SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of August 2008
Commission File Number 1-15028
China Unicom Limited
(Exact Name of Registrant as Specified in Its Charter)
75/F, The Center,
99 Queens Road Central, Hong Kong
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover
of Form 20-F or Form 40-F.)
Form 20-F
X
Form 40-F
(Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by
Regulation S-T Rule 101(b)(1):
.)
(Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by
Regulation S-T Rule 101(b)(7):
.)
(Indicate by check mark whether the registrant by furnishing the information contained in this
Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.)
Yes
No
X
(If Yes is marked, indicate below the file number assigned to the registrant in connection
with Rule 12g3-2(b):82-
.)
EXHIBITS
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Exhibit Number
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1
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Announcement in relation to the unaudited interim results
of China Unicom Limited for the six months ended June 30,
2008.
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FORWARD-LOOKING STATEMENTS
The announcement, constituting Exhibit 1 to this Form 6-K, contains forward-looking statements that
are, by their nature, subject to significant risks and uncertainties. Such forward-looking
statements may include, without limitation, the Companys operating strategy and future plan; its
restructuring plan; its capital expenditure plan; its future business condition and financial
results; its abilities to upgrade and expand networks and increase network efficiency; its ability
to improve existing services and offer new services; its ability to develop new technology
applications; its ability to leverage its position as an integrated telecommunications operator and
expand into new businesses and new markets; future growth of market demand for the Companys
services; and future regulatory and other developments in the PRC telecommunications industry.
Such forward-looking statements reflect the current views of the Company with respect to future
events. Actual results may differ materially from information contained in the forward-looking
statements as a result of a number of factors that may be beyond the Companys control, including,
without limitation, any changes in the regulatory regime and significant policies for the PRC
telecommunications industry, including changes in the structure or functions of the primary
industry regulator, the Ministry of Industry and Information Technology, or the MII (which has
assumed the regulatory functions of the former Ministry of Information Industry), or any changes in
the regulatory policies of the MII, the State-owned Assets Supervision and Administration
Commission and other relevant government authorities of the PRC; any decisions by the PRC
government in relation to the technology standards and licenses of third generation mobile
telecommunication; the results of the ongoing restructuring of the PRC telecommunications industry;
any changes in the effects of competition on the demand and price of the Companys
telecommunications services; the effect of the Companys restructuring and the integration of the
Company and China Netcom Group Corporation (Hong Kong) Limited following the completion of the
proposed merger; any changes in telecommunications and related technologies and applications based
on such technologies; and any changes in political, economic, legal and social conditions in the
PRC, including the PRC governments policies with respect to economic growth, consolidations or
restructuring of and other structural changes in the PRC telecommunications industry, foreign
exchange, foreign investment and entry by foreign companies into the PRC telecommunications market.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CHINA UNICOM LIMITED
(Registrant)
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Date: August 26, 2008
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By:
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/s/ Chang Xiaobing
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Name:
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Chang Xiaobing
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Title:
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Chairman and Chief Executive Officer
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Exhibit 1
CHINA UNICOM LIMITED
(Incorporated in Hong Kong with limited liability)
(Stock Code: 0762)
2008 INTERIM RESULTS ANNOUNCEMENT
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Highlights:
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Excluding the unrealised loss on
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changes in fair value of derivative
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Compared with same
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component of convertible bonds*
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period of last year
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in same period of last year
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Continuing operations:
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Revenue:
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RMB35.14 billion
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Up
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4.0
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%
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Profit for the period:
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RMB3.77 billion
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Up
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107.1
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%
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Up
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8.9
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%
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Basic earnings per
share:
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RMB0.276 Yuan
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Up
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93.0
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%
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Up
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1.5
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%
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EBITDA:
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RMB15.88 billion
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Up
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10.8
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%
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Down
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0.6
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%
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Free cash flow from continuing operations was RMB6.92 billion.
Profit for the period from discontinued operations was RMB0.65 billion.
Profit for the period was RMB4.42 billion.
Basic earnings per share was RMB0.324.
CHAIRMANS STATEMENT
In the first half of this year, the Company proactively addressed various challenges including
market competition and adjustments to domestic roaming tariffs. While maintaining effective
business developments, the Company continued to explore new markets. The Company entered into two
major transactions (the proposed disposal of its CDMA business and a proposed merger with China
Netcom) as it moved towards implementing a strategic restructuring of its business. The
Company has also been proactively involved in the support of the recent natural disasters in China,
in order to fulfill its corporate social responsibilities. The work mentioned above have all been
progressing well, and its business has been developing steadily.
1
Highlights of the first half year results
Continuing operations:
During the first half of this year, the Company recorded revenues of RMB35.14 billion, representing
an increase of 4.0% over the same period of last year. Service revenues amounted to RMB35.12
billion, including RMB32.50 billion from the GSM business and RMB2.62 billion from the long
distance, data and internet business.
Profit before tax and profit for the period amounted to RMB5.13 billion and RMB3.77 billion
respectively, representing an increase of 49.5% and 107.1% respectively over the same period of
last year, and an increase of 1.2% and 8.9%, respectively, if eliminating the effect of the
unrealized loss on changes in fair value of the derivative component of convertible bonds in the
same period of last year. EBITDA amounted to RMB15.88 billion. Free cash flow was RMB6.92 billion.
Discontinued operations:
As a result of the proposed disposal of the CDMA business, the Company has classified this business
as discontinued operations. Profit for the discontinued operations for the period was RMB0.65
billion.
Profit for the period:
The Company recorded a total profit of RMB4.42 billion (including profit from continuing operations
of RMB3.77 billion and profit from discontinued operations of RMB0.65 billion). Basic earnings per
share was RMB0.324, of which basic earnings per share from continuing operations was RMB0.276.
Steady development of operations
In the first half of this year, the Companys mobile business developed steadily. The Company
persisted in brand marketing for its GSM business, enhanced its sales and marketing system, and
executed target marketing activities, all of which helped to achieve steady growth in users,
revenue and profits. The Company maintained its marketing strategies for the CDMA business, and
endeavored to minimize the impact brought by the proposed disposal of such operations, to ensure
the steady operation of its overall business. As at 30 June 2008, the Company had 127.60 million
GSM subscribers and 43.17 million CDMA subscribers.
The Companys mobile value-added business grew rapidly during the period. While the Company
continued to increase the penetration rate and diversity of revenue from its mature businesses such
as SMS and Cool Ringtone service, it also focused on the promotion of its GPRS business,
achieving a penetration rate of 17.3%. In the first half of this year, revenue derived from GSM
mobile value-added service increased by 21.6% over the same period of last year, and represented
24.1% of service revenue from GSM mobile business.
2
The Company adjusted its business model for the long distance, data and internet businesses, and
focused on the promotion of its multimedia video, internet and corporate information businesses,
all of which realized steady growth in profits.
Enhancement of service and management quality
The Company adopted 2008 the Olympic Year of Unicoms Services as its theme, and launched a
series of new measures to ensure its provision of its services during the Olympic and to strengthen
its control over the service quality. These measures enabled the Company to further enhance the
quality and standard of its services.
The Company further strengthened its infrastructure management, IT control, and information system
support capabilities. Smooth network operations were ensured through the enhancement of operational
maintenance and network safety management, and the strengthening of various basic works, such as
budget control, performance appraisals, separation of management of inflow and outflow fund, and
internal control appraisals.
Strategic restructuring progressing well
On 2 June 2008, the Company entered into a framework agreement with China Telecom in respect of the
disposal of its CDMA business and related assets. The consideration for the transaction is RMB43.8
billion, to be paid in cash. On the same day, it announced its intention to merge with China Netcom
by way of a scheme arrangement of China Netcom, whereby the Company would offer 1.508 China Unicom
shares for every China Netcom share, and 3.016 China Unicom ADSs for every China Netcom ADS.
On 28 July 2008, the Company announced that it had entered into a detailed agreement with China
Telecom in respect of the disposal of its CDMA business and related assets, and a circular was sent
to shareholders on 1 August 2008 in relation to that transaction. The Company believes that
disposal of the CDMA business will be beneficial to the Company as it focuses its financial and
operational resources on the development of its GSM business and the future development of 3G
services, which are expected to enhance investment returns.
On 15 August 2008, the Company issued a circular to shareholders in respect of the proposed merger
with China Netcom. The Company believes that the proposed merger is in line with the overall
development and trend of global integration of fixed-line and mobile businesses, and is beneficial
to the enhancement of its overall competitiveness.
Actively fighting against disasters to protect communications
During the snowstorms in southern China early this year and the Wenchuan earthquake in May, the
communication networks in the stricken areas were severely damaged. The Company immediately
launched a series of emergency measures and dispatched employees
3
to repair networks and timely
re-established the connection between the severely affected areas with the outside world, thus
safeguarding the communication channels for the rescue works and ensuring the communication of
messages of care to the stricken areas, and actively performed its corporate social
responsibilities.
OUTLOOK
The telecommunication industry in China still has tremendous potential, and the industry
restructuring may bring new changes and opportunities to the Company. In the second half of this
year, the Company will increase investments in its GSM network and enhance its overall network
coverage and communication quality. The Company will focus on further developing its mobile
business, in particular the GPRS value-added services, to boost overall revenue. The Company will
continue to execute its strategic restructuring, and ensure a smooth transition and transfer of its
CDMA business. The Company also plans to complete the proposed merger with China Netcom smoothly
and proactively integrate its existing resources, enhance operational efficiency and service
capabilities, in order to achieve synergies.
The Company will convene Extraordinary General Meetings on 16 September 2008 at which the proposal
in respect of the disposal of its CDMA business and the merger with China Netcom will be presented
to our shareholders for approval.
Following the completion of the merger, the Company will change its name to China Unicom (Hong
Kong) Limited (or China Unicom as its short name). The new company will focus on establishing a
market leading position in the domestic 3G market, integrating its mobile and fixed-line
businesses, launching innovative products and developing new markets with the aim of becoming a
world-class broadband communications and information services provider.
We believe that the new company will have stronger integrated capabilities, clearer business
strategies and broader scope for business development.
Finally, I would take this opportunity to express on behalf of the Board our heartfelt thanks to
Mr. Shang Bing, Mr. Yang Xiaowei, Mr. Li Zhengmao and Mr. Miao Jianhua for their contributions to
the Company during their terms of office as Directors. I would also like to express my gratitude to
our shareholders and the communities for their support to the Company, and also thanks to the
management and all the staff for their efforts in facing the challenges of the first half of this
year.
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The Chairman and Chief Executive Officer
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Chang Xiaobing
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25 August 2008
4
FINANCIAL AND BUSINESS OVERVIEW
I.
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Financial Overview
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For the first half of 2008, the Company continued to follow its existing business objectives
and being committed to the market-oriented business strategies, enhanced the quality of
business development and achieved steady and sustainable growth in all businesses.
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Continuing Operations (Note 1)
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1.
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Revenue
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For the first half of 2008, our revenue from continuing operations continued to grow
steadily and reached RMB35.14 billion, up by 4.0% from the same period of last year (Note
2). Of the total revenue, service revenue was RMB35.12 billion, up by 4.0% from the
same period of last year. Among the service revenue, service revenue from our GSM
cellular business reached RMB32.50 billion while service revenue from our long distance,
data and internet business reached RMB2.62 billion.
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2.
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Costs and Expenses
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For the first half of 2008, total costs and expenses from continuing operations,
including financial gains, interest income and other gains, were RMB30.00 billion, down
by 1.1% from the same period of last year. Excluding the effect of the unrealised loss on
changes in fair value of derivative component of convertible bonds (Note 3) for the same
period of last year, total costs and expenses would be up by 4.5% from the same period of
last year. Selling and marketing expenses were RMB5.36 billion, up by 3.4% from the same
period of last year and depreciation and amortisation expenses were RMB10.97 billion,
down by 0.6% from the same period of last year.
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3.
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Earnings
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For the first half of 2008, our profit before income tax from continuing operations was
RMB5.13 billion, up by 49.5% from the same period of last year. Profit before income tax
for the GSM cellular business was RMB5.16 billion while profit before income tax for long
distance, data and Internet business was RMB0.35 billion.
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For the first half of 2008, profit before income tax was up by 49.5% from the same period
of last year. Excluding the effect of the unrealised loss on changes in fair value of
derivative component of convertible bonds for the same period of last year, profit before
income tax for the first half of 2008 would be up by 1.2% compared to the same period of
last year.
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5
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EBITDA (Note 4) from continuing operations was RMB15.88 billion and EBITDA margin
(representing EBITDA as a percentage of the total revenue) was 45.2%. EBITDA margin for
the GSM cellular business was 43.6%.
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Discontinued Operations (Note 1)
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For the first half of 2008, profit for the period from discontinued operations, i.e. CDMA
cellular business which is also classified as held for sale, was RMB0.65 billion.
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Consolidated Earnings
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For the first half of 2008, profit for the period (Note 5) was RMB4.42 billion (including
profit from continuing operations of RMB3.77 billion and profit from discontinued operations
of RMB0.65 billion). Basic earnings per share was RMB0.324 and basic earnings per share for
continuing operations was RMB0.276.
