1. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. How can China Unicom use the iPhone to increase 5% of the subscriber market share within 24 months? MGMT 650B – Consulting Skills for Managers Presented by Team D: BOHRA, Shilpa Rajesh; CHAN, Yat Hei Timothy; LIN, Michelle Lan Yan; MO, Siu Hei Ray; TONG, Sze Man Sharon; TSE, Mei Yi Joyce 24 October 2009

2. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Table of contents Sections 1.Executive Summary 3 2.iPhone Pricing 5 3.Killer Message To Represent iPhone 17 4.Mid To Long Term Strategy26 5.Our Recommendations34 Appendix A.Interview Highlights36 Page

3. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 3 Section 1 Executive Summary

4. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 4 Executive summary China Unicom (“CU” or “Unicom”), being the second largest mobile operator in China as well as globally, is facing a highly competitive market resulting with losing subscriber market share in China every year since 2003. SITUATION In August 2009, CU partnered with Apple to launch iPhone 3G in China hoping to regain its subscriber market share. How can CU use the iPhone to increase 5% of the subscriber market share within 24 months? CU should set competitive pricing on iPhone and associated plans; deliver a clear iPhone message which is most appealing to customers; and set a sustainable strategy to maintain the market shares gained from launching iPhone. 1. CU should set the competitive pricing which could achieve market penetration a)The current iPhone prices are uncompetitive b)Potential customers (such as bloggers) think the current price of iPhone is too expensive c)Current data plan pricing are not accepted by most mobile users 2.CU needs to come up with a “killer” message that represents iPhone to attract more China mobile users considering switching to CU a)A clear “killer” message will help CU target the correct market segments and increase its presence b)Currently CU has not incorporate iPhone’s features in the “killer” message for appealing to potential Chinese subscribers c)There are potential users who would want to switch operator to CU 3.CU should plan longer term strategies to sustain the market shares gained from iPhone launch a)Younger age group, high tech gurus, top management should be CU’s targeted customer segments b)Improvement in 2G and 3G network shows increase of subscriptions c)From now and beyond 24 months, CU should build and develop its own data platform which can be on any smartphones and help CU to sustain subscriber market share growth COMPLICATION QUESTION ANSWER RATIONALE

5. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 5 Section 2 iPhone Pricing

6. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. CU’s iPhone pricing are uncompetitive CU’s iPhone handsets are priced on average 26% higher than Apple Store prices in Hong Kong; 27% higher than grey market prices We believe the pricing is incorrect. CU may want to target high-end customer segment, but potential users can just buy the phones from grey market or from Hong Kong to sign up with China Mobile instead We recommend CU to cut 30% of the iPhone retail prices to stay competitive Source: www.zo.com.cn, www.apple.com.hk, China Unicom Comparison of iPhone handset costs from grey market, Hong Kong Apple Store and China Unicom

7. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Cutting prices of iPhone will not hurt profitability Our sensitivity analysis shows that cutting 30% of retail prices to match grey market prices will defend the market share Cutting prices will not hurt profitability given the increase in volume We believe cutting prices by 30% will lead to a 120% increase in sales volume Total gross profit will increase by 10% as a result Elasticity analysis of price cutting Note: Projected sales are from our estimation based on elasticity and price sensitivity. Retail price 4,999 4,499 3,999 3,499 Cost 2,000 2,000 2,000 2,000 Gross profit 2,999 2,499 1,999 1,499 Gross margin60.0%55.5%50.0%42.8% Projected sales ('000) 500 550 750 1,100 Increase in sales10.0%50.0%120.0% Total gross profit (mn) 1,500 1,375 1,499 1,649 Change in gross profit-8.3%0.0%10.0% Cutting 30% of retail price Cutting 20% of retail price Cutting 10% of retail price Base case

8. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. CU’s upfront payment is too high Due to the 24 months contract, CU’s iPhone users will need to prepay high tariff upfront. Total upfront payment ranges from Rmb 5,999 – 7,999 Comparing to grey market iPhone where no prepayment is needed, Unicom requires 49% higher payment We believe this is uncompetitive. We advise Unicom to cancel this requirement. What do you need to pay at the beginning to own an iPhone? Source: www.zo.com.cn, www.apple.com.hk, China Unicom

9. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. What do customers think of the data plans? % of respondents think pricing of data plan is acceptable Out of 300,000 respondents, 42% customers think pricing of China Telecom (“CT”) is more reasonable as compared to 17% of CU’s pricing This could be due to the fact that CT’s data plan charges is time based instead of the usual byte based, which is more user-friendly Source: Sina.com

10. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Prices and promotions is the number one attraction for customers to switch to CU Reasons for potentially shifting to CU Source: Sina.com Reasons for potentially shifting to CU

11. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Bloggers think iPhone prices are expensive We surveyed bloggers’ initial responses from Chinese discussion forums They think iPhone are expensive. We recommend Unicom to cut price Most of the responses were negative. The main issues are:  Affordability concern - “Unicom’s iPhone is way too expensive, I wonder how many people can afford it…( 联通版的实在是太贵了啊，有几个人能买的起 …)” - Posted by 们领军, 2009-9-29 11:15  High upfront payment - “The total upfront payment is too high. Those who can afford to pay the upfront prepayment should have already bought iPhone in the grey market. ( 不管如何实惠，第一次付款的钱数太多。有如此多的钱的人想要 iphone 的早买了 … 要是真正的分期付款就好了 …)” - Posted by 123.182.171.*, 2009- 10-6 22:56  iPhone in the grey market is cheaper and has WiFi functionality - “Although iPhone sold in the grey market does not have official warranty, I can still have it repaired elsewhere, and the service is pretty good. iPhone sold in the grey market has WiFi functionality and is a lot cheaper than Unicom’s handset plans… ( 水货 iphone 坏了吗没人管？ 我这还不错 跟普通手机一样 保修 虽不是全国联保 但免费升 级保修什么地 还是没问题的 这样算下来, 有比联通多了个 wifi 还便宜了许多...)” - Posted by 115.48.237.*, 2009-10-5 23:10 Source: Baidu..com

12. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Bloggers think iPhone prices are expensive (con’t) Most of the responses were negative. The main issues are (cont’d):  Without WiFi, data cost will be a lot higher - “Without WiFi, you are likely to incur a lot more expensive 3G data charges…( 联通 3G 是没有 wifi 的 … 联通的想上网只能 3G... 多上会，不好意思，你的手机号会欠费好几百 …)”- Posted by 吃西红柿番茄, 2009-10-1 19:14  It is cheaper to buy iPhone in the grey market and join CU’s student plan “I think it is cheaper to buy an iPhone in the grey market and join CU’s student plan… ( 诚然，现在 iphone 水货也 3700 多，加上 2 年每月 126 总共要近 7000 ，可是你又没有 wifi ，怎么和水货竞争。想来想去要么等，要么买部水货手机再办个 66 套餐合适 )” - Posted by 122.194.5.*, 2009-10-3 07:07  Tariff of CU’s iPhone packages seems to be reasonable “I think the price packages of Unicom’s iPhone are pretty reasonable… Unicom offers flat rate on domestic roaming and long-distance calls which is good. Phones sold in the grey market may be cheaper, but Unicom’s packages are bundled with monthly voice minutes and data. I think Unicom’s iPhone packages are more attractive… (… 现在 有了联通 -wcdma ，据说最低 套餐 96 ，关键全国范围接听免费，打电话也不贵，还有 那么多增值服务，我觉的挺好。网上说用联通 -iPhone 要 5099 元，这可是 2 年 186 元的 话费 呢 … 这样看来 iPhone 还 是比较合适的 )” - Posted by myie2cn, 2009-9-27 20:56 Source: Baidu..com

13. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Pricing of iPhone in Hong Kong Price of iPhone charged by different retailers in Hong Kong iPhone 3G (8GB) has been a big success in Hong Kong. Hutchison Telecom 3 Hong Kong is the exclusive distributor and they sold over 200,000 iPhone 3G since its launch, accounting for 2% of total mobile users in Hong Kong. It could be due to the fact that the price gap between 3 stores, Apple stores and Boardway are minimal. People prefer buying iPhone in 3 stores with a discount and continue using 3’s services. Source: Market research report Note: The $3000 iPhone price in 3 is subjected to a 24 months contact with 3. The monthly tariff have to be $138 (1000 voice mins).

14. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. The pricing and prepayment charged by CU is too high Pricing and Prepayment package for the 3G 8GB iPhone of CU and Hutchison Hutchison users who join the HK$138 tariff plan need to pay HK$4000 (Handset price plus Prepayment) for the 8GB iPhone 3G, while Unicom users need to pay about HK$7000 for the 8GB iPhone 3G. CU needs to decrease the prepayment amount and handset price in order to make its new product competitive and attract new customers. Note: Both prices subjected to a 24 mths contract with $138/mth tariff

15. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Impact on Hutchison after launching iPhone Impact on Hutchison ARPU after launching iPhone iPhone was launched by Hutchison on 2007, the overall ARPU of Hutchison has increased by 20% in 2007 and further increased by 10% in 2008. iPhone plays an important role on this. CU may refer to Hutchison’s tariff plans when designing their own plans. Source: Hutchison Annual Reports

16. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Impact on Hutchison after launching iPhone (Cont’d) Impact on Hutchison Revenue structures after launching iPhone The traditional mobile voice business is already saturated, Hutchison’s mobile revenue growth since launching of iPhone in 2007 comes from mobile data services such as internet browsing and other related applications. Non-voice revenue of Hutchison grown from 18% in 2006 to 29% in 2008 of their total mobile revenue. China Unicom should provide more data services to iPhone users in order to diversify its revenue structures. Source: Hutchison Annual Reports

17. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 17 Section 3 Killer Message To Represent iPhone

18. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. What is the current market visibility of CU as compared to its competitors? No. of hits results found on each “Search Words” in Youku.com Source: Youku.com From the Youku.com search, CU and its associated network, advertisement and 3G handsets has lowest hit number of results found CU needs to increase its presence in the telecommunication market and to increase TV advertisements and promotion for its 3G network and iPhone 599 1,128 2,261

19. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. CU currently focuses its TV advertisement message on the functionality of 3G Video Function – Connecting People CU focuses its TV advertisement promotions on the functionality of its 3G network, from high speed connection, video call functions, music download, high speed internet and its corporate advertisement on “Changing the World” Music down load 3G with the World Source: Youku.com High Speed Network Changing the World

20. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. While CU’s competitor, China Telecom has clear messages for its target segments China Telecom’s target segment: business users and young people It is easier for the customers to see the image and value in China Telecom Business Users – Connect the business people and CEO from anywhere and anytime Lifestyle Phone for young people with multi-functions Source: Youku.com

21. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. CU should deliver the message - “iPhone is a Lifestyle Phone” and … CU can leverage on the brand of the iPhone and deliver a clear message to the target customers that iPhone is more than a phone for voice call, it’s a lifestyle phone that can be built into our daily life iPhone combines three lifestyle functions: iPod + revolutionary mobile phones + breakthrough internet communicator Steven Jobs, CEO of Apple said that “iPhone is doing 5 years ahead of what other phone” with great design and faster speed Source: Steve Jobs, CEO of Apple – Introducing the iPhone Faster Speed - 36% faster than Nokia phone Combination of iPod + Phone + Internet Design – “Something wonderful in your hand” Multi-functions – Doing 5 years ahead of other phone

22. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. …“iPhone in CU will bring you to the front in the 3G world” The “pure blood” CU iPhone version has two unique functions: CU’s 3G service “WO” and Apple’s APP store CU’s 3G network provides handy supports to iPhone and most smartphone’s functions Apple’s APP store already has over 65,000 iPhone applications available, far more developed than China Mobile’s MobileMarket which has just launched China Unicom’s “WO” 3G service Apple’s APP store fits different customers’ needs in 3G applications Source: www.news.cn, news.chinayes.comwww.news.cn

23. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. CU’s killer message should target high-end market CU’s iPhone is targeted to high income, high life quality customers Upon current research, CU has very limited advertising on iPhone CU’s promotion on iPhone should include users comments from popular businessmen or celebrities as benchmarking OPhone’s promotion strategy – users comments from successful businessmen Source: www.news.cn, ophone001.comwww.news.cn

24. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. How does iPhone compare with OPhone? iPhone has unique design, functions and features that OPhone is imitating. OPhone is launched by China Mobile to target iPhone. OPhone is considered as a strong competitor. OPhone runs on Google Android platform, or “O”pen Mobile System. iPhone is selling at a higher price than OPhone OPhone is more popular phone in China due to it has more localized data platforms installed which iPhone is currently lacked of. iPhone Vs OPhone Chinese customization  Low handset production costs  Software platforms Apple store Fetion, Monternet, e-surfing Mobile market Network standard advantage (Compatible with other popular handsets with 85% of the world) China Mobile China Unicom iPhone OPhone China Telecom Source: Brokerage research reports

25. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. What do customers think so far? % of respondents willing to switch operator Out of 300,000 respondents, 47% potential customers are more willing to change to CU than 27% customers prefer CT This could be due to customers are aware of more popular 3G handsets will only work on CU’s WCMDA network Source: Sina.com

26. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 26 Section 4 Mid To Long Term Strategy

27. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Strategy 1 - Target Customer Segments The customer segment should target the 20-40 age group, high technology gurus, high management employees They have the highest spending power and propensity The target user group will have the highest data demand Strategy to target customers in one years time Source: Market research report

28. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Strategy 1 - Targeted Customer Segments (Cont’d) We believe the spending power across the country are different We advise China Unicom to focus its effort on the more affluent provinces in the costal areas These are the provinces with higher market potential Targeting top 10 provinces to grasp 55% of the potential market Source: Market research report

29. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Strategy 2 - Improve its telecommunication network RMB38.7 billion (US$5.6 billion) has earmarked to develop its 3G business in 2009 but it still has a weak telecommunication network. At the moment, China Unicom has the least telecommunication ports in China as compared with its competitors. Source: Brokers’ reports No. of Telecommunication Ports Own By Each China Mobile Operator

30. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Prior to 2009, CU operated the CDMA network in China. Due to Government’s mandated restructuring, CU was forced to sell the network to CT. CT spent Rmb 100 bn to improve its network and to do market campaign. In 9 months, monthly new addition subscribers market share improved from 3.6% to 31.8% We believe CU can reference the success of CT by spending money to improve its existing GSM/WCDMA network. 30 No. of Monthly New Subscription of CDMA Network in China Source: China Unicom and China Telecom Strategy 2 - Improve its telecommunication network (Cont’d)

31. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 31 Source: Chetan Sharma Consulting No. of Quarterly Net-adds of Different US Operators Strategy 3 - Develop its own unique data platform The data platform should be a killer weapon against its competitors on data subscription Referencing to Verizon, a US mobile operator, Verizon wireless developed its own data platform and was introduced in 2008. Being the best amongst US operators and able to achieve “Any App, Any Device”, it is able to sustain a consistent net-adds growth every quarter since 2005. Verizon remained competitive against AT&T which has the exclusivity of selling iPhone.

32. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Unlocking the Value of the iPhone Managing China market complexity Leveraging Apple iPhone technology & brand image Driving Transformation iPhone - not just mobile, it’s a lifestyle Connecting people, any where any time iPhone - hi-tech, trendy style icon. Drive promotion as a “Premium” brand. Develop strong countrywide distribution network. Improve network quality & service standard. Introduce hi-tech mobile handsets & related software offerings. Leverage unique functionalities & applications to attract customers from varied segments. Develop own application platform and promote its appeal & usage. Offer attractive iPhone handset prices. Introduce competitive tariff plans. Offer attractive applications in Chinese say QQ (IM application) Analyze customer segmentation and profitability Have a backup plan to face changes in government regulations.

33. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. China Unicom’s vision should be “connecting people by innovative technology” Cater to diversified customer needs with attractive CU own application store. Create Value for Customers Offer improved network quality & upgrade of service standards. Launched new full service brand system “WO”. Introduce new hi-tech products with constantly evolving network technology. Improve Operational ExcellenceStrengthen Management of Risk Improve Financial performance and subscriber market share Upgrade service standards Reach out to large no. of subscribers in short time by developing strong distribution network. Streamline business processes Develop better network quality Introduce latest innovative handsets Introduce enticing tariff plans to enable long term customer lock in. Develop attractive application offerings catering to varied customer needs. Promote iPhone as high end product and aggressively promote Promote the Apple iPhone with its plans. Created industry benchmark by introducing Flat roaming rates across China. Educate customers about Apple iPhone unique features, competitive tariff plans, and about grey marketers / imitators. Establish a High Performance Culture Recognize and value staff who align actions with values and strategy Improve communications internally and externally Retain and attract top talent Develop a dynamic culture able to problem solve and implement strategic initiatives Strategy Map

34. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 34 Section 5 Our Recommendations

35. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Our Recommendations We believe CU’s pricing of iPhone is unattractive. We recommend CU to cut 30% of the iPhone retail prices to stay competitive. We think the prepayment of tariff for iPhone packages are unappealing. Upfront prepayment is way too high which is scaring potential users away. We recommend CU to cancel this requirement. We believe CU to take this opportunity to improve brand image and promote iPhone and its 3G services as “lifestyle” products. Unicom can leverage on the premium image of iPhone to give an impression of providing more than “phone services”. In our view, CU will eventually lose the exclusive right to sell iPhone in 2 years’ time. Apple has been a tough partner. We believe CU should make this window of opportunity to improve its network, customers experience, as well as strengthen its data application platforms and ally with data content partners. CU can leverage on Apple’s branding to attract premium partners. In addition, CU can learn from Apple’s state-of-the-art technologies. By doing so, CU will transform into an operator with more advanced data platform, better network, more streamlined customers experience and becoming an operator of choice with advanced technologies. We believe eventually it does not matter whether Unicom still has the iPhone after 2 years.

36. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 36 Appendix 1 Interview Highlight

37. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview #1 - SL Cheung, Director of Corporate Development, China Unicom  To get an update of Unicom’s latest implementation of iPhone strategies  Key Takeaways: –China Unicom expects 3G to be a game changer for the company. The unified tariff plans and high speed data download should give a brand new experience to users –Unicom expects iPhone to be a killer product especially considering the outstanding track record of the product to lift up ARPU (Average revenue per user) in other countries –The tariff plans of iPhone are competitive. Sufficient handset subsidies are given to encourage users to sign up –Unicom is also improving the international roaming coverage on 3G. As at Oct 1, Unicom has signed roaming partnership agreements with 84 operators in 51 countries. This should bode well for high end users. –Unicom is improving its customer services to capture the business opportunities on 3G. For example, there is a “10-minute” performance pledge – time waiting for service in Unicom’s outlet will be less than 10 minutes –Unicom introduces the mobile application store on iPhone’s platform to encourage more data usage

38. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview #2 - Lina Shi, Ministry of Industry and Information Technology  To get an understanding on the telecom regulatory regime of the government  Key Takeaways: –Lina believes the tariff level in China is still high. There are rooms to bring the tariff down –Gov’t does not want to see any price war, which is value destructive –3G brings an opportunity to unify the existing tariff plans to a more reasonable level –The introduction of smartphones in China is positive to the industry as a whole, and the gov’t does not favour a particular smartphone brand –Gov’t is supporting home-grown technology standards (TD-SCDMA and WAPI), but realizes that they should also be supporting WCDMA and WiFi for the healthy development of the industry

39. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview #3 - David Murphy, Director, China Reality Research  To get the latest market research data on the Chinese telecom industry  Key Takeaways: –The telecom industry in China is highly segmented –China Mobile has the greatest brand, China Telecom the second and Unicom seems to be the least preferred operator –The service and network coverage of Unicom are the problems –In the recent survey, citizens were asked whether they would migrate from 2G to 3G. Results are striking. Most of them do not think there is a need to migrate. Even if they do, they will choose China Mobile given the service and strong brand name. Handset and the technology of 3G do not seem to bother them –Unicom needs to work hard to change the perception

40. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview #4 - Nicole McCormick, Consultant, Asia Communications  To get the understanding of iPhone and smartphone market in China  Key Takeaways: –Smartphone market in China is still at a budding stage. Market size is large. –Nicole expects China to sell 2-5 mn iPhones, but number is still considered small considering the total market size. –Apple does not be a strong brand presence in China considering iPod –Apple’s iPhone faces tough challenges given the strong competition from local handset vendors like ZTE, Huawei. Taiwan’s HTC also produces high quality smartphones like HTC Hero and HTC Magic to compete with Apple’s Unicom

41. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview #5 - Jacky Yung, CFO, China Telecom  To understand the strategy of China Telecom responding to Unicom’s iPhone launch  Key Takeaways: –China Telecom does not take the iPhone challenge lightly –China Telecom is introducing more CDMA EV-DO Rev B (3.5G) smartphones to compete with Unicom’s iPhone. –China Telecom considers those smartphones to be introduced are of high quality. Many are imported from LG and Samsung in Korea. –China Telecom is also in talks with Blackberry in Canada to introduce CDMA smartphones in China. Progress is going well. –China Telecom has a very strong presence in the fixed-line and broadband market. Company expects to leverage on the existing subscribers base to offer more bundling opportunities. At present, 48% of mobile users use one or more of China Telecom’s other services. –Tariff-wise, China Telecom’s price plans are very competitive comparing to Unicom’s

42. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Interview highlights Interview # 6 - Grace Wong, Head of Investors Relations, China Mobile  To understand the strategy of China Mobile responding to Unicom’s iPhone launch  Key Takeaways: –China Mobile is partnering with Google and other major handset vendors to produce OPhone, a term coined similarly to Apple’s iPhone –OPhone stands for OMS Phones. These smartphones are based on Google’s Android operating system. Major manufacturers of these phones are Lenovo, Dell, Philips, LG, Samsung, etc –Functionality speaking, OPhones are not much different from iPhones. China Mobile believes these handsets are competitive –Strategically, China Mobile is still in talks with Apple to launch iPhone 2G in China –The only weakness of China Mobile appears to be its 3G network (TD-SCDMA). Unlike Unicom’s WCDMA, a worldwide standard, TD-SCDMA is a Chinese homegrown standard which is virtually untested. However, gov’t support has been great. –China Mobile will continue to give out high handset subsidies to high-end users. The focus will be to stop high end users of China Mobile to churn out to Unicom for iPhone.

43. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Thank you very much. We welcome feedback and suggestions.