Edgar Filing: CHINA TELECOM CORP LTD

Form 6-K

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 September 2012

Commission File Number 1-31517

China Telecom Corporation Limited

(Translation of registrant’s name into English)

31 Jinrong Street, Xicheng District

Beijing 100033, China

(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 in paper as permitted by Regulation S-T Rule 101(b)(1): ¨)

(Indicate by check mark if the registrant is submitting the Form 6-K in 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


Exhibit Number		Page Number

1.1	Circular of (1) Major Transaction and Connected Transaction in respect of the Acquisition of Certain CDMA Network Assets and Associated Liabilities and (2) Renewal of Existing Continuing Connected Transactions, dated August 30, 2012	A-1

1.2	2012 Interim Report, dated August 22, 2012	B-1

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 6-K may be viewed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are, by their nature, subject to significant risks and uncertainties, and include, without limitation, statements relating to:

•

our business and operating strategies and our ability to successfully execute these strategies;

•

our network expansion and capital expenditure plans;

•

our operations and business prospects;

•

the expected benefit of any acquisitions or other strategic transactions;

•

our financial condition and results of operations;

•

the expected impact of new services on our business, financial condition and results of operations;

•

the future prospects of and our ability to integrate the acquired business or assets;

•

the industry regulatory environment as well as the industry outlook generally; and

•

future developments in the telecommunications industry in the People’s Republic of China, or the PRC.

The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “will,” “would” and similar expressions, as they relate to us, are intended to identify a number of these forward-looking statements.

These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. We are under no obligation to update these forward-looking statements and do not intend to do so. Actual results may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the following:

•

any changes in the regulations or policies of the Ministry of Industry and Information Technology, or the MIIT, and other relevant government authorities relating to, among other matters:

•

the granting and approval of licenses;

•

tariff policies;

•

interconnection and settlement arrangements;

•

capital investment priorities;

•

the provision of telephone and other telecommunications services to rural areas in the PRC;

•

the convergence of television broadcast, telecommunications and Internet access networks, or three-network convergence; and

•

spectrum and numbering resources allocation;

•

the effects of competition on the demand for and price of our services;

•

effects of our restructuring and integration following the completion of our acquisition of the Code Division Multiple Access technology, or CDMA, telecommunications business in 2008;

•

any potential further restructuring or consolidation of the PRC telecommunications industry;

•

changes in the PRC telecommunications industry as a result of the issuance of the third generation mobile telecommunications, or 3G, licenses by the MIIT;

•

the development of new technologies and applications or services affecting the PRC telecommunications industry and our current and future business; and

•

changes in political, economic, legal and social conditions in the PRC, including changes in the PRC government’s specific policies with respect to foreign investment in and entry by foreign companies into the PRC telecommunications industry, economic growth, inflation, foreign exchange and the availability of credit.

Please also see the “Risk Factors” section of the Company’s latest Annual Report on Form 20-F, as filed with the Securities and Exchange Commission.

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.


	CHINA TELECOM CORPORATION LIMITED

Date: September 3, 2012	By:	/s/ Wang Xiaochu
		Name:	Wang Xiaochu
		Title:	Chairman and Chief Executive Officer

Exhibit 1.1

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Telecom Corporation Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser(s) or other transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is solely for the purpose of providing shareholders with certain information in connection with an extraordinary general meeting of the Company and is not an offer to sell or a solicitation of an offer to buy any securities. Any sale of the Company’s securities in the United States will be made only by means of a prospectus relating to such securities.

LOGO

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 728)

(1) MAJOR TRANSACTION AND CONNECTED TRANSACTION IN RESPECT OF

THE ACQUISITION OF CERTAIN CDMA NETWORK ASSETS AND

ASSOCIATED LIABILITIES

AND

(2) RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

Financial Adviser to China Telecom Corporation Limited

LOGO

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

LOGO

A letter from the Board is set out on pages 7 to 24 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 25 to 26 of this circular. A letter from China International Capital Corporation Hong Kong Securities Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 27 to 44 of this circular.

A notice dated 30 August 2012 convening an extraordinary general meeting of the Company to be held at 31 Jinrong Street, Xicheng District, Beijing, PRC on 16 October 2012 at 10:00 a.m. is set out on pages 69 to 72 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event by not later than 24 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or at any adjourned meeting should you so wish.

30 August 2012

A-1

CONTENTS


			Pages

Definitions				A-3

Letter from the Board				A-9

Introduction				A-9

The Acquisition Agreement				A-12

Relationship between the Parties				A-16

Information about the Acquisition Target				A-17

Reasons for and Benefits of the Acquisition				A-18

Financial Effects of the Acquisition				A-18

Additional Financial Information				A-19

Compliance with the Listing Rules				A-20

New Continuing Connected Transactions				A-20

Renewal of Existing Continuing Connected Transactions				A-21

Proposed Amendments to the Articles of Association				A-25

Recommendation				A-25

EGM				A-26

Additional Information				A-26

Letter from the Independent Board Committee				A-27

Letter from the Independent Financial Adviser				A-29

Appendix I	—	Financial Information of the Group		A-47

Appendix II	—	Unaudited Financial Information of the Acquisition Target		A-48

Appendix III	—	Unaudited Pro Forma Financial Information of the Group after the Acquisition		A-50

Appendix IV-A	—	Summary of Property Valuation Report		A-55

Appendix IV-B	—	Letter from the Property Valuer		A-65

Appendix V	—	General Information		A-67

Notice of Extraordinary General Meeting				A-71

A-2

DEFINITIONS

In this circular, unless the context otherwise requires, the following terms and expressions have the following meaning:


“Acquisition”		the acquisition of the Acquisition Target under the Acquisition Agreement

“Acquisition Agreement”		the acquisition agreement dated 22 August 2012 entered into between the Company (as purchaser) and China Telecommunications Corporation (as vendor) in relation to the Acquisition

“Acquisition Target”		the Assets and the Associated Liabilities

“ADSs”		American Depositary Shares which are issued by The Bank of New York Mellon and traded on the New York Stock Exchange, with each ADS representing 100 H Shares

“Ancillary Telecommunications Services Framework Agreement”		the Ancillary Telecommunications Services Framework Agreement between the Company and China Telecommunications Corporation, as amended by its supplemental agreements from time to time and as renewed on 22 August 2012 with expiration on 31 December 2015

“Annual Caps”		the maximum aggregate annual values

“Articles of Association”		the articles of association of the Company, as amended, modified or otherwise supplemented from time to time

“Assets”		the assets relating to the CDMA Network to be acquired by the Company as specified in the Acquisition Agreement

“associate(s)”		has the meaning ascribed thereto in the Listing Rules

“Associated Liabilities”		the liabilities to be assumed by the Company as specified in the Acquisition Agreement