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Capital Expenditures on and Free Cash Flow from Continuing Operations
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For the first half of 2008, our capital expenditures on continuing operations totaled RMB7.31
billion. Free cash flow from continuing operations (representing net cash generated from
operating activities minus capital expenditures) was RMB6.92 billion.
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Balance Sheet
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As at 30 June 2008, our capital structure was further improved. The liabilities-to-assets
ratio (Note 6) decreased from 34.9% as at 31 December 2007 to 32.3% as at 30 June 2008. The
debt-to-capitalisation ratio (Note 7) decreased from 3.8% as at 31 December 2007 to 3.5% as at
30 June 2008.
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II.
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Business Overview
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In the first half of 2008, the Company continued to enhance its branding, strengthen its
product and business management, improve service support and steadily develop its business,
despite the impact from adjustments to mobile roaming tariffs and the major restructuring in
the China telecom sector.
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1.
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Mobile Business
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The GSM business continued to focus on brand marketing, enhancing its sales and marketing and
improving its value proposition in different customer segments. As a result, it achieved
steady growth by improving perceptions and countering the impact of calling-party-pay
policies and domestic roaming tariff adjustments. As of 30 June 2008, total number of GSM
subscribers reached 127.599 million, a net addition of 7.035 million in the first half of
2008. The average minutes of usage (MOU) per subscriber per
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6
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month for GSM reached 249.6
minutes, slightly ahead of 248.4 minutes in the first half of last year. Average revenue per
user (ARPU) was RMB43.6, representing a decline of RMB3.7 from RMB47.3 in the first half of
last year. The GSM monthly average churn rate was 2.80% in the first half of this year.
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Despite the roaming tariff adjustment and the telecom restructuring, the Companys CDMA
business maintained stable revenues by actively promoting various theme-based marketing
programs and offering differentiated and customized mobile terminals. As of 30 June 2008, the
total number of CDMA subscribers reached 43.169 million, a net addition of 1.242 million in
the first half of 2008. The average MOU per subscriber per month for CDMA was 243.0 minutes,
representing a decrease of 23.4 minutes from 266.4 minutes in the first half of last year. The
APRU was RMB51.1, representing a decline of RMB6.0 from RMB57.1 in the first half of last
year. The CDMA monthly average churn rate was 2.75% in the first half of this year.
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2.
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Mobile Value-added Business
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In the first half of 2008, while continuing to increase the penetration of SMS and Cool
Ringtone services, the Company targeted GPRS services as a new growth area. By increasing
GPRS service coverage and launching new wireless applications such as Stock in Palm,
wireless data revenues continued to grow.
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SMS services continued to grow strongly. In the first half of 2008, GSM SMS volume reached
38.06 billion, representing an increase of 6.9% over the same period of last year, and CDMA
SMS volume reached 9.95 billion messages, representing an increase of 7.2% over the same
period of last year.
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The penetration of Cool Ringtone service further increased. As of 30 June 2008, GSM Cool
Ringtone subscribers reached 42.285 million with a net addition of 4.334 million, and a
penetration rate of 33.1%. CDMA Cool Ringtone subscribers reached 12.222 million with a net
addition of 39,000, and a penetration rate of 28.3%.
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The GPRS business grew rapidly. As of 30 June 2008, the GPRS network had achieved nationwide
coverage in all 31 provinces, established roaming partnership with 20 GPRS operators in 12
overseas countries. For the first half of 2008, total GPRS subscribers reached 22.046 million,
with a net addition of 13.153 million and penetration rate of 17.3%. GPRS revenues reached RMB
0.45 billion.
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For CDMA 1X wireless data services, the number of U-Net subscribers continued to grow. As of
30 June 2008, U-Net subscribers totaled 2.338 million, U-Net revenues increased 29.3% compared
with the same period of last year, and CDMA 1X wireless data revenues, as percentage of CDMA
service revenue, reached 12.3%, significantly higher than that of the first half of last year.
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7
3.
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Long Distance, Data and Internet Businesses
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In the first half of 2008, the long distance, data and Internet businesses underwent business
transformations, focusing on improving profitability and they achieved steady growth by
further developing data business, Internet applications and enterprise information services.
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Traditional data and domestic long distance voice business declined. In the first half of
2008, outgoing domestic and international long distance calls totaled 9.39 billion minutes,
representing a decrease of 20.5% compared with the same period of last year. Incoming calls
from international destinations, together with Hong Kong, Macau and Taiwan, amounted to 2.24
billion minutes, representing an increase of 20.1% compared with the same period of last year.
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The Companys long distance data leased-line business grew steadily. As of 30 June 2008, the
total circuit leased line bandwidth was 64,000 x 2Mbps, and the total leased bandwidth based
on Asynchronous Transfer Mode (ATM) and Frame Relay (FR) services was 8,635 x 2Mbps. The total
subscribers of Uni-Video broadband video telephony service reached 441,000.
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New Internet applications and enterprise information services continued to be rolled out
during the first half of 2008. As of 30 June 2008, the number of Internet broadband
subscribers reached 813,000. The number of Internet Ruyi Mailbox subscribers totaled 12.917
million. The number of Ruyi virus-killing subscribers reached 520,000.
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4.
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Distribution Channel and Customer Services
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In the first half of 2008, the Company has improved its distribution channel infrastructure on
many levels, aiming to improve channel capabilities. The Companys brand image and customer
perceptions have been improved by placing product promotional self-service systems in the
sales outlets. Channel capability for marketing products and services to end users has also
been strengthened. The Company has fully expanded its electronic online sales channels, and
has opened industry-leading unified online sales outlets. The online outlet provides inquiry
services to customers electronically, and will roll out transactional services such as online
payment, charging, and card purchase.
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The Company has followed a business philosophy of Customer Focus, Service-driven
Development. By initiating the Olympic Year of Unicoms Services marketing program, the
Company strived to fulfill its service commitment, and achieve continued service innovation.
By deploying large scale bonus-point redemption program and providing customized membership
services, the Company has improved customer loyalty and customer retention. The Company has
also initiated a remote recharge service based on recharge nationwide no matter where you buy
the card capability by providing secure and convenient top-up payment services for prepaid
customers. As a result, customer satisfaction has been further improved.
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8
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*
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To enable an investor to better understand the Groups operating results of
continuing operations and enhance the comparability between accounting periods, the
unrealised loss on changes in fair value of derivative component of convertible bonds of
approximately RMB1.64 billion for the six months ended 30 June 2007, that is not
considered to be an indicator of the Groups operating performance of continuing
operations, is excluded.
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Note 1:
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On 2 June 2008, the Company, the Companys wholly-owned subsidiary, China Unicom
Corporation Limited (CUCL) and China Telecom Corporation Limited (China Telecom)
entered into the CDMA business framework agreement whereby CUCL will sell, and China
Telecom will purchase, the CDMA Business. (Please refer to the Announcement on (1)
Proposed Disposal of the CDMA Business by Unicom to Telecom (2) Proposed Major
Transaction (3) Possible Connected Transaction and (4) Resumption of Trading issued on 2
June 2008). According to the above framework agreement and the progress of negotiations
made between China Telecom and the Company, in accordance with the Hong Kong Financial
Reporting Standards (HKFRS) 5, Non-Current Assets Held for Sale and Discontinued
Operations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA),
the management of the Company presented the proposed disposal of assets and liabilities
on the unaudited condensed consolidated interim balance sheet as at 30 June 2008 as
assets and liabilities classified as held for sale. In addition, the management of the
Company recognised the CDMA business segment as discontinued operations, accordingly,
profit from discontinued operations are presented separately in the unaudited condensed
consolidated interim income statement for the six months ended 30 June 2008. The 2007
comparative figures of the unaudited condensed consolidated interim income statement and
cash flow statement were also restated accordingly. For details, please refer to Note 10
of the Group results.
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Note 2:
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Upon the adoption of HKFRS in 2005, merger accounting is used by the Group to
account for the combination of entities and businesses under common control in accordance
with HKFRS 3 Business Combinations and Accounting Guideline 5 Merger accounting for
common control combinations issued by the HKICPA. Accordingly, the results of operations
and financial position of Guizhou Business are included in the consolidated financial
statements of the Group as if they were always part of the Group from the beginning of
the earliest period presented. As a result, comparative figures have been restated. For
details, please refer to Note 2 of the Group results.
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Note 3:
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The unrealised loss on changes in fair value of derivative component of
convertible bonds of the same period last year was approximately RMB1.64 billion. Since
SK Telecom Co. Ltd. had fully converted the convertible bonds into the Companys shares
in August 2007, as a result, the Company no longer needs to recognise the changes in fair
value of derivative component of convertible bonds from that date onwards.
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Note 4:
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EBITDA represents profit for the period before interest income, financial
gain/costs, other gains-net, income tax and depreciation and amortisation. As the
telecommunications business is a capital intensive industry, capital expenditures and
financial gain/costs may have a significant impact on the net profit of the companies
with similar operating results. Therefore, we believe EBITDA may be helpful in analyzing
the operating results of a telecommunications service operator like our Company.
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9
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Although EBITDA has been widely applied in the global telecommunications industry as
indicator to reflect the operating performance, financial capability and liquidity,
it should be considered in addition to, and is not a substitute for or superior to,
the measure of financial performance prepared under generally accepted accounting
principles (GAAP) as it does not have any standardised meaning under GAAP and is
not regarded as measures of operating performance and liquidity under GAAP. In
addition, it may not be comparable to similar indicators provided by other
companies.
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Note 5:
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The new enterprise income tax law is effective from 1 January 2008 and the
enterprise income tax rate is changed from 33% to 25%. The effective tax rate of
continuing operations for the first half of 2008 was 26.6% while the effective tax rate
for the same period of last year was 47.0%.
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Note 6:
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Liabilities-to-assets ratio represents total liabilities over total assets.
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Note 7:
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Debt-to-capitalisation ratio represents interest bearing debts plus minority
interest over interest bearing debts plus total equity.
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GROUP RESULTS
China Unicom Limited (the Company) is pleased to announce the unaudited condensed consolidated
interim results of the Company and its subsidiaries (the Group) for the six months ended 30 June
2008 extracted from the unaudited condensed consolidated interim financial information of the Group
as set out in 2008 interim report. The interim results have been reviewed by the Audit Committee.
