Party B shall complete particular telecommunications engineering project on scheduled under the specific services agreement(s) according to relevant construction procedures, and ensure that the quality conforms with relevant standards and regulations, secure normal operation of the telecommunications system or equipment, satisfy Party A's reasonable demands, and timely report to Party A on the progress of the relevant works.
3.3 If the service quality of Party B does not conform with the relevant standards and regulations, Party A may, in a reasonable manner and according to circumstances, reduce service charges payable to Party B.
3.4 Party A may regularly or randomly inspect the construction progress of Party B.
4. EXAMINATION AND VERIFICATION OF CONSTRUCTION COMPLETION, AND MAINTENANCE
4.1 Party B shall notify Party A of the verification date by giving a written notice to this effect within 7 working days before the completion of each particular construction work; if Party A is unable to participate in the examination and verification as scheduled, Party A shall give prior notice to Party B and discuss with Party B to fix another examination and verification date.
4.2 If the completed construction work passes the examination and is accepted, Party B shall hand over the work to Party A within 10 working days after the date of examination and verification; if Party A is unable to take over the work in time, thereby causing losses to the completed work, then such losses shall be borne by Party A.
4.3 If any rework or repair and remedial work is found to be necessary on any part of the work during the examination and verification of the completed work, both parties shall, on acceptance, determine remedial measures and a time limit. Party B shall complete the remedial work by such a time limit, and then, on completion and after examination and acceptance, it shall be handed over to Party A. Any expenses thus incurred shall be borne by Party B.
4.4 Party B is responsible for maintaining the quality of the work and make repairs for a period of one year after the examination and verification of the completion of work. During the period of the abovementioned warranty, Party B is responsible for repairing any matters that are related to the quality of the work and caused by the construction, and Party B shall bear all the repairing charges. However, Party B shall take no responsibility for any loss caused by the quality defect of the equipment itself.
4.5 Party B shall be responsible for the repair or rework, without compensation, of work the construction quality of which does not conform to requirements. In case of any delay in delivery caused by repair or rework, Party B shall be liable to a delay penalty.
4.6 If Party B fails to complete as scheduled under the specific services agreement(s), then for each day withheld, Party B shall pay Party A a delay penalty at a rate equivalent to 0.3% of the total service charges stipulated under the specific services agreement(s).
APPENDIX II
THE MAINTENANCE OF TELECOMMUNICATION LINES
1. BASIC PRINCIPLES
1.1 Party B agrees to provide telecommunication lines maintenance services to Party A in accordance with the terms and conditions under this Agreement.
1.2 Both parties shall, in accordance with the relevant laws, regulations and the procedures specified by the relevant regulatory authority of the industry, separately execute specific services agreement(s) in relation to specific telecommunication lines as appendices to this Agreement. In such services agreement(s), both parties shall specifically agree on matters such as the category, quantity, scope, maintaining areas of the telecommunication lines, etc.
1.3 Under the specific services agreement(s) executed according to the preceding section 1.2, the provision of, and the payment of relevant charges for, the concrete services shall be performed in accordance with the basic principles and relevant conditions stipulated in this Agreement.
1.4 The telecommunication lines maintenance services provided by Party B shall conform with the relevant regulations and standards in relation to manufacturing safety and technology quality stipulated by the relevant authorities.
1.5 Party A shall provide reasonable and necessary assistance for Party B to perform the relevant maintenance services under the appendices of this Agreement.
2. MAINTENANCE SERVICE CHARGES AND PAYMENT
2.1 The basis for the pricing of the maintenance services and the pricing standard shall be performed in accordance with the relevant provisions of the Tariff Manual of Posts and Telecommunications issued in 1999 by the Ministry of Information Industry. If the above pricing document is superceded by other government documents, then both parties shall use the newly issued government documents as the basis for pricing.
2.2 The maintenance fees shall be paid monthly. The payment time is within ten (10) day of next month. The amount of advance payment for the maintenance fees shall be calculated based on the relevant standards stated in the preceding section 2.1 and depend on the numbers of telecommunication lines that Party B is responsible for maintaining.
2.3 Party B shall bear the relevant expenses for low-value and easily-worn items, tools, vehicles, transportation fees and personnel fee incurred in providing the maintenance services, while Party A shall bear the relevant expenses for back-up
items, spare parts, fees for emergency repair main material and manufacturers supporting fees.