“Board”		the board of Directors of the Company

“Business Day”		any day on which commercial banks in Beijing, China are open for corporate business

“Capacity”		capacity on the constructed CDMA Network required by the Company to operate the CDMA Service measured in terms of actual number of subscribers

A-3

DEFINITIONS


“CDMA”		Code Division Multiple Access Technology, which is a digital transmission technology that accommodates higher throughput by using various coding sequences to mix and separate voice and data signals for wireless communication, including all upgrades to such technology from time to time

“CDMA Network”		the CDMA cellular telecommunications network owned by China Telecommunications Corporation and operated by the Company

“CDMA Service”		the service of providing, operating or marketing the provision of CDMA telecommunications business by the Company

“CDMA Service Revenue”		the service revenue generated by the Company in the course of operating its CDMA telecommunication business which shall be calculated by the total revenue from the CDMA Service under IFRS minus any upfront non-refundable revenue arising out of the CDMA Service and any revenue from sale of telecommunication products in connection with the CDMA Service

“China” or “PRC”		the People’s Republic of China (excluding, for the purposes of this circular, Hong Kong, the Macau Special Administrative Region and Taiwan)

“China Telecommunications Corporation”		China Telecommunications Corporation , a state-owned enterprise established under the laws of the PRC on 17 May 2000 and the controlling shareholder of the Company, with its principal business being the investment holding of companies primarily involved in the provision of telecommunications services in the PRC, the provision of specialised telecommunication support services and other businesses

“Company”		China Telecom Corporation Limited , a joint stock limited company, listed on the main board of the Stock Exchange, incorporated in the PRC with limited liability on 10 September 2002 and whose principal business includes basic telecommunications businesses such as the provision of fixed telecommunications services and mobile telecommunications services, and value-added telecommunications businesses such as Internet connection services business and information service business

“Completion Date”		31 December 2012

“connected person”		has the meaning ascribed to it in the Listing Rules

“controlling shareholder”		has the meaning ascribed to it in the Listing Rules

“Directors”		the directors of the Company

A-4

DEFINITIONS


“EGM”		the extraordinary general meeting of the Company to be convened on 16 October 2012, the notice of which is set out in this circular, or any adjournment thereof

“Engineering Framework Agreement”		the Engineering Framework Agreement between the Company and China Telecommunications Corporation, as amended by its supplemental agreements from time to time and as renewed on 22 August 2012 with expiration on 31 December 2015

“Existing Continuing Connected Transactions”		certain existing continuing connected transactions of the Company, including the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement

“Final Consideration”		the consideration payable for the Acquisition by the Company to China Telecommunications Corporation after the Price Adjustment of the Initial Consideration in accordance with the Acquisition Agreement

“Financial Adviser” or “UBS”		UBS AG, Hong Kong Branch acting as the financial adviser to the Company in respect of the Acquisition

“Group”		the Company, together with all of its subsidiaries

“H Shares”		the ordinary shares issued by the Company, with a Renminbi-denominated par value of RMB1.00, which are subscribed for and paid up in a currency other than Renminbi and are listed on the Stock Exchange

“HK$”		Hong Kong Dollars, the lawful currency of Hong Kong. For reference only, the amounts in Hong Kong Dollars set out in this circular are translated from Renminbi at HK$1.00 = RMB0.816. Such translation should not be construed as representations that the amounts in one currency actually represent, or could be converted into, the amounts in another currency at the rate indicated, or at all

“Hong Kong”		the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee”		an independent board committee, comprising all of the independent non-executive Directors of the Company, namely Mr. Wu Jichuan, Mr. Qin Xiao, Mr. Tse Hau Yin, Aloysius, Madam Cha May Lung, Laura and Mr. Xu Erming, formed to advise the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions

“Independent Financial Adviser” or “CICC”		China International Capital Corporation Hong Kong Securities Limited, acting as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions

A-5

DEFINITIONS


“Independent Shareholders”		shareholders of the Company other than China Telecommunications Corporation and its associates

“Independent Third Party”		an entity which is independent of and not connected to the Company or its connected persons, and which is not a connected person of the Company

“Initial Consideration”		the initial consideration payable for the Acquisition by the Company to China Telecommunications Corporation agreed under the Acquisition Agreement, which is RMB84,595,410,000 (equivalent to approximately HK$103,671 million)

“Latest Practicable Date”		24 August 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

“Listed Service Areas”		Guangdong, Jiangsu, Zhejiang, Fujian, Liaoning, Shandong, Anhui, Hebei, Hubei, Jilin, Heilongjiang, Jiangxi, Henan, Shaanxi, Sichuan, Shanxi, Hunan, Hainan, Yunnan, Gansu, Qinghai and Guizhou provinces, and Beijing, Shanghai, Chongqing and Tianjin municipalities, and the Guangxi Zhuang, Xinjiang Uygur, and the Inner Mongolia, Ningxia Hui, and Xizang autonomous regions and other areas as may be agreed between the Company and China Telecommunications Corporation

“Listing Rules”		The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

“Network Branches”		China Telecommunications Corporation Network Branch and other network branches set up by China Telecommunications Corporation in 30 provinces, municipalities and autonomous regions, including Guangdong, Jiangsu, Zhejiang, Fujian, Liaoning, Shandong, Anhui, Hebei, Hubei, Jilin, Heilongjiang, Jiangxi, Henan, Shaanxi, Sichuan, Shanxi, Hunan, Hainan, Yunnan, Gansu, Qinghai and Guizhou provinces, and Beijing, Shanghai, Tianjin and Chongqing municipalities, and the Guangxi Zhuang, Xinjiang Uygur, the Inner Mongolia and Ningxia Hui autonomous regions

“New Continuing Connected Transactions”		the new continuing connected transactions entered into between the Company and China Telecommunications Corporation and/ or its associates arising from the Acquisition, consisting of the transactions contemplated under each of the CDMA Network Facilities Lease Framework Agreement and the Land Use Right Lease Framework Agreement

A-6

DEFINITIONS


“Pre-completion Period”		the period between the date on which the Acquisition Agreement becomes effective and the Completion Date

“Price Adjustment”		the adjustment to the Initial Consideration to reflect changes in the value of the Acquisition Target during the Relevant Period as specified in the Acquisition Agreement

“Properties”		the land use rights, buildings and structures with good and valid title that are owned by China Telecommunications Corporation and which form part of the Assets under the Acquisition, a summary of which is set out in Appendix IV-A — Summary of Property Valuation Report

“Property Leasing Framework Agreement”		the Property Leasing Framework Agreement between the Company and China Telecommunications Corporation, as amended by its supplemental agreements from time to time and as renewed on 22 August 2012 with expiration on 31 December 2015