10
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
AS AT 30 JUNE 2008
(All amounts in Renminbi (RMB) thousands)
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Unaudited
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Audited
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30 June
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31 December
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Note
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2008
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2007
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|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
109,737,056
|
|
|
|
116,162,165
|
|
Goodwill
|
|
|
|
|
|
|
2,770,983
|
|
|
|
3,143,983
|
|
Other assets
|
|
|
|
|
|
|
9,970,088
|
|
|
|
12,855,199
|
|
Deferred income tax assets
|
|
|
|
|
|
|
410,696
|
|
|
|
426,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,888,823
|
|
|
|
132,588,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
813,438
|
|
|
|
2,528,364
|
|
Accounts receivable, net
|
|
|
6
|
|
|
|
2,307,728
|
|
|
|
3,211,154
|
|
Prepayments and other current assets
|
|
|
|
|
|
|
1,842,109
|
|
|
|
3,516,279
|
|
Amounts due from related parties
|
|
|
|
|
|
|
87,234
|
|
|
|
109,096
|
|
Amounts due from Domestic Carriers
|
|
|
|
|
|
|
172,937
|
|
|
|
149,736
|
|
Short-term bank deposits
|
|
|
|
|
|
|
140,795
|
|
|
|
644,016
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
6,734,234
|
|
|
|
6,675,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,098,475
|
|
|
|
16,834,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets classified as held for sale
|
|
|
10
|
|
|
|
11,512,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
146,499,777
|
|
|
|
149,422,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to
the Companys equity holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
|
1,439,451
|
|
|
|
1,436,908
|
|
Share premium
|
|
|
|
|
|
|
64,553,493
|
|
|
|
64,320,066
|
|
Reserves
|
|
|
|
|
|
|
3,965,458
|
|
|
|
3,968,515
|
|
Retained profits
|
|
|
|
|
|
|
|
|
|
|
|
|
- Proposed 2007 final dividend
|
|
|
9
|
|
|
|
|
|
|
|
2,726,858
|
|
- Others
|
|
|
|
|
|
|
29,175,469
|
|
|
|
24,760,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,133,871
|
|
|
|
97,213,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in equity
|
|
|
|
|
|
|
4,824
|
|
|
|
3,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
99,138,695
|
|
|
|
97,217,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
30 June
|
|
|
31 December
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bank loans
|
|
|
|
|
|
|
1,571,816
|
|
|
|
1,660,921
|
|
Obligations under finance leases
|
|
|
|
|
|
|
2,618
|
|
|
|
3,882
|
|
Deferred income tax liabilities
|
|
|
|
|
|
|
5,317
|
|
|
|
5,864
|
|
Deferred revenue
|
|
|
|
|
|
|
619,170
|
|
|
|
1,303,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,198,921
|
|
|
|
2,973,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables and accrued liabilities
|
|
|
7
|
|
|
|
26,476,256
|
|
|
|
32,031,307
|
|
Taxes payable
|
|
|
|
|
|
|
1,090,805
|
|
|
|
1,239,512
|
|
Amounts due to China United
Telecommunications
Corporation
|
|
|
|
|
|
|
18,996
|
|
|
|
820,699
|
|
Amounts due to related parties
|
|
|
|
|
|
|
816,079
|
|
|
|
769,558
|
|
Amounts due to Domestic Carriers
|
|
|
|
|
|
|
669,394
|
|
|
|
600,283
|
|
Current portion of long-term bank loans
|
|
|
|
|
|
|
2,057,724
|
|
|
|
2,191,382
|
|
Current portion of obligations under finance
leases
|
|
|
|
|
|
|
266
|
|
|
|
1,448
|
|
Advances from customers
|
|
|
|
|
|
|
6,538,550
|
|
|
|
11,577,405
|
|
Dividends payable
|
|
|
9
|
|
|
|
149,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,817,070
|
|
|
|
49,231,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities classified as held for sale
|
|
|
10
|
|
|
|
7,345,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
47,361,082
|
|
|
|
52,205,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
|
|
|
|
146,499,777
|
|
|
|
149,422,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current liabilities
|
|
|
|
|
|
|
(21,551,207
|
)
|
|
|
(32,397,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
|
101,337,616
|
|
|
|
100,190,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
UNAUDITED CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
(All amounts in RMB thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
(As restated)
|
|
|
|
Note
|
|
2008
|
|
|
(Note 2)
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (Turnover)
|
|
|
|
|
|
|
|
|
|
|
|
|
GSM business
|
|
|
3, 4, 11
|
|
|
|
32,499,400
|
|
|
|
31,289,317
|
|
Data and Internet business
|
|
|
3, 4, 11
|
|
|
|
1,592,356
|
|
|
|
1,550,334
|
|
Long Distance business
|
|
|
3, 4, 11
|
|
|
|
1,028,070
|
|
|
|
930,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service revenue
|
|
|
|
|
|
|
35,119,826
|
|
|
|
33,769,663
|
|
Sales of telecommunications products
|
|
|
3, 4
|
|
|
|
15,396
|
|
|
|
4,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
3, 4
|
|
|
|
35,135,222
|
|
|
|
33,773,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased lines and network capacities
|
|
|
11
|
|
|
|
(356,923
|
)
|
|
|
(310,429
|
)
|
Interconnection charges
|
|
|
11
|
|
|
|
(4,494,345
|
)
|
|
|
(4,092,501
|
)
|
Depreciation and amortisation
|
|
|
|
|
|
|
(10,972,659
|
)
|
|
|
(11,043,693
|
)
|
Employee benefit expenses
|
|
|
|
|
|
|
(2,792,343
|
)
|
|
|
(2,600,405
|
)
|
Selling and marketing
|
|
|
11
|
|
|
|
(5,356,823
|
)
|
|
|
(5,179,412
|
)
|
General, administrative and other expenses
|
|
|
11
|
|
|
|
(5,949,614
|
)
|
|
|
(5,512,887
|
)
|
Cost of telecommunications
products sold
|
|
|
|
|
|
|
(304,387
|
)
|
|
|
(109,186
|
)
|
Financial gain
|
|
|
|
|
|
|
109,183
|
|
|
|
29,804
|
|
Interest income
|
|
|
|
|
|
|
71,309
|
|
|
|
98,441
|
|
Unrealised loss on changes in fair value
of
derivative component of convertible
bonds
|
|
|
|
|
|
|
|
|
|
|
(1,638,735
|
)
|
Other gains - net
|
|
|
|
|
|
|
42,498
|
|
|
|
16,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax
|
|
|
|
|
|
|
5,131,118
|
|
|
|
3,431,435
|
|
Income tax expenses
|
|
|
5
|
|
|
|
(1,365,657
|
)
|
|
|
(1,613,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from continuing operations
|
|
|
|
|
|
|
3,765,461
|
|
|
|
1,818,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from discontinued operations
|
|
|
3, 10
|
|
|
|
654,767
|
|
|
|
359,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
|
|
|
4,420,228
|
|
|
|
2,177,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
|
|
|
|
|
4,419,318
|
|
|
|
2,177,291
|
|
Minority interest
|
|
|
|
|
|
|
910
|
|
|
|
688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,420,228
|
|
|
|
2,177,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
(As restated)
|
|
|
|
Note
|
|
2008
|
|
|
(Note 2)
|
|
|
Earnings per share for profit
attributable to
the equity holders of the
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic (RMB)
|
|
|
8
|
|
|
|
0.324
|
|
|
|
0.172
|
|
- diluted (RMB)
|
|
|
8
|
|
|
|
0.321
|
|
|
|
0.170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share for profit from
continuing operations attributable to the
equity holders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic (RMB)
|
|
|
8
|
|
|
|
0.276
|
|
|
|
0.143
|
|
- diluted (RMB)
|
|
|
8
|
|
|
|
0.273
|
|
|
|
0.142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share for profit from
discontinued operations attributable to
the
equity holders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic (RMB)
|
|
|
8
|
|
|
|
0.048
|
|
|
|
0.029
|
|
- diluted (RMB)
|
|
|
8
|
|
|
|
0.048
|
|
|
|
0.028
|
|
14
UNAUDITED CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
(All amounts in RMB thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
(As restated)
|
|
|
|
Note
|
|
2008
|
|
|
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
|
|
|
|
|
|
14,222,761
|
|
|
|
16,621,448
|
|
Net cash outflow from investing activities
|
|
|
|
|
|
|
(10,338,534
|
)
|
|
|
(10,535,669
|
)
|
Net cash outflow from financing activities
|
|
|
|
|
|
|
(2,383,945
|
)
|
|
|
(10,247,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow/(outflow) from continuing
operations
|
|
|
|
|
|
|
1,500,282
|
|
|
|
(4,161,537
|
)
|
Net cash inflow from discontinued
operations
|
|
|
10
|
|
|
|
1,125,964
|
|
|
|
980,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and
cash equivalents
|
|
|
|
|
|
|
2,626,246
|
|
|
|
(3,181,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning
of period
|
|
|
|
|
|
|
6,675,476
|
|
|
|
12,243,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash and cash equivalents included
in the disposal group
|
|
|
10
|
|
|
|
(2,567,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period
|
|
|
|
|
|
|
6,734,234
|
|
|
|
9,062,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of the balances of cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash balances
|
|
|
|
|
|
|
2,936
|
|
|
|
3,229
|
|
Bank balances
|
|
|
|
|
|
|
6,731,298
|
|
|
|
9,058,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,734,234
|
|
|
|
9,062,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
NOTES
(All amounts in RMB thousands unless otherwise stated)
1.
|
|
GENERAL INFORMATION
|
|
|
|
China Unicom Limited (the Company) was incorporated as a limited liability company in the
Hong Kong Special Administrative Region (Hong Kong), the Peoples Republic of China (the
PRC) on 8 February 2000. The principal activities of the Company are investment holding and
the Companys subsidiaries are principally engaged in the provision of GSM and CDMA cellular,
long distance, data and Internet services in the PRC. The GSM and CDMA businesses are
hereinafter collectively referred to as the Cellular Business. The Company and its
subsidiaries are hereinafter referred to as the Group. The address of its registered office
is 75th Floor, The Center, 99 Queens Road Central, Hong Kong.
|
|
|
|
The shares of the Company were listed on the Stock Exchange of Hong Kong Limited on 22 June
2000 and the American Depositary Shares (ADS) of the Company were listed on the New York
Stock Exchange on 21 June 2000.
|
|
|
|
The immediate holding company of the Company is China Unicom (BVI) Limited (Unicom BVI). The
majority of the equity interests in Unicom BVI is owned by China United Telecommunications
Corporation Limited (A Share Company, a joint stock company incorporated in the PRC on 31
December 2001, with its A shares listed on the Shanghai Stock Exchange on 9 October 2002). The
majority of the equity interests in A Share Company is owned by China United
Telecommunications Corporation (a state-owned enterprise established in the PRC, hereinafter
referred to as Unicom Group). The directors of the Company consider Unicom Group to be the
ultimate holding company.
|
|
|
|
Purchase of assets and business of Guizhou branch of Unicom Group (hereinafter referred to as
Business Combination)
|
|
|
|
Pursuant to an asset transfer agreement entered between China Unicom Corporation Limited
(CUCL, a subsidiary of the Company) and Unicom Group on 16 November 2007, CUCL agreed to
purchase the GSM cellular telecommunication assets and business, and the CDMA cellular
telecommunication business (operated through a leasing of CDMA network capacity from Unicom
New Horizon Mobile Telecommunications Company Limited (Unicom New Horizon, a wholly-owned
subsidiary of Unicom Group)) of Guizhou branch of Unicom Group (Guizhou Business) at a cash
consideration of RMB880 million. The consideration for the Business Combination was determined
with reference to the results of a business valuation using methods commonly used in capital
market transactions in the telecommunications industry and the negotiations between the
parties. In addition, pursuant to the asset transfer agreement, the profit or loss of the
Guizhou Business for the period from 31 December 2006 to the effective date of the Business
Combination was transferred to Unicom Group.
|
|
|
|
The aforementioned Business Combination became effective on 31 December 2007, when all the
conditions to the Business Combination were satisfied and cash consideration was settled by
CUCL. Upon the completion of the Business Combination, the cellular telecommunications
business operations of CUCL have been expanded to all provinces, cities and autonomous regions
in the PRC. The Company has adopted merger accounting to account for this business combination
of entities and businesses under the common control of Unicom Group. Please refer to Note 2
for details.
|
|
|
|
Proposed disposal of the Groups CDMA business to China Telecom Corporation Limited (China
Telecom)
|
|
|
|
On 2 June 2008, the Company, CUCL and China Telecom entered into the CDMA business framework
agreement (the Framework Agreement), which sets out the terms and conditions on which the
Company, CUCL and China Telecom will proceed with the CDMA business disposal whereby CUCL will
sell, and China Telecom will purchase, the CDMA business operated by the Group. The CDMA
business was defined in the Framework Agreement to include the CDMA mobile telecommunication
operations, and its related assets (including certain jointly used CDMA base stations to be
agreed between CUCL and China Telecom)
|
16
|
|
and liabilities owned and
operated by CUCL. Pursuant to the Framework Agreement, the consideration for the proposed CDMA
business disposal is RMB43.8 billion and will be payable by China Telecom to the Group in cash
in three installments and the consideration is subject to a price adjustment mechanism, which
is based on the CDMA service revenue generated by the Group for the six months ended 30 June
2007 and 30 June 2008. Based on the CDMA service revenue generated by the Group for the six
months ended 30 June 2007 and 30 June 2008, and as agreed by the Company and China Telecom,
there will be no adjustment to the consideration as a result of the price adjustment
mechanism. The completion of the proposed CDMA business disposal is subject to various
conditions as set forth in the Framework Agreement.
|
|
|
In addition, the Group has been notified by Unicom Group that, on 2 June 2008, Unicom Group,
Unicom New Horizon and China Telecommunications Corporation (China Telecom Group) entered
into a framework agreement which sets out the key terms and conditions on which Unicom Group
and Unicom New Horizon will sell their CDMA cellular telecommunications network to China
Telecom Group for a consideration of RMB66.2 billion. It is expected that this proposed CDMA
network disposal will be completed concurrent with the proposed CDMA business disposal.
|
|
|
|
On 27 July 2008, the Company, CUCL and China Telecom entered into the CDMA business disposal
agreement (the Disposal Agreement). Pursuant to the Disposal Agreement , the Company and
CUCL have agreed to sell and China Telecom agreed to purchase: (i) the entire CDMA business,
which is owned and operated by CUCL, together with the assets of CUCL which are relevant to
the CDMA operations and the rights and liabilities of CUCL relating to its CDMA subscribers,
immediately prior to the completion date; (ii) the entire equity interest in China Unicom
(Macau) Company Limited (Unicom Macau, a subsidiary of the Company); and (iii) 99.5% of the
equity interest in Unicom Huasheng Telecommunications Technology Company Limited (Unicom
Huasheng, a subsidiary of CUCL) representing the entire equity interest in Unicom Huasheng
held by CUCL (collectively referred to as the CDMA Business). The scope of the CDMA Business
is set out in the Disposal Agreement and the detailed items will be confirmed by the Company,
CUCL and China Telecom in a final list of the detailed items of the CDMA Business which will
be established on or before the delivery date of the CDMA Business.
|
|
|
|
In addition, the Group has been notified by Unicom Group that on 27 July 2008, Unicom Group,
Unicom New Horizon and China Telecom Group entered into the CDMA network disposal agreement,
which sets out the terms and conditions on which Unicom Group and Unicom New Horizon will
sell, and China Telecom Group will purchase, the CDMA network at a consideration of RMB66.2
billion. Completion of the CDMA network disposal is also expected to occur on the same date as
the completion of the CDMA Business disposal.