2.4 Both parties shall verify the settlement of maintenance service charges every three (3) months, that is to say, within five (5) working days after the end of each quarter, the verification for the settlement of maintenance service charges for that period shall be conducted. After the confirmation of settlement of the maintenance service charges, any surplus shall be refunded and any shortfall made good.
3. QUALITY ASSURANCE
3.1 Both parties shall jointly test, inspect, confirm, and record and file, the quality status of the telecommunication lines before the commencement of the maintenance services.
3.2 Party B shall maintain the telecommunication lines according to the relevant maintenance procedures and maintenance areas of the telecommunication lines specified under this Appendix, and ensure that the quality conforms with relevant standards and regulations, ensure normal operation of the telecommunication lines, satisfy Party A's reasonable demands, and timely provide Party A with the relevant statements and data.
3.3 Party A has the right to regularly or irregularly inspect the quality of Party B's maintenance services. If Party B fails to complete the maintenance services in accordance with the relevant maintenance procedures of the State and the provisions under this Appendix, and the quality of the maintenance does not conform with Party A's requirements, the maintenance fees for the current period may be deducted at Party A's discretion. If Party B fails to provide Party A with the relevant statements and data in a timely manner or the said statements and data are inaccurate and incomplete, the maintenance fees for the current period may be deducted at Party A's discretion.
3.4 If mismanagement or improper maintenance of Party B or third parties entrusted by Party B causes damage to telecommunication lines equipment or causes the equipment to be unusable or causes the equipment to be working abnormally, then Party B shall bear all direct losses of the damaged equipment, and Party A has the right to deduct from the maintenance service charges that is payable by Party A a sum of money equivalent to the losses as confirmed by both parties.
3.5 Party B shall bear full responsibility for any loss to third parties or to the maintenance personnel resulting from Party B's maintenance problems.
APPENDIX III
THE UTILIZATION OF SUPPLIED ASSETS AND MATERIALS
1. PROPERTY USE AND FUNCTION
1.1 Party B agrees to provide to Party A a number of premises of its own ("Proprietary Property") and premises of a third party with the use right (the "Third Party's Property"), in accordance with the requirements stated by Party A from time to time.
Among the premises used by Party A when this Agreement is signed, the list of self owned premises of Party B is stated in Schedule 1 to this appendix, while the list of third party's premises is stated in Schedule 2 to this appendix.
Party A may, during the term of this Agreement, demand to increase or decrease the number of the premises in accordance with Party A's operational needs, and Party B shall satisfy such requirements as practicable as possible.
1.2 Party A shall use the premises as mentioned in section 1.1 for such legal purposes as offices, retail outlets, and for operation.
2. LEASING FEE AND ITS PAYMENT
2.1 For uses of Party B's abovementioned Proprietary Property by Party A, Party A shall pay a leasing fee according to market rental value (real estate management fee included). Specific leasing fees stipulated in accordance with such principles are stated in the Schedule 1 to this appendix.
2.2 For uses of the abovementioned Third Party's Property by Party A, Party A shall only need to pay such leasing fee as was actually paid by Party B to the third party (such royalty is subject to Party A's prior review and confirmation) as well as taxes and levies stipulated by the government. Party B shall not demand any other charges from Party A.
2.3 Party A shall verify the number of premises by March 15th and September 15th each year and pay the leasing fee for the first half year and the second half year by March 25th and September 25th, respectively, of the current year.
2.4 For arrears in royalty payment by Party A, an overdue penalty equivalent to 0.03% of the arrears shall be paid by Party A to Party B for each day of arrears.
2.5 Party B shall be liable for all taxes related to the Party B's Proprietary Property that is used by Party A.
3. REPRESENTATIONS AND WARRANTIES
3.1 Party B warrants that it has the right to provide the abovementioned Proprietary Property and Third Party's Property for Party A's use. If the property right and /or use right vested in the abovementioned property are challenged and, for any reason and in any circumstances, thereby causing Party A's rights of use under this appendix to be incapable of being realized or suffer other losses, then Party B agrees to bear responsibility and compensate Party A for all the direct monetary losses caused to Party A.