“Property Valuer” or “CEA”		Beijing CEA Real Estate Appraisal Co., Ltd, acting as the independent valuer providing appraisal service on the evaluation of the Properties

“Relevant Period”		the period between the date following the base date for the asset appraisal (being 31 March 2012) up to (and including) the Completion Date

“Retained Assets and Liabilities”		the assets and liabilities of China Telecommunications Corporation held by the Network Branches and will be retained by China Telecommunications Corporation in accordance with the Acquisition Agreement, including (i) monetary funds of the Network Branches and (ii) properties, properties under construction and land use rights of defective title as at the base date for the asset appraisal (being 31 March 2012) owned by the Network Branches, and any new properties, properties under construction and land use rights obtained by the Network Branches during the Relevant Period

“RMB”		Renminbi, the lawful currency of the PRC

“SASAC”		State-owned Assets Supervision and Administration Commission of the State Council of the PRC

“SFO”		Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time

“Shareholders”		shareholders of the Company

“Stock Exchange”		The Stock Exchange of Hong Kong Limited

A-7

DEFINITIONS



“Supervisory Committee”		the supervisory committee of the Company

“Telecom CDMA Lease”		the CDMA network capacity lease agreement dated 27 July 2008 signed between the Company and China Telecommunications Corporation, as amended by its supplemental agreement dated 25 August 2010 expiring on 31 December 2012

FORWARD-LOOKING STATEMENTS

Certain statements contained in this circular may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 (as amended). Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. In addition, we do not intend to update these forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s most recent Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the “SEC”) and in the Company’s other filings with the SEC.

A-8

LETTER FROM THE BOARD

LOGO

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 728)


Executive Directors:		Registered office:
Wang Xiaochu		31 Jinrong Street
Yang Jie		Xicheng District
Wu Andi		Beijing 100033, PRC
Zhang Jiping
Yang Xiaowei		Place of business in Hong Kong:
Sun Kangmin		38th Floor
Ke Ruiwen		Dah Sing Financial Centre
		108 Gloucester Road
Independent Non-executive Directors:		Wanchai, Hong Kong
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming

30 August 2012

To the Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION AND CONNECTED TRANSACTION IN RESPECT OF

THE ACQUISITION OF CERTAIN CDMA NETWORK ASSETS AND

ASSOCIATED LIABILITIES

AND

(2) RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

The Acquisition

Reference is made to the announcement of the Company dated 22 August 2012 in relation to the Acquisition.

At present, pursuant to the Telecom CDMA Lease, China Telecommunications Corporation has agreed to lease the Capacity on the CDMA Network to the Company and the Company has the exclusive right to use and operate the CDMA Network to provide the CDMA Service in the Listed Service Areas during the term of the Telecom CDMA Lease. The lease fee for the Capacity under the CDMA Network is currently 28% of the audited CDMA Service Revenue. To facilitate the arrangement under the Telecom CDMA Lease, China Telecommunications Corporation has set up certain network branches in the Listed Service Areas to procure and construct the CDMA Network and hold the relevant CDMA Network assets, including the Acquisition Target.

A-9

LETTER FROM THE BOARD

China Telecommunications Corporation has granted to the Company an option to purchase the CDMA Network (the “Purchase Option”) under the Telecom CDMA Lease. The Purchase Option may be exercised, at the discretion of the Company, at any time during the term of the Telecom CDMA Lease or within one year after the expiry of the Telecom CDMA Lease. No premium has been paid or will be payable by the Company for the grant of the Purchase Option. The Telecom CDMA Lease will expire on 31 December 2012.

For the reasons set out in the section headed “Reasons for and Benefits of the Acquisition” in this circular, the Company has proposed to acquire from China Telecommunications Corporation certain assets and associated liabilities relating to the CDMA Network (comprising the Acquisition Target) held by the Network Branches located in 30 provinces, municipalities and autonomous regions in the PRC (which do not include Xizang Autonomous Region). Pursuant to the Acquisition Agreement entered into on 22 August 2012, the Company has agreed to purchase, and China Telecommunications Corporation has agreed to sell, the Acquisition Target at the Initial Consideration of RMB84,595,410,000 (equivalent to approximately HK$103,671 million), which is subject to the Price Adjustment in accordance with the mechanism described in the section headed “The Acquisition Agreement — Consideration” in this circular to arrive at the Final Consideration.

As certain applicable percentage ratios in respect of the Acquisition represent more than 25% but less than 100% for the Company, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the approval of the Shareholders.

As China Telecommunications Corporation is the controlling shareholder of the Company, China Telecommunications Corporation is a connected person of the Company and the Acquisition also constitutes a connected transaction under Chapter 14A of the Listing Rules.

As the Acquisition constitutes a major and connected transaction for the Company under Chapters 14 and 14A of the Listing Rules, it is subject to the reporting, announcement and independent shareholders’ approval requirements. As China Telecommunications Corporation is a connected person of the Company and is regarded as having a material interest in the Acquisition, it and its associates will abstain from voting on the resolutions relating to the Acquisition at the EGM.

New Continuing Connected Transactions

Following the completion of the Acquisition, the Company will lease certain CDMA Network facilities, properties and land use rights which will not form part of the Assets of the Acquisition Target from China Telecommunications Corporation and/or its associates to maintain continuity in the business operations of the Company and the provision of the CDMA Service by the Company. Accordingly, the Company entered into the New Continuing Connected Transactions with China Telecommunications Corporation and/or its associates on 22 August 2012 and the relevant agreements will become effective on the day immediately after the Completion Date.

As each applicable percentage ratio (other than the profits ratio) under the Listing Rules for each of the New Continuing Connected Transactions is less than 0.1%, such transactions are regarded as continuing connected transactions exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Rule 14A.33 of the Listing Rules.

A-10

LETTER FROM THE BOARD

Renewal of Existing Continuing Connected Transactions

Reference is made to the announcement of the Company dated 22 August 2012, in which the Board announced that the Company and China Telecommunications Corporation have agreed on 22 August 2012 to renew the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement in accordance with their respective provisions for a further term of three years expiring on 31 December 2015.

The Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement will expire on 31 December 2012 under their current terms.

As China Telecommunications Corporation is the controlling shareholder of the Company, the transactions contemplated under each of the Existing Continuing Connected Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As certain applicable percentage ratios (other than the profits ratio) of the proposed Annual Caps for the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement are expected to exceed the 5% threshold under Chapter 14A of the Listing Rules, such continuing connected transactions will fall under Rule 14A.35 of the Listing Rules and are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee has been established to advise the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions. CICC has also been retained as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions.