|
|
|
|
The aforementioned proposed disposal of CDMA Business is subject to various conditions,
including, among other things: (i) approval by the shareholders of the A Share Company for the
proposed disposal of the CDMA Business, and approval by the non-affiliated shareholders of the
A Share Company for the waiver of CDMA network purchase option and the termination of 2006
CDMA Lease Agreement (please refer to Note 4.2(c) of the Companys 2007 Annual Report for
details); (ii) approval by the shareholders of the Company for the proposed disposal of the
CDMA Business, and approval by the independent shareholders of the Company for the transfer
agreement entered between the A Share Company and CUCL pursuant to which A Share Company has
agreed to transfer all of its rights and obligations under the waiver of CDMA network purchase
option and the termination of 2006 CDMA Lease Agreement to CUCL (the Transfer Agreement);
(iii) the necessary procedures required by applicable law and/or required by the relevant
binding agreements or documents of CUCL having been performed in accordance with the
requirements of the completion plan as set out in the CDMA Business Disposal Agreement; (iv)
receipt of any other regulatory or corporate approvals that are necessary for the completion
of the proposed disposal of the CDMA Business; and (v) the business and assets identification
and specific revenue due diligence having been completed and the results of such
identification and due diligence having been jointly confirmed. The extraordinary general
meeting of the shareholders of the Company for approving the above Disposal Agreement and the
Transfer Agreement will be held on 16 September 2008.
|
17
|
|
Proposed merger between the Company and China Netcom Group Corporation (Hong Kong) Limited
(China Netcom) by way of a scheme of arrangement of China Netcom
|
|
|
|
On 2 June 2008, the Company and China Netcom jointly announced that the Company had formally
presented the share proposal, the ADS proposal, and the option proposal to the board of
directors of China Netcom, and requested the China Netcoms board of directors to put forward
the proposals to the shareholders of China Netcom to consider a merger of the Company and
China Netcom (Proposed Merger) by way of a scheme of arrangement of China Netcom (the
Scheme) under Section 166 of the Hong Kong Companies Ordinance.
|
|
|
|
Pursuant to the aforementioned share proposal and ADS proposal, each holder of China Netcom
share and China Netcom ADS will be entitled to receive 1.508 new ordinary shares and 3.016 new
ADSs of the Company respectively for every China Netcom share and China Netcom ADS. For the
option proposal, the Company will establish a new option plan, and each holder of China Netcom
option will be entitled to receive new options of the Company to acquire the Companys shares
in exchange for their outstanding China Netcom options (whether vested or not). The grant of
these options will be based on a formula that values the new options of the Company to be
received by a holder of China Netcom options being equivalent to the see-through price of
that holders outstanding China Netcom options. The effectiveness of the above proposals and
the Scheme is subject to the various conditions, including, among other things: (i) the
approval of the Companys shareholders for (a) the proposals, (b) the allotment and issue by
the Companys shares pursuant to the share proposal and the ADS proposal and (c) the adoption
of a new option scheme for issuance of options under the option proposal; (ii) the approval of
the Scheme by the requisite majority of shareholders of China Netcom at a meeting of the
shareholders of China Netcom to be convened at the direction of the High Court of Hong Kong
for the approval of the Scheme.
|
|
|
|
On 13 August 2008, the Company made a further announcement, please refer to Note 12.2 for
details. The extraordinary general meeting of the shareholders of the Company for the
resolutions described in (i) above will be held on 16 September 2008.
|
|
2.
|
|
BASIS OF PREPARATION
|
|
|
|
This unaudited condensed consolidated interim financial information for the six months ended
30 June 2008 has been prepared in accordance with Hong Kong Accounting Standards (HKAS) 34
Interim Financial Reporting issued by the Hong Kong Institute of Public Accountants
(HKICPA). The unaudited condensed consolidated interim financial information for the six
months ended 30 June 2008 and 2007 have not been audited by the auditors, and the financial
information for the year ended 31 December 2007 are extracted from the audited financial
statements as set out in the Companys 2007 Annual Report. The accounting policies and
estimates adopted in the preparation of the unaudited condensed consolidated interim financial
information are consistent with those used in preparing the annual financial statements for
the year ended 31 December 2007 except that the Group applied HK(IFRIC)-Int 11 Group and
treasury share transactions on 1 January 2008 retrospectively, subject to the transitional
provisions of Hong Kong Financial Reporting Standard (HKFRS) 2 Share-based Payment. The
adoption of HK(IFRIC)-Int 11 does not have any impact on the Groups unaudited condensed
consolidated interim results. In addition, the Group changed the accounting estimate on
provision for subscriber points expenses for certain provincial branches, where there were
stabilised and reliable historical redemption statistics available. This change of estimate
led to the reversal of provision for subscriber points expenses for those provincial branches,
based on the historical redemption rates, amounting to approximately RMB92 million for
continuing operations and approximately RMB57 million for discontinued operations for the six
months ended 30 June 2008.
|
18
|
|
Business Combination
|
|
|
|
Since the Group and Guizhou Business were both under the common control of Unicom Group prior
to the Business Combination, the purchase of Guizhou Business in 2007 is considered as a
business combination of entities and businesses under common control, which has been accounted
for using merger accounting in accordance with the Accounting Guideline 5 Merger accounting
for common control combinations (AG 5) issued by the HKICPA in November 2005. The acquired
assets and liabilities of Guizhou Business are stated at historical costs, and are included in
the unaudited condensed consolidated interim financial information from the beginning of the
earliest period presented as if the Guizhou Business had always been part of the Group. As a
result, the 2007 comparative figures in the unaudited condensed consolidated interim financial
information have been restated accordingly.
|
|
|
|
Discontinued Operations
|
|
|
|
Based on the Framework Agreement dated 2 June 2008, in accordance with HKFRS 5 Non-current
Assets Held for Sale and Discontinued Operations issued by the HKICPA (HKFRS 5), the assets
and liabilities of CDMA Business disposal group, which include the assets and liabilities of
the CDMA business segment of the Group, as well as certain other telecommunications network
assets and other assets in certain regions (including certain jointly used CDMA base
stations/auxiliary facilities and sales offices which will also be sold to China Telecom),
have been classified as held for sale and are carried at the lower of their carrying amount
and fair value less costs to sell since their carrying amount will be recovered principally
through a sales transaction rather than through a continuing use since 2 June 2008. The scope
and net carrying value of such network assets and other assets are estimated based on the
initial agreement between the Group and China Telecom, which may be different from the value
of the detailed items of the CDMA Business to be delivered to China Telecom and which will be
agreed and finalised on or before the delivery date, in accordance with the completion plan
set out in the Disposal Agreement.
|
|
|
|
In addition, in accordance with HKFRS 5, the results and cash flows of the operations of the
CDMA business segment of the Group have been presented as discontinued operations in the
unaudited condensed consolidated interim financial information of the Group for the six months
ended 30 June 2008, and the 2007 comparative figures for the unaudited condensed consolidated
interim income statement and cash flow statement were also re-presented as discontinued
operations accordingly. For details, please refer to Note 10.
|
|
|
|
The impact of the restatements of comparative 2007 financial information in connection with
the Business Combination and the proposed disposal of the CDMA Business are summarised below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guizhou
|
|
|
CDMA
|
|
|
|
|
|
|
|
|
|
|
The Group
|
|
|
Business
|
|
|
business
|
|
|
|
|
|
|
The Group
|
|
|
|
(as previously
|
|
|
(Business
|
|
|
(discontinued
|
|
|
|
|
|
|
(continuing
|
|
|
|
reported)
|
|
|
Combination)
|
|
|
operations)
|
|
|
Elimination
|
|
|
operations)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months
ended 30 June 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (Turnover)
|
|
|
49,174,762
|
|
|
|
683,571
|
|
|
|
(15,893,221
|
)
|
|
|
(191,313
|
)
|
|
|
33,773,799
|
|
Profit for the period
|
|
|
2,130,956
|
|
|
|
47,023
|
|
|
|
(359,600
|
)
|
|
|
|
|
|
|
1,818,379
|
|
Basic earnings per
share (RMB)
|
|
|
0.168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.143
|
|
|
|
The unaudited condensed consolidated interim financial information should be read in
conjunction with the Groups annual financial statements for the year ended 31 December 2007.
The Groups policies on financial risk management, including the management of credit risk,
liquidity risk, cash flow and fair value interest rate risk and foreign exchange risk, as well
as capital risk management, are set out in the Companys 2007 Annual Report.
|
19
|
|
As at 30 June 2008, the current liabilities of the Group exceeded the current assets by
approximately RMB21.6 billion (31 December 2007: RMB32.4 billion). Taking into account of
available sources of financing and continuous net cash inflows from operating activities, the
Group has sufficient funds to meet its working capital requirements and debt obligations. As a
result, the unaudited condensed consolidated interim financial information of the Group for
the six months ended 30 June 2008 have been prepared under the going concern basis.
|
|
|
|
The interim financial information is unaudited, but has been reviewed by the Companys Audit
Committee. The Companys auditors, PricewaterhouseCoopers, has also reviewed the condensed
consolidated interim financial information in accordance with Hong Kong Standard on Review
Engagements 2410 Review of interim financial information performed by the independent
auditor of the entity issued by the HKICPA. PricewaterhouseCooperss independent review
report to the Board of Directors is included in the interim report to be sent to shareholders.
|
|
3.
|
|
SEGMENT INFORMATION
|
|
|
|
The Group comprises four business segments based on the various types of telecommunications
services mainly provided to customers in Mainland China. The major business segments operated
by the Group are classified as below:
|
|
|
|
Continuing operations:
|
|
|
|
GSM business the provision of GSM telephone and other related services;
|
|
|
|
|
Data and Internet business the provision of domestic and international data,
Internet and other related services; and
|
|
|
|
|
Long Distance business the provision of domestic and international long distance
and other related services.
|
|
|
|
CDMA business the provision of CDMA telephone and related services, through a
leasing arrangement for CDMA network capacity from Unicom New Horizon (Note 10 and 11);
|
|
|
The Groups primary measure of segment results for continuing operations is based on segment
profit or loss before income tax. Unallocated costs primarily represent corporate expenses,
unrealised loss on changes in fair value of derivative component of convertible bonds and
income tax expense whilst unallocated income mainly represents interest income, which cannot
be identified to different operating segments. Segment assets consist primarily of property,
plant and equipment, other assets, prepayments, inventories, receivables and operating cash.
Segment liabilities primarily comprise operating liabilities. Capital expenditure mainly
comprises additions to property, plant and equipment.