3.2 Party A warrants that Party A will compensate Party B for all the direct monetary losses incurred by Party B arising from any damage to or loss of the abovementioned properties caused by Party A.
Exhibit 4.29
[English Translation]
SERVICE AGREEMENT FOR SUPPLY, INSTALLATION AND MAINTENANCE OF STEEL TOWERS
This Agreement was entered into on 8 May 2002 in Wuhan, Hubei, the People's Republic of China (hereinafter the "PRC") by and between:
China Mobile (Hong Kong) Limited (hereinafter "PARTY A"), Address: 60th Floor, The Center, 99 Queen's Road Central, Hong Kong Legal Representative: Wang Xiao-chu
And
Hubei Communications Service Company (hereinafter "PARTY B"), Address: #10, Jiangxing Road, Jianghan District, Wuhan City, Hubei Province Legal Representative: Meng Da-li
WHEREAS:
1. Party A, a liability limited company incorporated and in good standing under the laws of the Hong Kong SAR, carries out mobile communication and other authorized telecommunication operations in the provinces of Mainland China through a number of its wholly-owned subsidiaries incorporated in Mainland China (hereinafter called the "OPERATING SUBSIDIARIES");
2. Party B, a state-owned company incorporated and in good standing under the laws of the PRC, is specialized in manufacture, sale, installation, and maintenance of communications equipment and other communications related services;
3. In view to facilitate the development of mobile communications operation and expand the service coverage area of its Operating Subsidiaries, Party A will purchase steel towers for communications from Party B and agrees to commission Party B to provide services of supply, installation and maintenance of the steel towers.
4. Party B agrees to supply the steel towers to Party A and its Operating Subsidiaries according to the terms and conditions herein, and provide services of manufacture, installation and maintenance of the steel towers.
This Agreement was reached by and between Party A and Party B on basis of mutual and equitable benefit, on the following terms and conditions:
ARTICLE 1 SUPPLY TARGET AND SERVICE SPECIFICATIONS
1.1 The supply target under This Agreement means the steel towers (including parts) supplied by Party B.
1.2 The services under This Agreement include manufacture, installation and maintenance of the steel towers supplied by Party B.
1.3 Whereas all the steel towers purchased by Party A are to be used for operation of its Operating Subsidiaries, Party A will instruct its relevant Operating Subsidiaries to carry out performance under this Agreement (including payment of the steel towers price and relevant services charges) for the benefit of Party B when necessary, and Party B agrees to carry out performance under this Agreement for the benefit of the relevant Operating Subsidiaries (including provision of the services as stipulated herein).
ARTICLE 2 PRICING AND PAYMENT
2.1 The following principles shall apply in the determination of price and service charges for the steel towers:
(1) Such prevailing State or local government set prices, as amended from time to time, if any, shall apply, or;
(2) In the absence of State or local government set prices, market prices agreed upon by both parties shall apply.
2.2 The price of the steel towers under this agreement (including manufacture cost and installation expenses of the steel towers and their foundations, hereinafter called the "Total Price") shall be determined according to the principles as mentioned in Article 2.1 by the Operating Subsidiaries specified by Party A and Party B, and shall be paid by the Operating Subsidiaries to Party B according to the following terms of payment:
(1) The Operating Subsidiaries specified by Party A shall make a payment equivalent to 20% of the total price to Party B, subject to a prepayment notice issued from Party B to this effect, within 15 working days after the Operating Subsidiaries confirms the total price in written form to Party B.
(2) The Operating Subsidiaries specified by Party A shall make a payment equivalent to 70% of the total price to Party B, within 15 working days after the Operating Subsidiaries have received the steel tower ordered and Party B has completed the installation;
(3) The Operating Subsidiaries specified by Party A will conduct test and inspection on the steel towers after completion of the installation by Party B, and if satisfactory, issue an inspection certificate countersigned by Party B; the Operating Subsidiaries specified by Party A shall make a payment equivalent to 5% of the total price to Party B within 15 working days after issuance of the inspection certificate; the remainder 5% shall be payable by the Operating Subsidiaries specified by Party A to Party B one year after the date of issuance of the inspection certificate, on condition that the steel towers are maintained in good working conditions.