The purpose of this circular is to provide you with information regarding the resolutions to be approved at the EGM, including, among other things, further particulars of:

(i)

the Acquisition;

(ii)

information on the New Continuing Connected Transactions;

(iii)

details of the renewal of the Existing Continuing Connected Transactions;

(iv)

the letter from the Independent Board Committee containing its recommendations to the Independent Shareholders;

(v)

the letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders;

(vi)

financial information of the Group;

(vii)

unaudited financial information of the Acquisition Target;

(viii)

unaudited pro forma financial information of the Group after the Acquisition;

A-11

LETTER FROM THE BOARD

(ix)

a summary of the property valuation report and a letter from the Property Valuer;

(x)

details of the amendments to the Articles of Association; and

(xi)

the notice of the EGM to consider and, if thought fit, to approve the resolutions relating to the Acquisition, the renewal of the Existing Continuing Connected Transactions and other matters.

THE ACQUISITION AGREEMENT

Date

22 August 2012

Parties

(1)

the Company, as purchaser; and

(2)

China Telecommunications Corporation, as vendor.

Acquisition Target to be Acquired

The Acquisition Target comprises the following assets and associated liabilities relating to the CDMA Network:

(1)

the Assets, including certain assets of China Telecommunications Corporation held by the Network Branches, including but not limited to the Properties and other auxiliary facilities, general facilities, line equipment, wired transmission equipment, wireless transmission equipment, switching equipment, digital communication equipment, corporate information system equipment, emergency communication equipment, mobile communication equipment and power supply equipment, software copyrights and patented technologies, together with contracts, agreements and operating records, documents and files related to these assets, except any assets in the Retained Assets and Liabilities; and

(2)

the Associated Liabilities, including liabilities of China Telecommunications Corporation assumed by the Network Branches to be transferred in association with the transfer of the Assets, and relevant contracts, agreements, records, documents and files related to these liabilities, except any liabilities in the Retained Assets and Liabilities.

Consideration

The Initial Consideration for the Acquisition is RMB84,595,410,000 (equivalent to approximately HK$103,671 million), and is subject to the Price Adjustment in accordance with the mechanism described in the Acquisition Agreement to arrive at the Final Consideration.

The Initial Consideration and the mechanism for the Price Adjustment were arrived at after arm’s length negotiations between the Company and China Telecommunications Corporation and are on normal commercial terms, with reference to various factors including, but not limited to, a valuation range determined on the basis of a number of generally accepted industry valuation methodologies and conventions, the appraised value of the Assets (based on a report commissioned by China Telecommunications Corporation and produced by an independent appraiser), the specific and unique characteristics of the Assets, the prevailing business conditions and growth prospects of the CDMA Service provided by the Company, standard commercial terms, and other considerations such as that arising during the normal course of negotiations.

A-12

LETTER FROM THE BOARD

The Initial Consideration, which will be adjusted by the Price Adjustment as specified in the Acquisition Agreement to reflect the change in value of the Acquisition Target during the Relevant Period, will form the Final Consideration payable by the Company to China Telecommunications Corporation for the Acquisition. A mutually recognised auditor will be appointed to conduct an audit on the financial information of the Acquisition Target within a reasonable period of time after the Completion Date. The Price Adjustment will be based on the change of the carrying amount, which will primarily be driven by the capital expenditure, the depreciation and the changes in the liabilities in relation to the Acquisition Target during the Relevant Period. The amount of the Price Adjustment will not be more than RMB3,000 million (equivalent to approximately HK$3,676 million). The Final Consideration will not be more than RMB87,595,410,000 (equivalent to approximately HK$107,347 million).

The Final Consideration will be payable in cash by the Company to China Telecommunications Corporation as follows: (i) RMB25,500 million (equivalent to HK$31,250 million) will be payable within five Business Days following the Completion Date and (ii) the balance of the Final Consideration (the “Deferred Payment”) will be payable on or before the fifth anniversary of the Completion Date after all the conditions precedent for completion as set out below have been fulfilled or otherwise waived by both parties. The payment will be funded from the Company’s internal resources and relevant debt financing sources.

The Company may, from time to time, prepay all or part of the Deferred Payment at any time after the Completion Date without penalty until the fifth anniversary of the Completion Date. The Company will pay interest on the outstanding amount of the Deferred Payment to China Telecommunications Corporation at half-yearly intervals and the interest will accrue from the day following the Completion Date. The interest rate will be set at a 5 basis points premium to the yield of the 5-year super AAA rated Medium Term Notes most recently published by the National Association of Financial Market Institutional Investors before the Completion Date and will be adjusted once a year in accordance with the last yield of the 5-year super AAA rated Medium Term Notes published by the National Association of Financial Market Institutional Investors at the end of each year. For the Shareholders’ reference, the yield of 5-year super AAA rated Medium Term Notes published by the National Association of Financial Market Institutional Investors on 20 August 2012 was 4.35%.

In the event any amount payable by the Company under the Acquisition Agreement is not paid when due, the Company will be required to pay the liquidated damages on such amount at a daily rate of 0.03% of the arrears from the day following the applicable due date to the date that such amount has actually been paid in full.

The Acquisition Agreement Becoming Effective

The Acquisition Agreement will become effective when all of the following conditions are fulfilled:

(i)

the Acquisition Agreement having been executed by the legal representative of each party or their respective authorised representatives with official company seals of both parties affixed to the Acquisition Agreement;

(ii)

the Acquisition having been approved by China Telecommunications Corporation;

(iii)

the Acquisition having been approved by the Board, the Independent Board Committee and the Independent Shareholders of the Company; and

A-13

LETTER FROM THE BOARD

(iv)

all required approvals, consents, authorisations and filings in connection with the Acquisition from the relevant government and regulatory authorities in the PRC, which shall include but not limited to the approval from the SASAC, having been obtained.

Conditions Precedent to Completion

The completion of the Acquisition is conditional upon the fulfilment of the following conditions:

(i)

the Acquisition Agreement having become effective;

(ii)

each of the representations and warranties made by China Telecommunications Corporation at the date of the Acquisition Agreement remaining true, accurate and complete and none of them being misleading or false or containing any material omission in all material aspects;

(iii)

all undertakings, obligations and conditions that should be performed or observed by China Telecommunications Corporation before the Completion Date as provided in the Acquisition Agreement having been duly performed and observed by China Telecommunications Corporation;

(iv)

no event having occurred which has or will have any material adverse impact on the condition of the Acquisition Target; and

(v)

China Telecommunications Corporation having performed all necessary procedures for the completion of the Acquisition required by applicable laws and/or binding agreements and documents in relation to the Acquisition including, but not limited to, the procedures of announcing to/notifying creditors or obtaining consent from creditors and obtaining written consent from third parties if any of the Assets are subject to any third party rights or restrictions on such rights have been released.