|
20
3.1 Business Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
|
|
|
|
|
|
|
Continuing operations
|
|
|
operations
|
|
|
|
|
|
|
|
|
|
|
Data and
|
|
|
Long
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
GSM
|
|
|
Internet
|
|
|
Distance
|
|
|
Unallocated
|
|
|
|
|
|
|
continuing
|
|
|
CDMA
|
|
|
|
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
amounts
|
|
|
Elimination
|
|
|
operations
|
|
|
business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (Turnover):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Usage fee
|
|
|
17,633,360
|
|
|
|
1,035,110
|
|
|
|
353,120
|
|
|
|
|
|
|
|
|
|
|
|
19,021,590
|
|
|
|
6,103,566
|
|
|
|
25,125,156
|
|
Monthly fee
|
|
|
3,218,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,218,929
|
|
|
|
2,037,238
|
|
|
|
5,256,167
|
|
Interconnection revenue
|
|
|
3,439,935
|
|
|
|
10,899
|
|
|
|
254,672
|
|
|
|
|
|
|
|
|
|
|
|
3,705,506
|
|
|
|
1,052,461
|
|
|
|
4,757,967
|
|
Leased lines rental
|
|
|
|
|
|
|
303,210
|
|
|
|
414,801
|
|
|
|
|
|
|
|
|
|
|
|
718,011
|
|
|
|
|
|
|
|
718,011
|
|
Value-added services
revenue
|
|
|
7,844,996
|
|
|
|
236,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,081,296
|
|
|
|
3,585,757
|
|
|
|
11,667,053
|
|
Other revenue
|
|
|
362,180
|
|
|
|
6,837
|
|
|
|
5,477
|
|
|
|
|
|
|
|
|
|
|
|
374,494
|
|
|
|
330,420
|
|
|
|
704,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total services revenue
|
|
|
32,499,400
|
|
|
|
1,592,356
|
|
|
|
1,028,070
|
|
|
|
|
|
|
|
|
|
|
|
35,119,826
|
|
|
|
13,109,442
|
|
|
|
48,229,268
|
|
Sales of
telecommunications
products
|
|
|
15,322
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,396
|
|
|
|
2,422,960
|
|
|
|
2,438,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from
external customers
|
|
|
32,514,722
|
|
|
|
1,592,430
|
|
|
|
1,028,070
|
|
|
|
|
|
|
|
|
|
|
|
35,135,222
|
|
|
|
15,532,402
|
|
|
|
50,667,624
|
|
Intersegment revenue
|
|
|
|
|
|
|
664,765
|
|
|
|
620,776
|
|
|
|
|
|
|
|
(1,285,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
32,514,722
|
|
|
|
2,257,195
|
|
|
|
1,648,846
|
|
|
|
|
|
|
|
(1,285,541
|
)
|
|
|
35,135,222
|
|
|
|
15,532,402
|
|
|
|
50,667,624
|
|
Leased lines and
network capacities
|
|
|
(109,582
|
)
|
|
|
(221,323
|
)
|
|
|
(26,018
|
)
|
|
|
|
|
|
|
|
|
|
|
(356,923
|
)
|
|
|
(4,144,017
|
)
|
|
|
(4,500,940
|
)
|
Interconnection charges
|
|
|
(5,365,403
|
)
|
|
|
(82,970
|
)
|
|
|
(331,513
|
)
|
|
|
|
|
|
|
1,285,541
|
|
|
|
(4,494,345
|
)
|
|
|
(1,314,981
|
)
|
|
|
(5,809,326
|
)
|
Depreciation and
amortisation
|
|
|
(9,475,659
|
)
|
|
|
(1,134,394
|
)
|
|
|
(362,532
|
)
|
|
|
(74
|
)
|
|
|
|
|
|
|
(10,972,659
|
)
|
|
|
(289,460
|
)
|
|
|
(11,262,119
|
)
|
Employee benefit
expenses
|
|
|
(2,369,058
|
)
|
|
|
(263,907
|
)
|
|
|
(142,044
|
)
|
|
|
(17,334
|
)
|
|
|
|
|
|
|
(2,792,343
|
)
|
|
|
(1,039,014
|
)
|
|
|
(3,831,357
|
)
|
Selling and marketing
|
|
|
(4,922,879
|
)
|
|
|
(312,746
|
)
|
|
|
(121,186
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
(5,356,823
|
)
|
|
|
(4,138,930
|
)
|
|
|
(9,495,753
|
)
|
General,
administrative and
other expenses
|
|
|
(5,264,775
|
)
|
|
|
(395,535
|
)
|
|
|
(219,933
|
)
|
|
|
(69,371
|
)
|
|
|
|
|
|
|
(5,949,614
|
)
|
|
|
(1,746,807
|
)
|
|
|
(7,696,421
|
)
|
Cost of
telecommunications
products sold
|
|
|
(301,887
|
)
|
|
|
(2,487
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
(304,387
|
)
|
|
|
(1,990,467
|
)
|
|
|
(2,294,854
|
)
|
Financial gain/(costs)
|
|
|
372,077
|
|
|
|
23,148
|
|
|
|
28,910
|
|
|
|
(599,332
|
)
|
|
|
284,380
|
|
|
|
109,183
|
|
|
|
(2,523
|
)
|
|
|
106,660
|
|
Interest income
|
|
|
44,385
|
|
|
|
5,191
|
|
|
|
1,815
|
|
|
|
304,298
|
|
|
|
(284,380
|
)
|
|
|
71,309
|
|
|
|
6,946
|
|
|
|
78,255
|
|
Other gains - net
|
|
|
38,149
|
|
|
|
791
|
|
|
|
3,111
|
|
|
|
447
|
|
|
|
|
|
|
|
42,498
|
|
|
|
8,950
|
|
|
|
51,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss)
before income tax
|
|
|
5,160,090
|
|
|
|
(127,037
|
)
|
|
|
479,443
|
|
|
|
(381,378
|
)
|
|
|
|
|
|
|
5,131,118
|
|
|
|
882,099
|
|
|
|
6,013,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,365,657
|
)
|
|
|
(227,332
|
)
|
|
|
(1,592,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,765,461
|
|
|
|
654,767
|
|
|
|
4,420,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,765,461
|
|
|
|
653,857
|
|
|
|
4,419,318
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,765,461
|
|
|
|
654,767
|
|
|
|
4,420,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful
debts
|
|
|
685,791
|
|
|
|
31,349
|
|
|
|
12,671
|
|
|
|
|
|
|
|
|
|
|
|
729,811
|
|
|
|
214,308
|
|
|
|
944,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
for segment assets (a)
|
|
|
4,477,187
|
|
|
|
701,014
|
|
|
|
946,915
|
|
|
|
1,180,162
|
|
|
|
|
|
|
|
7,305,278
|
|
|
|
|
|
|
|
7,305,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
As at 30 June 2008
|
|
|
|
|
|
|
|
|
|
|
|
Data and
|
|
|
Long
|
|
|
|
|
|
|
|
|
|
|
|
|
GSM
|
|
|
CDMA
|
|
|
Internet
|
|
|
Distance
|
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
amounts
|
|
|
Elimination
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
109,392,564
|
|
|
|
9,157,757
|
|
|
|
7,908,047
|
|
|
|
17,687,296
|
|
|
|
52,644,644
|
|
|
|
(50,290,531
|
)
|
|
|
146,499,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment liabilities
|
|
|
30,219,849
|
|
|
|
7,345,091
|
|
|
|
2,576,636
|
|
|
|
3,465,833
|
|
|
|
3,753,673
|
|
|
|
|
|
|
|
47,361,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June 2007
|
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
|
|
|
|
|
|
|
Continuing operations
|
|
|
operations
|
|
|
|
|
|
|
|
|
|
|
Data and
|
|
|
Long
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
GSM
|
|
|
Internet
|
|
|
Distance
|
|
|
Unallocated
|
|
|
|
|
|
|
continuing
|
|
|
CDMA
|
|
|
|
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
amounts
|
|
|
Elimination
|
|
|
operations
|
|
|
business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (Turnover):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Usage fee
|
|
|
17,762,799
|
|
|
|
1,152,390
|
|
|
|
406,631
|
|
|
|
|
|
|
|
|
|
|
|
19,321,820
|
|
|
|
6,497,777
|
|
|
|
25,819,597
|
|
Monthly fee
|
|
|
3,642,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,642,487
|
|
|
|
2,360,536
|
|
|
|
6,003,023
|
|
Interconnection revenue
|
|
|
2,883,681
|
|
|
|
19,234
|
|
|
|
202,318
|
|
|
|
|
|
|
|
|
|
|
|
3,105,233
|
|
|
|
997,419
|
|
|
|
4,102,652
|
|
Leased lines rental
|
|
|
|
|
|
|
250,074
|
|
|
|
317,886
|
|
|
|
|
|
|
|
|
|
|
|
567,960
|
|
|
|
|
|
|
|
567,960
|
|
Value-added services
revenue
|
|
|
6,453,903
|
|
|
|
122,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,576,824
|
|
|
|
3,012,816
|
|
|
|
9,589,640
|
|
Other revenue
|
|
|
546,447
|
|
|
|
5,715
|
|
|
|
3,177
|
|
|
|
|
|
|
|
|
|
|
|
555,339
|
|
|
|
349,490
|
|
|
|
904,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total services revenue
|
|
|
31,289,317
|
|
|
|
1,550,334
|
|
|
|
930,012
|
|
|
|
|
|
|
|
|
|
|
|
33,769,663
|
|
|
|
13,218,038
|
|
|
|
46,987,701
|
|
Sales of
telecommunications
Products
|
|
|
4,035
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,136
|
|
|
|
2,675,183
|
|
|
|
2,679,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from
external customers
|
|
|
31,293,352
|
|
|
|
1,550,435
|
|
|
|
930,012
|
|
|
|
|
|
|
|
|
|
|
|
33,773,799
|
|
|
|
15,893,221
|
|
|
|
49,667,020
|
|
Intersegment revenue
|
|
|
|
|
|
|
869,732
|
|
|
|
707,351
|
|
|
|
|
|
|
|
(1,577,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
31,293,352
|
|
|
|
2,420,167
|
|
|
|
1,637,363
|
|
|
|
|
|
|
|
(1,577,083
|
)
|
|
|
33,773,799
|
|
|
|
15,893,221
|
|
|
|
49,667,020
|
|
Leased lines and
network capacities
|
|
|
(113,438
|
)
|
|
|
(181,499
|
)
|
|
|
(29,577
|
)
|
|
|
|
|
|
|
14,085
|
|
|
|
(310,429
|
)
|
|
|
(4,198,304
|
)
|
|
|
(4,508,733
|
)
|
Interconnection charges
|
|
|
(4,930,669
|
)
|
|
|
(223,997
|
)
|
|
|
(500,833
|
)
|
|
|
|
|
|
|
1,562,998
|
|
|
|
(4,092,501
|
)
|
|
|
(1,221,524
|
)
|
|
|
(5,314,025
|
)
|
Depreciation and
amortisation
|
|
|
(9,530,313
|
)
|
|
|
(1,149,073
|
)
|
|
|
(364,106
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
(11,043,693
|
)
|
|
|
(312,222
|
)
|
|
|
(11,355,915
|
)
|
Employee benefit
expenses
|
|
|
(2,215,036
|
)
|
|
|
(237,722
|
)
|
|
|
(125,820
|
)
|
|
|
(21,827
|
)
|
|
|
|
|
|
|
(2,600,405
|
)
|
|
|
(917,473
|
)
|
|
|
(3,517,878
|
)
|
Selling and marketing
|
|
|
(4,755,839
|
)
|
|
|
(297,124
|
)
|
|
|
(126,439
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(5,179,412
|
)
|
|
|
(4,276,199
|
)
|
|
|
(9,455,611
|
)
|
General,
administrative and
other expenses
|
|
|
(4,907,902
|
)
|
|
|
(335,436
|
)
|
|
|
(255,110
|
)
|
|
|
(14,439
|
)
|
|
|
|
|
|
|
(5,512,887
|
)
|
|
|
(1,602,557
|
)
|
|
|
(7,115,444
|
)
|
Cost of
telecommunications
products sold
|
|
|
(108,771
|
)
|
|
|
(400
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(109,186
|
)
|
|
|
(2,734,486
|
)
|
|
|
(2,843,672
|
)
|
Financial (costs)/gain
|
|
|
(61,721
|
)
|
|
|
6,855
|
|
|
|
(2,354
|
)
|
|
|
(244,898
|
)
|
|
|
331,922
|
|
|
|
29,804
|
|
|
|
(10,547
|
)
|
|
|
19,257
|
|
Interest income
|
|
|
59,347
|
|
|
|
11,715
|
|
|
|
3,934
|
|
|
|
355,367
|
|
|
|
(331,922
|
)
|
|
|
98,441
|
|
|
|
5,265
|
|
|
|
103,706
|
|
Unrealised loss on
changes in fair value
of derivative
component of
convertible bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,638,735
|
)
|
|
|
|
|
|
|
(1,638,735
|
)
|
|
|
|
|
|
|
(1,638,735
|
)
|
Other gains - net
|
|
|
16,383
|
|
|
|
98
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
16,639
|
|
|
|
1,105
|
|
|
|
17,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss)
before income tax
|
|
|
4,745,393
|
|
|
|
13,584
|
|
|
|
237,201
|
|
|
|
(1,564,743
|
)
|
|
|
|
|
|
|
3,431,435
|
|
|
|
626,279
|
|
|
|
4,057,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,613,056
|
)
|
|
|
(266,679
|
)
|
|
|
(1,879,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,818,379
|
|
|
|
359,600
|
|
|
|
2,177,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,818,379
|
|
|
|
358,912
|
|
|
|
2,177,291
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
|
688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,818,379
|
|
|
|
359,600
|
|
|
|
2,177,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful
debts
|
|
|
682,159
|
|
|
|
37,251
|
|
|
|
14,949
|
|
|
|
|
|
|
|
|
|
|
|
734,359
|
|
|
|
204,995
|
|
|
|
939,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
for segment assets (a)
|
|
|
4,863,425
|
|
|
|
957,764
|
|
|
|
786,865
|
|
|
|
2,670,349
|
|
|
|
|
|
|
|
9,278,403
|
|
|
|
|
|
|
|
9,278,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audited
|
|
|
|
As at 31 December 2007
|
|
|
|
|
|
|
|
|
|
|
|
Data and
|
|
|
Long
|
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
GSM
|
|
|
CDMA
|
|
|
Internet
|
|
|
Distance
|
|
|
amounts
|
|
|
Elimination
|
|
|
|
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
business
|
|
|
(As restated)
|
|
|
(As restated)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
107,735,724
|
|
|
|
9,885,462
|
|
|
|
7,985,260
|
|
|
|
17,573,749
|
|
|
|
56,650,413
|
|
|
|
(50,408,238
|
)
|
|
|
149,422,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment liabilities
|
|
|
32,947,282
|
|
|
|
9,100,579
|
|
|
|
2,526,811
|
|
|
|
3,831,729
|
|
|
|
3,798,875
|
|
|
|
|
|
|
|
52,205,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Capital expenditures classified under Unallocated amounts represent capital expenditures on
common facilities, which benefit all business segments.
|
22
3.2
|
|
Geographical Segments
|
|
|
|
The customers of the Groups services are mainly in Mainland China. There is no other
geographical segment with segment revenue from external customers equal to or greater than 10%
of total revenue.
|
|
|
|
In addition, although the Group has its corporate headquarter in Hong Kong, a substantial
portion of the Groups non-current assets (including property, plant and equipment and other
assets) are situated in Mainland China, as the Groups principal activities are conducted in
Mainland China. For the six months ended 30 June 2008 and 2007, substantially all capital
expenditures were incurred to acquire assets located in Mainland China and less than 10% of the
Groups assets and operations are located outside Mainland China. Accordingly, no geographical
segment information is presented.
|
|
4.
|
|
REVENUE (TURNOVER)
|
|
|
|
Revenue from continuing operations primarily comprises usage fees, monthly fees, interconnection
revenue, leased line rental income, value-added services revenue and sales of telecommunications
products earned by the Group. Tariffs for these services are subject to regulations by various
government authorities, including the State Development and Reform Commission, the Ministry of
Industry and Information Technology (MII, the former Ministry of Information Industry has been
consolidated into the MII) and the provincial price regulatory
authorities.
|
|
|
|
Revenue from continuing operations is presented net of business tax and government surcharges.