2.3 The steel tower maintenance charges per year under this agreement shall be a sum equivalent to 1.2% of the total price as determined under Article 2.2; the
first year maintenance charge of a particular steel tower shall be calculated based on of the actual number of days from the date of issuance of the inspection certificate under the prior 2.2 (3) to the December 31st of the then current year.
2.4 The terms of payment for maintenance service charges is as following:
(1) The Operating Subsidiaries specified by Party A shall prepay to Party B the tower maintenance charge for first half year and second half year each year by January 15th and July 15th, respectively.
(2) The sum of prepayment due of the tower maintenance charge shall be checked and verified by the Operating Subsidiaries specified by Party A and Party B before December 15 the previous year and June 15 the current year, respectively, then a prepayment bill of the tower maintenance charge shall be sent to the other party. In case of discrepancy, non-discrepancy sum shall be paid under Article 2.4(1), and payment of the remaining sum in discrepancy shall not be made until the sum is verified and accepted by both parties.
(3) The settlement of payment of the tower maintenance charge for the first half year and second half year shall be checked by the Operating Subsidiaries specified by Party A and Party B before February 15th and August 15th each year, respectively.
2.5 In case of arrears in payment by the Operating Subsidiaries specified by Party A, a daily arrear penalty equivalent to 0.3% of the arrears shall be paid to Party B.
2.6 Party B shall issue a commercial invoice timely to the Operating Subsidiaries specified by Party A after receipt of any payment as mentioned above.
ARTICLE 3 WARRANTY
3.1 Party B warrants that the steel towers manufactured, supplied and installed by Party B can meet the specifications requirements of Party A (or its Operating Subsidiaries) and the proper operation and safety requirements.
3.2 Party B shall have dedicated department dealing with failure report of Party A and carry out repair/restoration after Party B finds the failure or receives the failure report from Party A without delay. The relevant maintenance procedures shall apply to the time limit as of repair/restoration.
3.3 Test and inspection shall be conducted on communications equipment by both parties before maintenance service commences in order to verify the quality condition of the steel towers and keep records.
3.4 Party B shall supply relevant information, document, and spare parts together with the steel towers to Party A.
3.5 Party B shall maintain the steel towers according to relevant
maintenance procedures in order to ensure service quality meets
relevant standards and requirements and keep the steel towers in proper
operation conditions, and shall provide Party A with relevant reports
and data within time limit as reasonably required by Party A without
delay.
3.6 In the case the service quality of Party B is not up to relevant
standards and requirements or the steel tower can not be kept in good
operation conditions to such extent that failure time accumulates to 24
hours in half a year or more than 5 failures lasting at least 4 hours
occurred, the maintenance charge for the half year shall be deducted by
5%; if accumulated failure time reaches 72 hours in any half year
period, or more than 3 failures lasting at least 12 hours per
occurrence, the maintenance charge for the half year shall be exempted.
3.7 Party B may commission a third party to provide the services of supply,
installation, and maintenance under this agreement, subject to Party
A's prior written consent.
3.8 For any damage to the steel towers caused by improper construction,
maintenance or management of Party B or the third party as commissioned
under the Article 3.7, Party B shall be liable for all the damages or
shall urge the third party commissioned to be liable for all damages.
3.9 Party A may inspect, regularly or irregularly, the manufacturing,
installation progress and maintenance quality of the steel towers.
3.10 Party A shall assist Party B with the maintenance service when
necessary.
ARTICLE 4 TERM AND TERMINATION
4.1 This Agreement enters into force on and from the day when this
Agreement is signed by the legal or authorized representatives of both
parties and remains valid until December 31st, 2002, except the
provisions herein stipulate otherwise.
4.2 This agreement shall be extended for another year without limitation on
number of extensions, until either party gives a written notice three
months before expiry of this agreement to terminate this agreement.
4.3 Party A may terminate this agreement from time to time if any one of
the following conditions is not met. When this agreement is terminated,
except otherwise the prior rights and liabilities of both parties
existed before, no other rights or liabilities shall be entitled to or
binding on both parties:
(1) Party B obtained waiver from the Stock Exchange of Hong Kong
Limited (hereinafter the "SEHK") on connected transactions,
regardless so identified according to the Listing rules of HK
United Exchange; and
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(2) Transactions, if applicable, are approved by independent shareholder(s) of Party A, which has no interest therein according to the Listing rules of the SEHK.