Both parties shall use their reasonable endeavours to fulfil all conditions precedent as soon as practicable and in any event not later than 31 December 2012. If any of the above conditions precedent are not fulfilled on or before 31 December 2012, both parties shall, if practicable, agree in writing to either postpone the date on which the relevant conditions precedent are to be fulfilled or waive the relevant conditions precedent (save for condition (i) which cannot be waived) and proceed to completion as if all conditions precedent have been fulfilled.

As at the Latest Practicable Date, none of the conditions referred above have been fulfilled, and neither the Company nor China Telecommunications Corporation has any intention to waive any of the conditions. A further announcement will be made by the Company when all of the conditions precedent to the completion of the Acquisition have been fulfilled or waived (as the case may be).

Arrangements during the Relevant Period

During the Relevant Period, both parties agree that the Network Branches will continue to procure and construct the CDMA Network in the ordinary course in accordance with the construction plan for network capacity expansion with the consent of the Company as required under the Telecom CDMA Lease, including but not limited to the investments in, and expenses to be incurred on, the CDMA Network under the construction plan for network capacity expansion to ensure the normal procurement and construction of CDMA Network.

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LETTER FROM THE BOARD

The costs, fees, income and capital expenditure incurred by the Network Branches during the Relevant Period under the aforementioned construction plan for the CDMA Network shall be settled in accordance with the terms of the Telecom CDMA Lease and other existing arrangements.

Pre-completion Period

(1)

During the Pre-completion Period, both parties agree that the Network Branches shall continue to manage the Acquisition Target in accordance with the terms of the Telecom CDMA Lease and obtain the consent of the Company in relation to material operational decisions.

(2)

China Telecommunications Corporation has undertaken to the Company that, during the Pre-completion Period, it will:

(i)

not make any significant changes to the ordinary operation and financial policies of the Network Branches and the Acquisition Target;

(ii)

ensure the normal and ordinary operation and management of the Network Branches and the Acquisition Target;

(iii)

not change the approved CDMA Network projects, plans and proposals without the prior consent of the Company;

(iv)

fulfil all necessary conditions for the identification of the Acquisition Target upon reasonable requests by the Company for the sole purpose of completion; and

(v)

notify and consult the Company in respect of any matters, to the knowledge of China Telecommunications Corporation, that will occur on or before the Completion Date that may have a material adverse effect on the Acquisition Target, or ensure that the Company will be notified and will have the chance to be consulted with.

(3)

During the Pre-completion Period, both parties shall set up their respective task groups to take all necessary and appropriate measures to complete the preparation work for the transfer of the Acquisition Target including, but not limited to, the inventory check of the Acquisition Target, the provision of a preliminary schedule of specific assets and liabilities comprising the Acquisition Target (the “Preliminary Schedule”) by China Telecommunications Corporation (which will form the basis of the final schedule of the Acquisition Target to be signed on the Completion Date (the “Final Schedule”)), and the preparation work for the novation, succession and renewal of the relevant contracts. Both parties will agree on a completion proposal during the Pre-completion Period to ensure the normal operation of relevant business and service operations and a smooth transfer of the Acquisition Target.

Completion and Relevant Arrangements

(1)

Both parties shall ensure a smooth transfer of the Acquisition Target and the normal operation of CDMA Service.

(2)

On the Completion Date, both parties shall complete the completion arrangements, including:

(i)

the delivery of the Assets;

(ii)

the delivery of the Associated Liabilities;

A-15

LETTER FROM THE BOARD

(iii)

the novation of the contracts;

(iv)

registration of the change of ownership in the Assets (if necessary);

(v)

the delivery of all documents and information in relation to the Acquisition Target, including but not limited to business records and operation records; and

(vi)

other matters in connection with the completion.

Both parties shall sign the Final Schedule on the Completion Date which will form the basis of the completion. A confirmation letter will also be signed between the parties on the Completion Date, setting out a specific list of matters to be handled following the Completion Date.

(3)

Both parties agree that any matters to be handled following the Completion Date shall be settled within twelve months from the Completion Date or such other date agreed by both parties. Both parties will review these matters and sign a confirmation letter and relevant agreement (if necessary) at the end of each of the sixth month and the twelfth month from the Completion Date in connection with the completion of these matters and any outstanding matters.

Representations and Warranties

Undertakings, representations and warranties of China Telecommunications Corporation

(1)

China Telecommunications Corporation has made certain representations and warranties in relation to, amongst others, its legality and qualification, information provided to the Company regarding the Acquisition Target, the operation legality of the Network Branches, the account of the Network Branches prior to the Completion Date, the conditions of the Assets, land use rights and properties to be acquired or leased by the Company, intellectual property rights, the existing contract relationships and business arrangements relating to the Acquisition Target, its compliance with tax and other laws in relation to the Acquisition Target, and litigations and investigations.

(2)

Each of the representations and warranties made by China Telecommunications Corporation under the Acquisition Agreement shall remain valid upon execution of the Acquisition Agreement and after the completion of the transfer of the Acquisition Target.

Undertakings, representations and warranties of the Company

The Company has made certain representations and warranties in relation to, amongst others, its legality and qualification, its eligibility of executing and performing the Acquisition Agreement and the payment of the Final Consideration.

RELATIONSHIP BETWEEN THE PARTIES

China Telecommunications Corporation is a state-owned enterprise engaged in the investment holding of companies primarily involved in the provision of telecommunications services, the provision of specialised telecommunications support services and other businesses.

As at the Latest Practicable Date, China Telecommunications Corporation holds 70.89% of the total issued share capital of the Company.

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LETTER FROM THE BOARD

INFORMATION ABOUT THE ACQUISITION TARGET

In 2008, China Telecommunications Corporation had agreed to acquire the CDMA network constructed by Unicom New Horizon Telecommunications Company Limited (previously known as Unicom New Horizon Mobile Telecommunications Co., Ltd.) (“Unicom New Horizon”) from China United Network Telecommunications Group Co., Ltd (previously known as China United Telecommunications Corporation) and Unicom New Horizon for a consideration of RMB66.2 billion. China Telecommunications Corporation owns the CDMA Network assets through certain network branches in the Listed Service Areas in China and has been continuously investing in the CDMA Network, upgrading and expanding its network coverage across China since the acquisition, which is now the largest CDMA network worldwide.