Relevant business tax and government surcharges for continuing operations amounted to
approximately RMB956 million for the six months ended 30 June 2008 (for the six months ended 30
June 2007: approximately RMB914 million).
|
|
5.
|
|
TAXATION
|
|
|
|
Provision for taxation for continuing
operations represents:
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
2008
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax on the estimated taxable profits
for the period
|
|
|
|
|
|
|
|
|
- Hong Kong
|
|
|
4,250
|
|
|
|
4,776
|
|
- Outside Hong Kong
|
|
|
1,616,087
|
|
|
|
1,941,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,620,337
|
|
|
|
1,946,485
|
|
Deferred taxation
|
|
|
(254,680
|
)
|
|
|
(333,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,365,657
|
|
|
|
1,613,056
|
|
|
|
|
|
|
|
|
|
|
Hong Kong profits tax has been provided at the rate of 16.5% (for the six months ended 30 June
2007: 17.5%) on the estimated assessable profit for the six months ended 30 June 2008. Taxation
on overseas profits has been calculated on the estimated assessable profit for the six months
ended 30 June 2008 at the rates of taxation prevailing in the countries in which the Group
operates. The Companys subsidiaries are mainly operated in the PRC, the applicable standard
enterprise income tax rate is 25% (for the six months ended 30 June 2007: 33%).
23
|
|
For the six months ended 30 June 2008, Unicom Huasheng and its branches are subject to income
tax at the
statutory enterprise income tax rate of 25% in Mainland China (for the six months ended 30 June
2007: 33%). From 1 January 2008, the income tax liabilities of Unicom Huasheng is assessed on a
consolidated basis and settled centrally in Beijing in accordance with the new PRC enterprise
income tax law. In previous years, the enterprise income tax of Unicom Huasheng and its branches
were assessed separately by relevant local tax authorities.
|
|
|
|
On 6 December 2007, the State Council issued the detail implementation regulations of the new
PRC enterprise income tax law. Pursuant to the regulations, a 5% withholding income tax will be
levied on dividends declared on or after 1 January 2008 by foreign investment enterprises to
their foreign shareholders in Hong Kong. Pursuant to a notice jointly issued by the Ministry of
Finance and the State Administration of Taxation on 22 February 2008, where foreign investment
enterprises declare dividends in 2008 and beyond out of their cumulative retained profits as at
31 December 2007, such dividends are exempt from withholding income tax. For dividends paid out
of profits earned by foreign investment enterprises after 1 January 2008, the 5% withholding
income tax will be applicable, unless the investor is deemed as a PRC Tax Resident Enterprise.
Currently, the PRC tax authority has not yet announced the formal guidance on the certification
procedures of PRC Tax Resident Enterprise. The Company preliminarily concluded that it met the
definition of PRC Tax Resident Enterprise after assessment. Therefore, as at 30 June 2008, there
is no deferred tax liability accrued in the Groups unaudited condensed consolidated interim
financial information for CUCLs undistributed profit generated during the six months ended 30
June 2008. The Group will continue to assess the impact to financial statements in accordance
with the detailed guidance issued by the PRC tax authority in future.
|
|
6.
|
|
ACCOUNTS RECEIVABLE, NET
|
|
|
|
The aging analysis of accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
30 June
|
|
|
31 December
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Within one month
|
|
|
1,438,791
|
|
|
|
1,968,344
|
|
More than one month to three months
|
|
|
813,489
|
|
|
|
944,300
|
|
More than three months to one year
|
|
|
1,352,582
|
|
|
|
1,519,487
|
|
More than one year
|
|
|
687,053
|
|
|
|
407,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,291,915
|
|
|
|
4,840,095
|
|
Less: Provision for doubtful debts
|
|
|
(1,984,187
|
)
|
|
|
(1,628,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,307,728
|
|
|
|
3,211,154
|
|
|
|
|
|
|
|
|
|
|
The normal credit period granted by the Group is on average 30 days from the date of invoice.
There is no significant concentration of credit risk with respect to individual customers
receivables, as the Group has a large number of customers.
24
7.
|
|
PAYABLES AND ACCRUED LIABILITIES
|
|
|
|
The aging analysis of payables and accrued liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
30 June
|
|
|
31 December
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
|
19,715,262
|
|
|
|
24,077,455
|
|
Six months to one year
|
|
|
4,100,197
|
|
|
|
5,063,993
|
|
More than one year
|
|
|
2,660,797
|
|
|
|
2,889,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,476,256
|
|
|
|
32,031,307
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
EARNINGS PER SHARE
|
|
|
|
Basic earnings per share for the six months ended 30 June 2008 and 2007 were computed by
dividing the profit attributable to equity holders by the weighted average number of ordinary
shares outstanding during the periods.
|
|
|
|
Diluted earnings per share for the six months ended 30 June 2008 and 2007 were computed by
dividing the profit attributable to equity holders by the weighted average number of ordinary
shares in issue during the periods, after adjusting for the effects of the dilutive potential
ordinary shares. All potential ordinary shares arose from (i) share options granted under the
amended Pre-Global Offering Share Option Scheme; (ii) share options granted under the amended
Share Option Scheme and (iii) the convertible bonds (for the six months ended 30 June 2007
only). For the purpose of computation of diluted earnings per share for the six months ended 30
June 2007, the potential ordinary shares which are not dilutive mainly arose from share options
granted under the amended Pre-Global Offering Share Option Scheme and the convertible bonds and
are excluded from the weighted average number of ordinary shares.
|
25
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
2008
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
Numerator (in RMB thousands):
|
|
|
|
|
|
|
|
|
Profit attributable to the equity holders of the Company
|
|
|
|
|
|
|
|
|
- Continuing operations
|
|
|
3,765,461
|
|
|
|
1,818,379
|
|
- Discontinued operations
|
|
|
653,857
|
|
|
|
358,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,419,318
|
|
|
|
2,177,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (in thousands):
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
and shares
used in computing basic earnings per share
|
|
|
13,652,107
|
|
|
|
12,690,576
|
|
Dilutive equivalent shares arising from share options
|
|
|
135,042
|
|
|
|
105,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted earnings per share
|
|
|
13,787,149
|
|
|
|
12,796,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (in RMB)
|
|
|
|
|
|
|
|
|
- Continuing operations
|
|
|
0.276
|
|
|
|
0.143
|
|
- Discontinued operations
|
|
|
0.048
|
|
|
|
0.029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.324
|
|
|
|
0.172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share (in RMB)
|
|
|
|
|
|
|
|
|
- Continuing operations
|
|
|
0.273
|
|
|
|
0.142
|
|
- Discontinued operations
|
|
|
0.048
|
|
|
|
0.028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.321
|
|
|
|
0.170
|
|
|
|
|
|
|
|
|
|
|
26
To enable an investor to better understand the Groups results, below are tables reconciling
earnings per share to adjusted earnings per share for the Group and continuing operations
respectively, excluding the unrealised loss on changes in fair value of derivative component
of convertible bonds for the six months ended 30 June 2007 which is not considered to be an
indicator of the Groups operating performance.
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
2008
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
The Group:
|
|
|
|
|
|
|
|
|
Profit attributable to equity holders of the Company
|
|
|
4,419,318
|
|
|
|
2,177,291
|
|
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
|
|
|
|
Unrealised loss on changes in fair value of
derivative component
of convertible bonds
|
|
|
|
|
|
|
1,638,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted profit attributable to equity holders
(excluding unrealised
loss on changes in fair value
of derivative component of
convertible bonds)
|
|
|
4,419,318
|
|
|
|
3,816,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic earnings per share (excluding
unrealised loss on
changes in fair value of
derivative component of convertible
bonds) (RMB)
|
|
|
0.324
|
|
|
|
0.301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share (excluding
unrealised loss on
changes in fair value of
derivative component of convertible
bonds) (RMB)
|
|
|
0.321
|
|
|
|
0.298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
Profit from continuing operations attributable to
equity holders of
the Company
|
|
|
3,765,461
|
|
|
|
1,818,379
|
|
|
|
|
|
|
|
|
|
|
Adjustment for:
|
|
|
|
|
|
|
|
|
Unrealised loss on changes in fair value of
derivative component
of convertible bonds
|
|
|
|
|
|
|
1,638,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted profit from continuing operations
attributable to equity
holders (excluding
unrealised loss on changes in fair value of
derivative component of convertible bonds)
|
|
|
3,765,461
|
|
|
|
3,457,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic earnings per share for continuing
operations
(excluding unrealised loss on changes in
fair value of derivative
component of convertible
bonds) (RMB)
|
|
|
0.276
|
|
|
|
0.272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share for continuing
operations
(excluding unrealised loss on changes in
fair value of derivative
component of convertible
bonds) (RMB)
|
|
|
0.273
|
|
|
|
0.270
|
|
|
|
|
|
|
|
|
|
|
27
9.
|
|
DIVIDENDS
|
|
|
|
At the annual general meeting held on 16 May 2008, the shareholders of the Company approved
the payment of a final dividend of RMB0.20 per ordinary share for the year ended 31 December
2007 totaling approximately RMB2,732 million (for the year ended 31 December 2006:
approximately RMB2,285 million) which has been reflected as a reduction of retained profits
for the six months ended 30 June 2008. As at 30 June 2008, such dividends have been paid by
the Company, except for dividends payable of approximately RMB149 million due to Unicom BVI.
|
|
10.
|
|
DISPOSAL GROUP AND DISCONTINUED OPERATIONS
|
|
|
|
Disposal Group
|
|
|
|
All the assets and liabilities related to the CDMA Business were constituted a disposal group
and have been presented as held for sale following the entering of the Framework Agreement in
accordance with HKFRS 5, these included the assets and liabilities of the CDMA business
segment as well as certain telecommunications network assets and other assets in certain
regions (including certain jointly used CDMA base stations/auxiliary facilities and sales
office which will also be sold to China Telecom). The scope and net carrying value of such
network assets and other assets are estimated based on the initial agreement between the Group
and China Telecom, which may be different from the value of the detailed items of the CDMA
Business to be delivered to China Telecom and which will be agreed and finalised on or before
the delivery date, in accordance with the completion plan set out in the Disposal Agreement.
|
|
|
|
All the assets and liabilities classified as held for sale were remeasured to the lower of
their carrying amount and fair value less costs to sell at the date of their classification on
2 June 2008 as held-for-sale and no remeasurement adjustment was recorded as at 30 June 2008.
In addition, the property, plant and equipment, direct incremental costs associated with
upfront non-refundable revenue included in other assets, and deferred CDMA customer
acquisition costs included in other assets and prepayments and other current assets ceased
to be depreciated and amortised from 2 June 2008.
|
|
|
|
As at 30 June 2008, the following assets and liabilities of the disposal group have been
classified to the assets and liabilities held for sale in the unaudited condensed consolidated
interim balance sheet:
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
30 June 2008
|
|
|
|
|
|
|
Assets classified as held for sale:
|
|
|
|
|
Property, plant and equipment
|
|
|
2,647,526
|
|
Goodwill
|
|
|
373,000
|
|
Other assets
|
|
|
3,066,608
|
|
Deferred income tax assets
|
|
|
198,162
|
|
Inventories
|
|
|
1,047,780
|
|
Accounts receivable, net
|
|
|
949,883
|
|
Prepayments and other current assets
|
|
|
662,032
|
|
Cash and cash equivalents
|
|
|
2,567,488
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of the disposal group
|
|
|
11,512,479
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities classified as held for sale:
|
|
|
|
|
Deferred revenue
|
|
|
391,765
|
|
Payable and accrued liabilities
|
|
|
1,703,635
|
|
Tax payable
|
|
|
(10,868
|
)
|
Advances from customers
|
|
|
5,260,559
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities of the disposal group
|
|
|
7,345,091
|
|
|
|
|
|
|
|
|
|
|
|
Total net assets of the disposal group
|
|
|
4,167,388
|
|
|
|
|
|
|
28
Discontinued operations
On 2 June 2008, the Group announced the proposed disposal of the CDMA Business (please refer
to Note 1 for details). Accordingly, the results and cash flows of the CDMA business segment
(including the CDMA business of CUCL, Unicom Huasheng and Unicom Macau) are presented in this
unaudited condensed interim financial information as discontinued operations. In addition, the
elimination entries on the intersegment revenue and costs between continuing operations and
discontinued operations were recorded against the discontinued operations.