ARTICLE 5 CONFIDENTIALITY
5.1 Except where the laws shall apply or the regulatory authority may require otherwise, neither party may provide or divulge to any other company, enterprise, organization or individual of any part or all of information herein or any information concerning operations of the other party, without prior written consent of the other party, which shall be given without undue delay or unreasonably refused.
ARTICLE 6 BREACH
6.1 Default of any provision herein by either party shall be deemed a breach of this agreement. Upon receipt of a written notice of breach from one party, the other party, upon confirming the existence of breach, shall give notice of correction to the first party within 15 days; if the defaulting party fails to make correction or give no written explanation, the other party may choose to terminate this agreement, subject to a give written notice to the other party, and the defaulting party shall compensate the damages caused to the other party; if the other party finds no breaching action, both parties shall settle the matter thus arising by conciliation. In case of failure, the relevant dispute settlement provisions herein shall apply.
6.2 Both parties agree that should Party A instruct its Operating Subsidiaries to carry out specific performance under this Agreement for the benefit of Party B, the Operating Subsidiaries specified by Party A, as far as the performance is concerned, shall have the same rights and liabilities as the Party A has under this agreement, including but not limited to claiming damages from Party B or compensating damages to Party B under prior 6.1 section.
ARTICLE 7 FORCE MAJEURE
7.1 If any unpredictable force majeure event, which occurrence and consequence are unavoidable, and uncontrollable, prevents either party from performing their obligations hereunder, this affected party shall give prompt notice to the other party, and shall, within 15 days, present detailed information and a certified statement indicating the grounds for non-performance, partial performance, or delayed performance due to this event. Depending on the extent to which the performance may be affected due to force majeure event, termination of the performance, or partial discharged or delayed performance concerned may be determined by both parties through negotiation.
ARTICLE 8 TRANSFER
8.1 Except the provisions herein stipulate otherwise, neither parity may transfer any right or liability hereunder, without the prior written consent of the other
party.
ARTICLE 9 NOTICE
9.1 Any notice hereof shall be made in writing, and a notice may be delivered by hand or sent by means of facsimile or post. For the first case, it shall be deemed as delivered upon handover; for facsimile communication, when the facsimile machine sending the message shows sending is OK it shall be deemed delivered; for post service, it shall be deemed delivered on the 5th working day (exclusive compulsory holiday) after sending out. Any notice is effective once it is delivered.
ARTICLE 10 APPLICABLE LAWS AND DISPUTE SETTLEMENT
10.1 This Agreement shall be governed by, and interpreted and executed
according to the laws of the PRC. For the purpose of This Agreement,
the PRC does not include Hong Kong SAR, Macao SAR, and Taiwan.
10.2 Any dispute arising from validity, interpretation or performance of
This Agreement between both parties shall be settled through friendly
conciliation. Should the conciliation fail within 30 days after the
dispute, both parties agree to submit it to China International
Economic and Trade Arbitration Commission for arbitration according to
applicable arbitration rules of the commission. The arbitration award
is final and binding on both parties. Except the matter under
arbitration, all the remaining parts of This Agreement remain valid and
effective during the arbitration.
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ARTICLE 11 SUPPLEMENTARY PROVISIONS
11.1 This Agreement is severable, any provision herein, if invalid or
unenforceable, does not affect the validity and enforcement of the
remaining provisions herein.
11.2 No alteration or amendment to this agreement may be made without
written confirmation of both parties; for any matter silent herein,
both parties may sign supplementary agreement.
11.3 This Agreement is made in Chinese. The four counterparts of the same
effect and force are equally held by both parties.
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China Mobile (Hong Kong) Limited
Legal/authorized Representative (signed): /s/ LI Zhenqun
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Hubei Communications Service Company
Legal/authorized Representative (signed): /s/ MAO Xinping
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Exhibit 4.30
[English Translation]
CO-OPERATION FRAMEWORK AGREEMENT IN RESPECT OF INDIRECT LOAN
This Agreement was entered into on 10 May 2002 in Beijing, the People's Republic of China (hereinafter "the PRC") by and between:
(1) China Mobile Communications Corporation (hereinafter "PARTY A"), a state-owned company incorporated and in good standing under the laws of the PRC, having its legal address at #53 Xi Bianmen Nei Da Jie Street, Xuan Wu District, Beijing, the PRC; and
(2) China Mobile (Hong Kong) Limited (hereinafter "Party B"), a limited liability company incorporated and in good standing under the laws of the Hong Kong SAR, having its legal address at 60th Floor, The Center, 99 Queen's Road Central, Hong Kong.