Based on the information provided by China Telecommunications Corporation, the capital expenditure incurred by it in relation to the CDMA Network located in 30 provinces, municipalities and autonomous regions in the PRC (which do not include Xizang Autonomous Region) for the three years ended 31 December 2009, 2010 and 2011 and the six months ended 30 June 2012 was approximately RMB53,200 million, RMB26,800 million, RMB21,500 million and RMB7,000 million respectively and the capital expenditure planned for the year ending 31 December 2012 is approximately RMB18,900 million.

The Acquisition Target is comprised of a substantial part of the CDMA Network assets and the Associated Liabilities owned by China Telecommunications Corporation through the Network Branches located in 30 provinces, municipalities and autonomous regions in the PRC (which do not include Xizang Autonomous Region). As at 31 March 2012, the total carrying amount of the Assets was approximately RMB111,206 million, in which the carrying amount of property, plant and equipment was approximately RMB93,046 million and the carrying amount of construction in progress was approximately RMB11,663 million. As at 31 March 2012, the carrying amount of Associated Liabilities amounted to approximately RMB30,032 million, and were all current liabilities.

The Properties in the Assets to be acquired comprise 1,907 pieces of land, 1,639 buildings and other structures located in the PRC as at 30 June 2012 and the value of the Properties was approximately RMB946 million based on the property valuation report prepared by the Property Valuer. As the total number of the Properties is very large and the nature and description of many of the Properties will be highly similar, the Company has applied for and obtained a waiver from the Stock Exchange from strict compliance with Rules 5.03 and 5.06(1) to (4) of the Listing Rules in relation to the format and content requirements of the valuation report to be included in the circular, on the grounds that (i) it would be unduly burdensome to individually list the Properties and their particulars and values in this circular, which are very large in number and highly similar in nature, and (ii) given the relatively insignificant value and minor significance of each piece of the Properties, detailed information of such Properties would be unnecessary and immaterial to the Independent Shareholders when considering the Acquisition.

Further, the Company has applied for and obtained a waiver from the Stock Exchange from strict compliance with Rule 19A.57 of the Listing Rules in relation to the requirement to furnish a certified English translation of the full text property valuation report, as the Properties are located in the PRC and consequently the underlying valuation and title information are also in Chinese and it would be unduly burdensome to prepare an English translation of the full report.

Pursuant to the above waivers, (i) only a summary valuation report of the Properties has been included in this circular, which is set out in Appendix IV-A, and (ii) the Company is not required to furnish a certified English translation of the full valuation report for public inspection.

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LETTER FROM THE BOARD

The unaudited financial information of the Acquisition Target for the three years ended 31 December 2009, 2010 and 2011 and the six months ended 30 June 2012 is set out in Appendix II to this circular, which has been prepared based on the relevant information provided by China Telecommunications Corporation.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The

Company believes that the Acquisition has the following benefits:

(1)

it will be value enhancing for the Company and the Shareholders. As a result of the rapid expansion of the Company’s mobile service, the CDMA Service Revenue and the lease fee for the Capacity under the Telecom CDMA Lease have undergone significant growth. The future lease fee savings as a result of the Acquisition are expected to exceed the incremental costs of owning the Assets such as depreciation, financial charges, maintenance and other costs arising from the Acquisition;

(2)

it will remove the need to renew the Telecom CDMA Lease and hence the risk of potential increases in mobile network lease fee rate;

(3)

it will allow the Company to have a more direct control over the future investment decisions of the CDMA Network, and to further focus on network optimisation and capacity expansion to better provide the mobile services to meet the increasingly high data traffic demands of the market;

(4)

it will allow the Company to fully integrate the assets and services of the Company’s CDMA Service in a manner similar to the Company’s fixed line service, in order to improve the operating efficiency and value of the mobile business as a whole;

(5)

the resulting business synergies from (i) centralised investment planning, maintenance, procurement and financial management and (ii) more closely integrated services and product offerings to drive innovation and growth will enhance Shareholders’ value; and

(6)

it will enhance the transparency of mobile business operation and development, and is expected to significantly reduce the transaction amount of continuing connected transactions in the future.

The Company believes that in order to realise the above benefits, it will need to continue to enhance its data network capacities and operations focused on the rapid proliferation of 3G smart devices and content development. Specifically, this would involve the ongoing expansion of its CDMA subscriber base to further achieve economies of scale, expand content and application development efforts, and to provide more integrated service offerings.

FINANCIAL EFFECTS OF THE ACQUISITION

As extracted from the interim report of the Company, the unaudited consolidated total assets and total liabilities of the Group were RMB433,885 million and RMB173,875 million, respectively as at 30 June 2012. Assuming the Acquisition had been completed on 30 June 2012, the total assets and total liabilities of the Group would be approximately RMB545,499 million and RMB285,489 million, respectively.

According to the interim report of the Company, the Group’s gearing ratio (being calculated as total liabilities divided by total assets) was approximately 40% as at 30 June 2012. Assuming the Acquisition had been completed on 30 June 2012, the Group’s gearing ratio would be approximately 52%.

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LETTER FROM THE BOARD

The future lease fee savings as a result of the Acquisition are expected to exceed the incremental costs of owning the Assets such as depreciation, financial charges, maintenance and other costs arising from the Acquisition, and therefore the Acquisition is expected to have a positive effect on the earnings of the Group in the future.

The unaudited pro forma financial information of the Group which illustrates the financial impact of the Acquisition on the Group’s assets and liabilities, is set out in Appendix III to this circular.

ADDITIONAL FINANCIAL INFORMATION

Borrowings and Indebtedness

As at the close of business on 31 July 2012, being the latest practicable date for the purpose of this indebtedness statement, the Group had outstanding unsecured and interest-bearing bank loans, loans from China Telecommunications Corporation and its associates and medium-term notes of approximately RMB47,015 million.

Save as disclosed above and other than intra-group liabilities and normal trade payables, the Group did not have any debt securities, any other borrowings or indebtedness in the nature of borrowings, including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, debentures, mortgages, charges, loans guarantees or other material contingent liabilities outstanding as at the close of business on 31 July 2012.

Contingent Liabilities

At the close of business on 31 July 2012, the Group had no material contingent liabilities.

Working Capital

Taking into account the financial resources available to the Group, including internally generated funds and available banking facilities, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least the next 12 months from the date of this circular.

Financial and Trading Prospects of the Group

The Company would complete the acquisition of the Acquisition Target from China Telecommunications Corporation pursuant to statutory procedures and integrate the mobile assets and business together this year. The acquisition of the Acquisition Target will be beneficial to strengthening the overall operation efficiency of the Company’s mobile service and improving profitability in the future. It will also enhance the Company’s ability to coordinate its mobile network investments and construction with its operation management and upgrade planning, appropriately grasping the opportunity of advancement to new technologies with a view to fostering the development of its mobile service.