The results of operations of the discontinued operations for the six months ended 30 June 2008
and 2007 are set out below:
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
(As restated)
|
|
|
|
2008
|
|
|
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
Revenue (Turnover)
|
|
|
15,532,402
|
|
|
|
15,893,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased lines and network capacities
|
|
|
(4,144,017
|
)
|
|
|
(4,198,304
|
)
|
Interconnection charges
|
|
|
(1,314,981
|
)
|
|
|
(1,221,524
|
)
|
Depreciation and amortisation
|
|
|
(289,460
|
)
|
|
|
(312,222
|
)
|
Employee benefit expenses
|
|
|
(1,039,014
|
)
|
|
|
(917,473
|
)
|
Selling and marketing
|
|
|
(4,138,930
|
)
|
|
|
(4,276,199
|
)
|
General, administrative and other expenses
|
|
|
(1,746,807
|
)
|
|
|
(1,602,557
|
)
|
Cost of telecommunications products sold
|
|
|
(1,990,467
|
)
|
|
|
(2,734,486
|
)
|
Financial costs
|
|
|
(2,523
|
)
|
|
|
(10,547
|
)
|
Interest income
|
|
|
6,946
|
|
|
|
5,265
|
|
Other gains - net
|
|
|
8,950
|
|
|
|
1,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax from discontinued operations
|
|
|
882,099
|
|
|
|
626,279
|
|
Income tax expenses
|
|
|
(227,332
|
)
|
|
|
(266,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after income tax from discontinued operations
|
|
|
654,767
|
|
|
|
359,600
|
|
|
|
|
|
|
|
|
|
|
29
|
|
The cash flow information of the discontinued operations for the six months ended 30 June 2008
and 2007 is set out below:
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
(As restated)
|
|
|
|
2008
|
|
|
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
|
|
1,148,512
|
|
|
|
1,002,926
|
|
Net cash outflow from investing activities
|
|
|
(22,548
|
)
|
|
|
(22,465
|
)
|
Net cash inflow from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from discontinued operations
|
|
|
1,125,964
|
|
|
|
980,461
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis of major expenses by nature for discontinued operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
Note
|
|
|
2008
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation on property, plant and equipment
|
|
|
|
|
|
|
275,427
|
|
|
|
299,251
|
|
Amortisation of other assets
|
|
|
|
|
|
|
14,033
|
|
|
|
12,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortisation
|
|
|
|
|
|
|
289,460
|
|
|
|
312,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation of direct incremental costs for
activating
CDMA cellular subscribers
|
|
|
|
|
|
|
239,306
|
|
|
|
309,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation of customer acquisition costs of
contractual
CDMA subscribers
|
|
|
|
|
|
|
1,938,086
|
|
|
|
1,868,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful debts
|
|
|
|
|
|
|
214,308
|
|
|
|
204,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-down of inventories to net realisable value
|
|
|
|
|
|
|
55,464
|
|
|
|
115,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Leased lines
|
|
|
|
|
|
|
49,074
|
|
|
|
42,530
|
|
- CDMA network capacities
|
|
11
|
|
|
|
4,094,943
|
|
|
|
4,155,774
|
|
- Others
|
|
|
|
|
|
|
228,145
|
|
|
|
181,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating lease expenses
|
|
|
|
|
|
|
4,372,162
|
|
|
|
4,379,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Repair and maintenance
|
|
|
|
|
|
|
245,594
|
|
|
|
256,565
|
|
- Travelling, entertainment and meeting
|
|
|
|
|
|
|
116,304
|
|
|
|
91,190
|
|
- Power and water charges
|
|
|
|
|
|
|
373,029
|
|
|
|
335,820
|
|
- Vehicle usage expenses
|
|
|
|
|
|
|
93,759
|
|
|
|
73,091
|
|
- Office and administration expenses
|
|
|
|
|
|
|
154,860
|
|
|
|
137,153
|
|
30
11.
|
|
RELATED PARTY TRANSACTIONS
|
|
|
|
The following is a summary of significant recurring transactions carried out by the Group with
Unicom Group and its subsidiaries. In the directors opinion, these transactions were carried
out in the ordinary course of business.
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Six months ended 30 June
|
|
|
|
|
|
|
|
2007
|
|
|
|
2008
|
|
|
(As restated)
|
|
|
|
|
|
|
|
|
|
|
Transactions with Unicom Group and its subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
Interconnection revenues
|
|
|
11,665
|
|
|
|
21,037
|
|
Interconnection charges
|
|
|
823
|
|
|
|
3,990
|
|
Rental income for premises and facilities
|
|
|
6,648
|
|
|
|
7,247
|
|
Charge for operator-based subscriber value-added services
|
|
|
146,706
|
|
|
|
126,575
|
|
Charge for customer services
|
|
|
350,860
|
|
|
|
327,295
|
|
Agency fee incurred for subscriber development services
|
|
|
71,151
|
|
|
|
26,680
|
|
Charge for cellular subscriber value-added services
|
|
|
57,596
|
|
|
|
12,734
|
|
Rental charges for premises, equipment and facilities
|
|
|
17,731
|
|
|
|
14,284
|
|
Charges for the international gateway services
|
|
|
4,383
|
|
|
|
7,209
|
|
Purchase of telecom cards
|
|
|
390,953
|
|
|
|
282,966
|
|
Agency fee
incurred for procurement of telecommunications
equipment
|
|
|
8,052
|
|
|
|
6,835
|
|
Charge for engineering design and technical services
|
|
|
34,113
|
|
|
|
23,918
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Interconnection charges
|
|
|
593
|
|
|
|
769
|
|
Charge for operator-based subscriber value-added services
|
|
|
52,425
|
|
|
|
51,008
|
|
Charge for customer services
|
|
|
75,381
|
|
|
|
92,648
|
|
Agency fee incurred for subscriber development services
|
|
|
16,802
|
|
|
|
5,984
|
|
CDMA network capacity lease rental
|
|
|
4,094,943
|
|
|
|
4,155,774
|
|
Constructed capacity related cost of CDMA network
|
|
|
159,749
|
|
|
|
85,641
|
|
Charge for cellular subscriber value-added services
|
|
|
40,036
|
|
|
|
8,851
|
|
Purchase of telecom cards
|
|
|
29,517
|
|
|
|
41,281
|
|
|
|
The purchase of Guizhou Business has been accounted for using merger accounting in accordance
with AG 5. Accordingly, the transactions between Guizhou branch of Unicom Group and the Group
were eliminated and not considered as related party transactions in the unaudited condensed
consolidated interim financial information.
|
|
12.
|
|
EVENTS AFTER BALANCE SHEET DATE
|
|
12.1
|
|
The proposed disposal of the Groups CDMA Business to China Telecom
|
|
|
|
|
Further to the announcement on 2 June 2008 in connection with the proposed disposal of the
CDMA Business by the Group to China Telecom, on 27 July 2008, the Company, CUCL and China
Telecom entered into the Disposal Agreement, which sets out the detailed terms and conditions
on which the Company and CUCL will sell, and China Telecom will purchase, the CDMA Business.
For details, refer to Note 1.
|
31
|
12.2
|
|
Proposed merger between the Company and China Netcom by the Scheme
|
|
|
|
|
Further to the joint announcement on 2 June 2008 for the Proposed Merger, on 13 August 2008,
the Company further announced:
|
|
(i)
|
|
Proposed change of accounting policies
|
|
|
|
|
If the proposed merger of the Company and China Netcom (Enlarged Group) is completed,
China Netcom will become a wholly-owned subsidiary of the Company and the financial
statements of the China Netcom will be consolidated into the financial statements of the
Group. In order to ensure consistency of accounting policies for buildings and fixed line
telecommunications equipment adopted by the Enlarged Group and to enhance the
comparability with the accounting policies adopted by other fixed line telecommunications
operators, the Board of Directors of the Company, on 25 July 2008, has approved the
change in the following accounting policies of the Group, which will take effect only on
completion of the proposed merger of the Company and China Netcom:
|
|
(a)
|
|
buildings of the Group will be stated at historical costs (less
accumulated depreciation and accumulated impairment losses) instead of at revalued
amounts; and
|
|
|
(b)
|
|
telecommunications equipment of long distance, data and Internet business
of the Group will be stated at revalued amounts instead of historical costs (less
accumulated depreciation and accumulated impairment losses).
|
|
(ii)
|
|
New connected transactions
|
|
|
|
|
Upon completion of the Proposed Merger and the Scheme becoming effective, China Netcom
will become a wholly-owned subsidiary of the Company and the parent company of China
Netcom will become a connected person of the Company. Accordingly, the existing
continuing connected transactions between China Netcom and its subsidiaries (which will
become subsidiaries of the Company) and the parent company of China Netcom will become
new continuing connected transactions of the Group with effect from the effective date of
the Proposed Merger.
|
|
|
|
|
In addition, there are existing continuing transactions between certain subsidiaries of
the Company and the parent company of China Netcom. Upon completion of the Proposed
Merger and the Scheme becoming effective, such existing continuing transactions will
become new continuing connected transactions of the Group with effect from the effective
date of the Proposed Merger. CUCL and the parent company of China Netcom have entered
into certain framework agreements to record the principles governing, and the principal
terms of, such existing continuing transactions.
|
|
|
|
|
Furthermore, pursuant to an agreement dated 12 August 2008 entered into between Unicom
Group and A Share Company and a transfer agreement dated 12 August 2008 entered into
between A Share Company, CUCL and China Netcom (Group) Company Limited (CNC China, a
company established in the PRC with limited liability as a wholly foreign owned
enterprise and a wholly-owned subsidiary of China Netcom), the terms of the continuing
connected transactions between the Group and Unicom Group that were approved on 1
December 2006 by the independent shareholders of the Company (the details of which were
set out in the circular issued to the shareholders of the Company dated 10 November
2006), will be amended with effect from the effective date of the Proposed Merger to
include CNC China as a party and to facilitate the business and operations of the
Enlarged Group.
|
|
|
(iii)
|
|
Proposed amendment to articles of association
|
|
|
|
|
The articles of association currently permit the Board of Directors to deal with
fractional Companys shares only in certain circumstances. The Board of Directors has
proposed that the articles of association be amended in order to give the Board of
Directors greater flexibility to deal with any fractional Companys shares which arise as
a result of an issue of the Companys shares by the Company.
|
32
|
(iv)
|
|
Proposed change of company name
|
|
|
|
|
Conditional upon the Scheme becoming effective, the Board of Directors has proposed that
the name of the Company be changed from China Unicom Limited in the English language
and
![(CHINESE CHARACTERS)](http://content.edgar-online.com/edgar_conv_img/2008/08/26/0001145549-08-001551_H02406H0240602.GIF)
in the Chinese language to China Unicom (Hong Kong) Limited
in the English language and
![(CHINESE CHARACTERS)](http://content.edgar-online.com/edgar_conv_img/2008/08/26/0001145549-08-001551_H02406H0240603.GIF)
in the Chinese
language, respectively, with effect from the effective date of the Scheme.
|
|
|
|
The extraordinary general meeting is expected to be held by the Company on 16 September 2008
for the purpose of considering and approving the above proposals.
|
13.
|
|
COMPARATIVE FIGURES
|
|
|
|
As stated in Note 2, comparative figures have been restated to reflect the effects of Business
Combination under common control, which is accounted for using merger accounting in accordance
with AG 5. In addition, the results and cash flows of the CDMA business segment have been
re-presented as discontinued operations in accordance with HKFRS 5 and therefore, the 2007
comparative figures of the unaudited condensed consolidated interim income statement and cash
flow statement were also restated accordingly.
|
INTERIM DIVIDEND
It was resolved by our Board of Directors that no interim dividend for the six months ended 30 June
2008 be declared.
CHARGE ON ASSETS
As at 30 June 2008, no property, plant and equipment was pledged to banks as loan security (30 June
2007: Nil).
REPURCHASE, SALE OR REDEMPTION OF LISTED SHARES OF THE COMPANY
For the six months ended 30 June 2008, neither the Company nor any of its subsidiaries repurchased,
sold or redeemed any of the Companys listed shares.
COMPLIANCE WITH CODE OF CORPORATE GOVERNANCE PRACTICES
The Company is committed to maintaining high standards of corporate governance. The Company has
complied with the code provisions in the Code of Corporate Governance Practices (the Code
Provision) as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the Listing Rules) for the six months ended 30 June 2008 except
the following:
(a)
|
|
Under the Code Provision A.2.1, the roles and responsibilities of chairman and chief
executive officer should be separate and should not be performed by the same individual. The
Board of Directors understands that the principle of the Code Provision is to clearly separate
the management of the Board from the daily management of the
|
33
|
|
Company so as to ensure balance of power and authority. Mr. Chang Xiaobing has been the Chairman and Chief Executive Officer of
the Company since December 2004. Mr. Shang Bing was the Companys President from November 2004
to May 2008 (Mr. Shang Bing has resigned as the President of the Company on 23 May 2008). Mr.
Chang Xiaobing chairs the Board and is responsible for all material affairs, including
development, business strategy, operation and management of the Company. The President of the
Company is responsible for the daily operation and management of the Company. The Board
believes that at the present stage, this arrangement achieves the aforesaid principle of
separation of responsibilities. It also facilitates the formulation and implementation of the
Companys strategies in a more effective manner so as to support the effective development of
the Companys business. As the Company is proposing to merge with China Netcom Group
Corporation (Hong Kong) Limited (Netcom) (for details, please refer to the paragraph headed
Recent Significant Developments below), upon the completion of the merger, Mr. Chang
Xiaobing will become the Chairman and Chief Executive Officer of the enlarged group. The
management of the enlarged group is expected to be mainly drawn from the existing management
teams of the Company and Netcom, and the management teams of the Company and Netcom will be
integrated and utilized to an optimal capacity in order to realize the synergies of the
combined businesses of the enlarged group.
|
|
(b)
|
|
Under the Code Provision A.4.1, non-executive directors shall be appointed for a specific
term, subject to re-election. The Companys non-executive directors are not appointed for a
specific term but are subject to retirement by rotation at the general meeting pursuant to the
Companys articles of association and are subject to re-election by shareholders pursuant to
the relevant requirements.
|
AUDIT COMMITTEE
The audit committee, together with the management, has reviewed the accounting principles and
practices adopted by the Company as well as the internal control of the Company, and discussed
financial reporting matters, including the review of interim report for the six months ended 30
June 2008.