WHEREAS:
1. Party A is the indirect controlling shareholder of Party B, which carries out mobile communication and other authorized telecommunication operations in the provinces of Mainland China through a number of its wholly-owned subsidiaries incorporated in Mainland China (hereinafter the "OPERATING SUBSIDIARIES");
2. In view to improving the total capital utilization of Party A and facilitating the operational development of the Operating Subsidiaries, Party A as the ENTRUSTING PARTY agrees to provide this RMB loan by mandate to the Operating Subsidiaries through an ENTRUSTED BANK (s) in the Mainland and Party B agrees to the arrangements as provided for herein.
This Agreement was reached by and between Party A and Party B on basis of mutual and equitable benefit pursuant to the following terms and conditions:
CLAUSE 1 PROSPECTIVE BORROWER(S) AND LOAN GRANT
1.1 The loan by mandate referred to herein is provided by Party A, to be
granted by a commercial bank (s) (hereinafter called "ENTRUSTED
BANK(s)") as the creditor(s) in the Mainland by mandate of Party A, to
such prospective borrower (s), and for such purposes and term, and at
such interest rate as determined by Party A herein. Advancements of
funds and the monitoring of the use of funds and payments of the loan
will be carried out by the Entrusted Bank (s) on behalf of Party A.
1.2 The borrower(s) shall be such Operating Subsidiaries as approved by
Party B.
1.3 The Operating Subsidiaries may, subject to the consent of Party B,
apply for borrowing facilities to Party A. In the case of acceptance of
the application, Party A will notify the Entrusted Bank(s) as the
creditor(s) to sign an
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Agreement of Loan and Borrowing by Mandate with the Operating
Subsidiaries, according to the principles and conditions provided for
herein.
CLAUSE 2 INTEREST RATE AND CALCULATION
2.1 The interest rate shall be 35% lower than the prevailing lending
interest rate required by the State authority. In the case of the
lending interest rate adjustment required by the State authority, the
applicable interest rate in the next year will be 35% lower than the
adjusted loan interest rate. If the interest rate thus obtained on
basis of the calculation as mentioned before (approximated to 0.001,
e.g. X.XXX%, the forth digit after the decimal point is negligible) is
not dividable by 3, the interest rate shall be adjusted by increment of
0.001% until such it is dividable by 3.
2.2 Interest shall start to accrue from the day on which the grant of the
loan is made as provided for in the Agreement of Loan and Borrowing by
Mandate, to be paid quarterly by means of transfer payment.
CLAUSE 3 TERM AND PURPOSES
3.1 In no case the term of the loan shall be more than two years
(inclusive), subject to particular provisions in the Agreement of Loan
and Borrowing by Mandate.
3.2 The loan shall be used only by the Operating Subsidiaries for such
purposes as payment of loan, fixed assets investment, and other payment
as directly relevant to mobile communication and other permitted
telecommunication operations of the Operating Subsidiaries.
CLAUSE 4 REPAYMENT
4.1 All the principals due under the Agreement of Loan and Borrowing by
Mandate shall be paid.
4.2 In case of early repayment by the Operating Subsidiaries, subject to
the consent of Party A, the interest shall be calculated based on the
actual number of days and the amount borrowed by the Operating
Subsidiaries.
4.3 In case of arrears in principals and/or interest due, Party A may
require the Entrusted Bank(s) to charge a penalty, calculated at a rate
of 0.21% per day on basis of overdue payment and duration.
4.4 The principal due shall be paid to the account with the Entrusted
Bank(s) by the Operating Subsidiaries and the interest due shall be
withheld by the Entrusted Bank(s).
CLAUSE 5 CONFIDENTIALITY
5.1 Except where the laws shall apply or the regulatory authorities may
require
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otherwise, neither party may provide or divulge to any other company,
enterprise, organization or individual of any part or all of
information herein or any information concerning operations of the
other party, without prior written consent of the other party, which
shall not be unreasonably withheld or delayed.