At present, in respect of the changes of China’s mobile telecommunications market, the trend of migration from 2G to 3G services has emerged. Approximately 900 million 2G service users nationwide are potential 3G service users of the Company. The development of broadband services still has great prospects while the demand for social informatisation is ever increasing. However, the Company is also facing new challenges brought by intensifying market competition and cannibalisation of traditional businesses by advanced technologies.

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LETTER FROM THE BOARD

Aiming to achieve a breakthrough of its full services development, the Company will grasp the opportunities and cope with the challenges. In the second half of the year, the Company will adhere to its strategy of advancing its dual leadership in innovation and service quality. The Company will exert efforts in accelerating the scale development of its three core services, including 3G service, broadband service and informatisation applications to increase revenue market shares of its full services. Furthermore, the Company will endeavour to enhance its management to strengthen four major capabilities, including innovation, services, efficient centralisation and operation. The Company will also consolidate its differentiated competitive edges of its products, services, networks and terminals to enhance both customer value and corporate value.

COMPLIANCE WITH THE LISTING RULES

As China Telecommunications Corporation is the controlling shareholder of the Company, China Telecommunications Corporation is a connected person of the Company. The Acquisition also constitutes a connected transaction under Chapter 14A of the Listing Rules.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquires, no Shareholders apart from China Telecommunications Corporation and its associates will be required to abstain from voting on the resolutions to approve the Acquisition Agreement together with the transactions contemplated thereunder.

NEW CONTINUING CONNECTED TRANSACTIONS

Such New Continuing Connected Transactions will comprise (i) the CDMA Network Facilities Lease Framework Agreement, pursuant to which the Company will mainly lease certain CDMA Network facilities located in Xizang Autonomous Region from China Telecommunications Corporation and/or its associates, and (ii) the Land Use Right Lease Framework Agreement, pursuant to which the Company and China Telecommunications Corporation and/or its associates will mutually lease certain land use rights from each other in connection with their respective operations. Certain properties to be leased by the Company from China Telecommunications Corporation and/or its associates will be added to the leased properties governed under the existing Property Leasing Framework Agreement, the details of which are set out in the announcement of the Company dated 22 August 2012 in relation to the renewal of certain existing continuing connected transaction between the Company and China Telecommunications Corporation and/or its associates.

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LETTER FROM THE BOARD

RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

On 25 August 2010 the Board approved, among other things, (i) the continuing connected transactions contemplated under the Engineering Framework Agreement and the Annual Caps applicable thereto; and (ii) the continuing connected transactions contemplated under the Ancillary Telecommunications Services Framework Agreement and the Annual Caps applicable thereto.

Engineering Framework Agreement

Pursuant to the Engineering Framework Agreement, China Telecommunications Corporation and/ or its associates through bids provide to the Group services such as construction, design, equipment installation and testing and/or engineering project supervision services. The charges payable for such engineering services shall be determined by reference to market rates. The charges payable for the design or supervision of engineering projects with a value of over RMB500,000 (equivalent to approximately HK$612,745), or engineering construction projects with a value of over RMB2,000,000 (equivalent to approximately HK$2,450,980) shall be determined by the tender award price.

The Group does not accord any priority to China Telecommunications Corporation and/or its associates to provide such services, and the tender may be awarded to an Independent Third Party. However, if the terms of an offer from China Telecommunications Corporation and/or its associates are at least as favourable as those offered by other tenderers, the Group may award the tender to China Telecommunications Corporation and/or its associates.

The Engineering Framework Agreement will expire on 31 December 2012. The Company and China Telecommunications Corporation agreed on 22 August 2012 to renew the Engineering Framework Agreement in accordance with its provisions for a further term of three years expiring on 31 December 2015. No later than 30 days prior to the expiry of the Engineering Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Engineering Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.

Ancillary Telecommunications Services Framework Agreement

Pursuant to the Ancillary Telecommunications Services Framework Agreement, China Telecommunications Corporation and/or its associates provide the Group with certain repair and maintenance services, including repair of telecommunications equipment, maintenance of fire equipment and telephone booths, as well as other customer services.

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LETTER FROM THE BOARD

The charges payable for the services under the Ancillary Telecommunications Services Framework Agreement are calculated on the following basis:

(i)

the government-prescribed prices (if any);

(ii)

where there are no government-prescribed prices but there are government-guided prices, the government-guided prices;

(iii)

where there are neither government-prescribed prices nor government-guided prices, the market prices. Market price shall mean the price at which the same type of services are provided by Independent Third Parties in the ordinary course of business; or

(iv)

where none of the above is applicable, the prices are to be agreed between the parties based on the reasonable costs incurred in providing the services plus reasonable profit margin (for this purpose, “reasonable costs” means such costs as confirmed by both parties after negotiations).

The Ancillary Telecommunications Services Framework Agreement will expire on 31 December 2012. The Company and China Telecommunications Corporation agreed on 22 August 2012 to renew the Ancillary Telecommunications Services Framework Agreement in accordance with its provisions for a further term of three years expiring on 31 December 2015. No later than 30 days prior to the expiry of the Ancillary Telecommunications Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Ancillary Telecommunications Services Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.

Reasons for and Benefits of the Transactions Contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement

The historical unique relationship and long-term cooperation between China Telecommunications Corporation and/or its associates and the Group has enabled China Telecommunications Corporation and/or its associates to gain a comprehensive and deep understanding of the Group’s network features and general business needs. Compared to third parties, China Telecommunications Corporation and/or its associates can more aptly ensure that high quality service is provided at a competitive price, thus lowering service costs. The Group will receive high quality service and can effectively lower its operational expenses.

Due to a long-standing and cooperative relationship in the past, China Telecommunications Corporation and/or its associates are more able to meet the needs of the Group and to provide responsive support services in a speedy and stable manner, thereby achieving effective business cooperation and synergies. China Telecommunications Corporation and/or its associates have set up specialised teams dedicated to serving the Group, and made proactive initiatives and technical preparations customised for the development of the Group, with a view to providing the Group with more systematic and efficient services.