The audit committee comprises Mr. Wong Wai Ming, Mr. Wu Jinglian, Mr. Shan Weijian and Mr. Cheung
Wing Lam, Linus, all being independent non-executive directors of the Company. The Chairman of the
committee is Mr. Wong Wai Ming.
REMUNERATION COMMITTEE
The major responsibilities of the remuneration committee include: considering and approving the
remuneration policies proposed by the management, remuneration packages of directors and senior
management as well as the Companys share option schemes.
The remuneration committee comprises Mr. Wu Jinglian and Mr. Cheung Wing Lam, Linus, both of whom
are independent non-executive directors of the Company, and Mr. Lu Jianguo, who is a non-executive
director of the Company. The Chairman of the committee is Mr. Wu Jinglian.
34
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF THE COMPANY
The Company has prepared the Procedures for Dealing of Securities by Directors in accordance with
Model Code for Securities Transactions by Directors of Listed Companies, as set out in Appendix 10
of the Listing Rules. The Company had made specific enquiries and all directors confirmed that they
had complied with the relevant code for securities transactions for the six months ended 30 June
2008.
EMPLOYEE AND REMUNERATION POLICY
As at 30 June 2008, the Group employed approximately 130 and 57,000 staff in Hong Kong and Mainland
China, respectively. Also, the Group employed approximately 60,000 temporary staff in Mainland
China. For the six months ended 30 June 2008, employee benefit expenses for the Group were RMB3.83
billion (for the six months ended 30 June 2007: RMB3.52 billion), in which employee benefit
expenses for continuing operations were RMB2.79 billion (for the six months ended 30 June 2007:
RMB2.60 billion). The Group endeavors to maintain its employees remuneration in line with market
trend and being competitive. Employees remuneration is determined in accordance with its
remuneration and bonus system based on their performance. The Group also provides comprehensive
benefit packages and career development opportunities for its employees, including retirement
benefits, housing benefits, internal and external training programmes, varying based on their
individual needs.
The Company has share option schemes, under which the Company may grant share options to eligible
staff for subscribing to the Companys shares.
RECENT SIGNIFICANT DEVELOPMENTS
This report contains the interim financial information of the Group for the six months ended 30
June 2008. Since 30 June 2008, there have been significant developments in the business and
operations of the Company which are expected to have material impact on business, financial and
trading prospects of the Group in the future. These recent development events are summarized herein
and set out below.
Proposed Merger with Netcom
On 2 June 2008, the boards of directors of the Company and Netcom jointly announced that the
Company had formally presented to the board of directors of Netcom, and requested the board of
directors of Netcom to put forward to the shareholders of Netcom for consideration, the proposals
relating to the merger of the Company and Netcom by way of a scheme of arrangement of Netcom under
Section 166 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) (the Scheme). Upon
the Scheme becoming effective, Netcom will become a wholly-owned subsidiary of the Company and the
listings of Netcoms shares and ADSs on the Hong Kong Stock Exchange and the New York Stock
Exchange, will be withdrawn, respectively.
35
The proposals constitute a very substantial acquisition for the Company under the Listing Rules and
are therefore subject to the approval of the Companys shareholders at an extraordinary general
meeting to be held on 16 September 2008 in accordance with the details set out in a notice of
extraordinary general meeting of the Company dated 15 August 2008. The details of the very
substantial acquisition are set out in a circular of the Company dated 15 August 2008 (the VSA
Circular), which also includes, in Appendix IV to the VSA Circular, the full text of the document
in respect of the Scheme (the Scheme Document). You may download and view the VSA Circular from
the Companys website at
www.chinaunicom.com.hk
or the website of the Hong Kong Stock Exchange at
www.hkexnews.hk
.
If the Scheme is approved, all other conditions of the Scheme as specified in the Scheme Document
have been satisfied or waived, as applicable, and the proposals become effective, the Company
intends to continue with the existing business of Netcom and has no intention to introduce any
major changes to the business of Netcom or to redeploy any fixed assets of Netcom and its
subsidiaries (the Netcom Group). After the completion of the proposed merger, the enlarged group
is expected to be an integrated telecommunications operator offering wireless, fixed-line,
broadband, data and value added services to its subscribers, and is expected to be granted a 3G
license. The Company intends to take measures to combine the experience and technologies of the
Group and the Netcom Group in the wireless and fixed-line businesses, respectively, to promote
business innovation and competitiveness and to improve operating and financial performance through
developing targeted business strategies according to the dynamic market developments. By combining
the resources and business strengths of the Company and Netcom in different areas, and upon
obtaining a license for mature 3G technology, it is intended that after the completion of the
proposed merger, the enlarged group will aim to become a world-class provider of broadband
communications and information services, establishing competitive advantages in technology,
products and services, providing professional and multi-tiered information services and satisfying
the changing and diverse needs of Chinas telecommunications market.
Change of Companys name
Conditional upon the Scheme becoming effective, the directors propose that the name of the Company
be changed from China Unicom Limited in the English language and
![(CHINESE CHARACTERS)](http://content.edgar-online.com/edgar_conv_img/2008/08/26/0001145549-08-001551_H02406H0240602.GIF)
in the
Chinese language to China Unicom (Hong Kong) Limited in the English language and
![(CHINESE CHARACTERS)](http://content.edgar-online.com/edgar_conv_img/2008/08/26/0001145549-08-001551_H02406H0240603.GIF)
in the Chinese language, respectively, with effect from the
effective date of the Scheme. The stock trading name currently used by the Company will remain
unchanged. Please see the VSA Circular for further details of the proposed change of the Companys
name.
Special Purpose Share Option Scheme
In connection with the proposed merger, it is also proposed that the Company adopt the Special
Purpose Share Option Scheme. Pursuant to the proposal to Netcoms optionholders
36
made in connection
with the proposed merger, the Company will grant Netcoms optionholders new options to be issued by
the Company pursuant to the Special Purpose Share Option Scheme in
consideration for the cancellation of their Netcom options outstanding (whether vested or not) at
the record time for determining their entitlements under the option proposal referred to above. The
Special Purpose Share Option Scheme will provide the Company with a means to incentivize and retain
Netcoms optionholders, who are middle to senior management staff of the Netcom Group, and to
encourage them to diligently achieve an enhancement in the value of the Company.
A summary of the principal terms of the Special Purpose Share Option Scheme (including the exercise
price of the options and the number of options to be granted under the Special Purpose Share Option
Scheme) is set out in Appendix II to the VSA Circular.
CDMA Business Disposal
On 2 June 2008, the Company, China Unicom Corporation Limited (CUCL, a wholly-owned subsidiary of
the Company), and China Telecom Corporation Limited (China Telecom) entered into a CDMA business
disposal framework agreement which sets out the terms and conditions on which the Company, CUCL and
China Telecom will proceed with the CDMA business disposal whereby CUCL will sell, and China
Telecom will purchase, the CDMA business of CUCL. On 27 July 2008, these parties further entered
into a CDMA business disposal agreement which sets out the detailed terms and conditions on which
CUCL and the Company will sell, and China Telecom will purchase, the CDMA business. The
consideration for the CDMA business disposal is RMB43.8 billion (approximately HK$50.0 billion) and
is payable in cash by China Telecom in three installments. The consideration is subject to a price
adjustment mechanism, which is based on the CDMA service revenue generated by the Group for the six
months ended 30 June 2007 and 30 June 2008, as set out in a circular issued by the Company dated 1
August 2008 (the CDMA Disposal Circular). Based on the CDMA service revenue generated by the
Group for the six months ended 30 June 2007 and 30 June 2008, and as agreed by the Company and
China Telecom, there will be no adjustment to the consideration as a result of the price adjustment
mechanism.
In connection with the CDMA business disposal, on 27 July 2008, CUCL agreed to waive its right to
exercise its option to purchase the CDMA network from Unicom New Horizon Mobile Telecommunications
Company Limited (Unicom New Horizon) and to terminate the CDMA lease pursuant to which CUCL
leases capacity on the CDMA network from Unicom New Horizon, in each case with effect from the
completion of the CDMA business disposal. The CDMA business disposal constitutes a major
transaction for the Company and is subject to the approval of the Companys shareholders at the
extraordinary general meeting of Unicom to be held on 16 September 2008 in accordance with the
details set out in a notice of extraordinary general meeting of the Company dated 1 August 2008.
Each of the waiver by CUCL of the option to purchase the CDMA network and the termination of the
CDMA lease constitutes a connected transaction for the Company and is subject to the approval of
the independent shareholders of the Company.
37
The CDMA business disposal is subject to various conditions, including, among other things, (a) the
approval of the Companys shareholders and the shareholders of China United Telecommunications
Corporation Limited (Unicom A Share Company) for the CDMA business disposal, (b) the approval of
the independent shareholders of the Company and the non-affiliated shareholders of Unicom A Share
Company for the waiver by CUCL of the option to purchase the CDMA network and the termination of
the CDMA lease, (c) the approval of the independent shareholders of China Telecom for the leasing
of capacity on the CDMA network by China Telecommunications Corporation to China Telecom and (d)
the receipt of any other necessary regulatory or corporate approvals for the completion of the CDMA
business disposal.
The directors believe that the terms of the CDMA business disposal are fair and reasonable and in
the interests of the Companys shareholders as a whole. In recent years, the Companys GSM business
has become the most significant contributor to its financial and operational performance. In the
interest of reducing the complexity facing its operations and management and deploying resources to
enhance focus on the development of its GSM business and relevant brands so as to maximise the
shareholder value and return on investment, the directors therefore propose to dispose of the
Companys CDMA business. The disposal will enable the Company to better focus its financial and
operational resources on the enhancement of its GSM business and the future development of 3G
services.
For detailed information about the CDMA business disposal, please see the announcement issued by
the Company on 28 July 2008 and the CDMA Disposal Circular. You may download and view these
documents from the Companys website at
www.chinaunicom.com.hk
or the website of the Hong Kong
Stock Exchange at
www.hkexnews.hk
.
PUBLICATION OF RESULTS ANNOUNCEMENT AND INTERIM REPORT
The 2008 interim results announcement is published on the Companys website at
www.chinaunicom.com.hk
and the website of the Hong Kong Stock Exchange at
www.hkexnews.hk
. The 2008
interim report will be available on the websites of The Stock Exchange of Hong Kong Limited and the
Company and will be despatched to all shareholders in due course.
The 2008 interim financial information set out above does not constitute the Groups statutory
financial statements for the six months ended 30 June 2008 but is extracted from the unaudited
interim financial information for the six months ended 30 June 2008 to be included in the 2008
interim report.
FORWARD-LOOKING STATEMENTS
The Company would like to caution investors and readers about the forward-looking nature of some of
the statements contained in this announcement. Such forward-looking statements may include, without
limitation, the Companys operating strategy and future plan; its restructuring plan; its capital
expenditure plan; its future business condition and financial
38
results; its abilities to upgrade and expand networks and increase network efficiency; its ability to improve existing
services and offer new services; its ability to develop new technology applications; its ability to
leverage its position as an integrated telecommunications operator and expand into new businesses
and new markets; future growth of market demand for the Companys services; and future regulatory
and other developments in the PRC telecommunications industry.
Such forward-looking statements reflect the current views of the Company with respect to future
events. Actual results may differ materially from information contained in the forward-looking
statements as a result of a number of factors that may be beyond the Companys control, including,
without limitation, any changes in the regulatory regime and significant policies for the PRC
telecommunications industry, including changes in the structure or functions of the primary
industry regulator, the Ministry of Industry and Information Technology, or the MII (which has
assumed the regulatory functions of the former Ministry of Information Industry), or any changes in
the regulatory policies of the MII, the State-owned Assets Supervision and Administration
Commission and other relevant government authorities of the PRC; any decisions by the PRC
government in relation to the technology standards and licenses of third generation mobile
telecommunication; the results of the ongoing restructuring of the PRC telecommunications industry;
any changes in the effects of competition on the demand and price of the Companys
telecommunications services; the effect of the Companys restructuring and the integration of the
Company and China Netcom Group Corporation (Hong Kong) Limited following the completion of the
proposed merger; any changes in telecommunications and related technologies and applications based
on such technologies; and any changes in political, economic, legal and social conditions in the
PRC, including the PRC governments policies with respect to economic growth, consolidations or
restructuring of and other structural changes in the PRC telecommunications industry, foreign
exchange, foreign investment and entry by foreign companies into the PRC telecommunications market.
|
|
|
|
|
By order of the Board
|
|
|
China Unicom Limited
|
|
|
Chu Ka Yee
|
|
|
Company Secretary
|
Hong Kong, 25 August 2008
As at the date of this announcement, the board of directors of the Company comprises:
|
|
|
Executive Directors:
|
|
Chang Xiaobing, Tong Jilu, Li Gang and Zhang Junan
|
Non-executive Director:
|
|
Lu Jianguo and Lee Suk Hwan
|
Independent Non-executive
Directors:
|
|
Wu Jinglian, Shan Weijian, Cheung Wing Lam, Linus,
and Wong Wai Ming
|
39
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