CLAUSE 6 APPLICABLE LAWS AND DISPUTE SETTLEMENT
6.1 This Agreement shall be governed by, and interpreted and executed
according to the laws of the PRC. For the purpose of This Agreement,
the PRC does not include Hong Kong SAR, Macao SAR, and Taiwan.
6.2 Any dispute arising from validity, interpretation or performance of
This Agreement between both parties shall be settled through friendly
conciliation. Should the conciliation fail within 30 days after the
dispute, both parties agree to submit it to China International
Economic and Trade Arbitration Commission for arbitration according to
applicable arbitration rules of the commission. The arbitration award
is final and binding on both parties. Except the matter under
arbitration, all the remaining parts of This Agreement remain valid and
effective during the arbitration.
CLAUSE 7 VALIDITY AND TEXT
7.1 This Agreement is valid only in the circumstances:
(1) Party B obtained waiver from The Stock Exchange of Hong Kong
Limited (hereinafter the "SEHK") on connected transactions or
a confirmation from the SEHK that the listing rules of the
SEHK on connected transactions do not apply to relevant
transactions; and
(2) Transactions, if applicable, are approved by independent
shareholder(s) of Party B, which has no interest therein
according to the Listing rules of the SEHK.
7.2 This Agreement is officially signed and sealed by the legal/authorized
representatives of both parties respectively.
7.3 This Agreement is made in Chinese. The four counterparts of the same
effect and force are equally held by both parties.
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China Mobile Communications Corporation
Legal/authorized Representative (signed): /s/ DONG Xin
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China Mobile (Hong Kong) Limited
Legal/authorized Representative (signed): /s/ ZHU Min
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.
.
.
Exhibit 8.1
LIST OF MAJOR SUBSIDIARIES
NAME OF ENTITY AND BUSINESS NAME (IF DIFFERENT) JURISDICTION OF INCORPORATION ----------------------------------------------- ----------------------------- Guangdong Mobile Communication Company Limited China Zhejiang Mobile Communication Company Limited China Jiangsu Mobile (BVI) Limited British Virgin Islands Jiangsu Mobile Communication Company Limited China Fujian Mobile (BVI) Limited British Virgin Islands Fujian Mobile Communication Company Limited China Henan Mobile (BVI) Limited British Virgin Islands Henan Mobile Communication Company Limited China Hainan Mobile (BVI) Limited British Virgin Islands Hainan Mobile Communication Company Limited China Beijing Mobile (BVI) Limited British Virgin Islands Beijing Mobile Communication Company Limited China Shanghai Mobile (BVI) Limited British Virgin Islands Shanghai Mobile Communication Company Limited China Tianjin Mobile (BVI) Limited British Virgin Islands Tianjin Mobile Communication Company Limited China Hebei Mobile (BVI) Limited British Virgin Islands Hebei Mobile Communication Company Limited China Liaoning Mobile (BVI) Limited British Virgin Islands Liaoning Mobile Communication Company Limited China |
Shandong Mobile (BVI) Limited British Virgin Islands Shandong Mobile Communication Company Limited China Guangxi Mobile (BVI) Limited British Virgin Islands Guangxi Mobile Communication Company Limited China Aspire Holdings Limited Cayman Islands Aspire (BVI) Limited British Virgin Islands Anhui Mobile (BVI) Limited British Virgin Islands Anhui Mobile Communication Company Limited China Jiangxi Mobile (BVI) Limited British Virgin Islands Jiangxi Mobile Communication Company Limited China Chongqing Mobile (BVI) Limited British Virgin Islands Chongqing Mobile Communication Company Limited China Sichuan Mobile (BVI) Limited British Virgin Islands Sichuan Mobile Communication Company Limited China Hubei Mobile (BVI) Limited British Virgin Islands Hubei Mobile Communication Company Limited China Hunan Mobile (BVI) Limited British Virgin Islands Hunan Mobile Communication Company Limited China Shaanxi Mobile (BVI) Limited British Virgin Islands Shaanxi Mobile Communication Company Limited China Shanxi Mobile (BVI) Limited British Virgin Islands Shanxi Mobile Communication Company Limited China |