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LETTER FROM THE BOARD

Annual Caps

Under Rule 14A.35(2) of the Listing Rules, in respect of a continuing connected transaction which is not fully exempted, a cap must be set and disclosed. The historical amounts, Annual Caps or revised Annual Caps (as the case may be) for the four years ending 31 December 2012, 2013, 2014 and 2015, for each of the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement are set out below:

Agreements

Audited
historical
amount for
the year
ended
31 December
2010

Audited
historical
amount for
the year
ended
31 December
2011

Unaudited
historical
amount for
the period
from
1 January to
30 June 2012

Annual Caps
for the year
ending
31 December
2012

Revised
Annual Caps
for the year
ending
31 December
2012

Annual Caps
for the year
ending
31 December
2013

Annual Caps
for the year
ending
31 December
2014

Annual Caps
for the year
ending
31 December
2015

Engineering Framework Agreement

RMB6,415
million
(equivalent to
approximately
HK$7,862
million)

RMB8,293
million
(equivalent to
approximately
HK$10,163
million)

RMB4,833
million
(equivalent to
approximately
HK$5,923
million)

RMB8,800
million
(equivalent to
approximately
HK$10,784
million)

RMB11,000
million
(equivalent to
approximately
HK$13,480
million)

RMB16,000
million
(equivalent to
approximately
HK$19,608
million)

Ancillary Telecommunications Services Framework Agreement

RMB6,838
million
(equivalent to
approximately
HK$8,380
million)

RMB7,878
million
(equivalent to
approximately
HK$9,654
million)

RMB4,665
million
(equivalent to
approximately
HK$5,717
million)

RMB9,000
million
(equivalent to
approximately
HK$11,029
million)

RMB10,500
million
(equivalent to
approximately
HK$12,868
million)

RMB14,000
million
(equivalent to
approximately
HK$17,157
million)

RMB15,000
million
(equivalent to
approximately
HK$18,382
million)

RMB16,000
million
(equivalent to
approximately
HK$19,608
million)

For the two years ended 31 December 2010 and 2011, the Annual Caps for the transactions contemplated under the Engineering Framework Agreement were RMB7,052 million and RMB8,800 million, respectively (equivalent to approximately HK$8,642 million and HK$10,784 million, respectively). For the two years ended 31 December 2010 and 2011, the Annual Caps for the transactions contemplated under the Ancillary Telecommunications Services Framework Agreement were RMB7,700 million and RMB9,000 million, respectively (equivalent to approximately HK$9,436 million and HK$11,029 million, respectively).

The Company has decided to increase the Annual Caps for the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement for the year ending 31 December 2012 from RMB8,800 million and RMB9,000 million, respectively (equivalent to approximately HK$10,784 million and HK$11,029 million, respectively) to RMB11,000 million and RMB10,500 million, respectively (equivalent to approximately HK$13,480 million and HK$12,868 million, respectively).

The increase in the Annual Cap for the year ending 31 December 2012 in relation to the Engineering Framework Agreement is mainly attributable to the increase in the capital expenditure level associated with the continuing optical fibre network upgrade during the period and the expected accompanying growth of engineering projects.

The increase in the Annual Cap for the year ending 31 December 2012 in relation to the Ancillary Telecommunications Services Framework Agreement is mainly attributable to the continuing expansion of the Company’s operation along with the further development of the Company’s full service, and also the anticipated increase in expenditures on customer services, and repair and maintenance services.

As each of the applicable percentage ratios (other than the profits ratio) of the above revised Annual Caps, which are applicable to the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement for the year ending 31 December 2012, calculated on an annual basis, is above 0.1% but less than 5%, pursuant to Rule 14A.34 of the Listing Rules, the above revised Annual Caps are only subject to the reporting, announcement and annual review requirements, but are exempt from the independent shareholders’ approval requirement contained in Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

As far as the Directors are aware, none of the Annual Caps of the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement for the year ending 31 December 2012 has been exceeded as at the Latest Practicable Date. Each of the Annual Caps of such agreements for the three years ending 31 December 2013, 2014 and 2015 has been determined by reference to the anticipated increase in the Company’s network assets including the capital expenditure that is to be incurred on, among other things, the optical fibre network upgrade projects and the CDMA Network optimisation and capacity expansion projects after the completion of the proposed Acquisition. Apart from that, the Company also takes into consideration the nature of the transactions contemplated under the respective agreements, the existing scale and operations of the Company’s business, the business plan of the Company and the inflationary pressures for the three years ending 31 December 2013, 2014 and 2015.

Annual Caps for the three years ending 31 December 2013, 2014 and 2015

The increase in the Annual Caps for the three years ending 31 December 2013, 2014 and 2015 compared to the revised Annual Cap for the year ending 31 December 2012 in relation to the Engineering Framework Agreement is mainly attributable to the expected material increase in the design, construction and supervision services that China Telecommunications Corporation and/or its associates provide to the Group following the proposed Acquisition to be completed on 31 December 2012.

The increase in the Annual Caps for the three years ending 31 December 2013, 2014 and 2015 in relation to the Ancillary Telecommunications Services Framework Agreement is mainly attributable to the anticipated increase in expenditures on repair and maintenance services and other customer services such as customers acquisition to be provided by China Telecommunications Corporation and/or its associates as a result of the continuing expansion of the Company’s operation along with the further development of the Company’s full services. Especially, the increase in the Annual Cap for the year ending 31 December 2013 over the revised Annual Cap for the year ending 31 December 2012 was determined after taking into consideration of the proposed Acquisition which, if completed on 31 December 2012, is expected to result in a material increase in expenditures on repair and maintenance services of the Company in 2013.

The consideration under each of the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement will be satisfied in cash and no payment will be made on a deferred basis.

Listing Rules Implications

The Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement were entered into between the Company and China Telecommunications Corporation. As China Telecommunications Corporation is the Company’s controlling shareholder, holding 70.89% of the issued share capital of the Company, China Telecommunications Corporation is a connected person of the Company and the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement constitute continuing connected transactions of the Company for the purpose of Chapter 14A of the Listing Rules.

As certain applicable percentage ratios (other than the profits ratio) of the renewed Annual Caps for the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement for the three years ending 31 December 2013, 2014 and 2015 are expected to exceed the 5% threshold under Chapter 14A of the Listing Rules, such continuing connected transactions will fall under Rule 14A.35 of the Listing Rules and are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements contained in Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Details of the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement will be disclosed in the Company’s next published annual report and accounts, as required under Rules 14A.45 and 14A.46 of the Listing Rules.

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Over the years, the Company has always attached great importance to the nurturing and skill improvement of talents, and it has established a dedicated training department to organise training activities for the staff. As such, the Company had included “technology training” in the business scope as stated in the business licence of the Company. The Company has been notified by the relevant regulatory authority that the internal training of enterprises shall not fall into the business scope of a company and it shall not be included in the business scope in the business licence. As a result, the Company proposed to remove “technology training” from the general businesses of the business scope of the Company in the Articles of Association accordingly.

Due to the change in the members of the Supervisory Committee, the number of supervisors who represent the shareholders shall be adjusted to four members and the number of supervisors who represent the employee shall be adjusted to two members. The Company proposed to amend the relevant article in the Articles of Association to reflect the proposed composition of the Supervisory Committee.

The Board considers that the proposed amendments to the Articles of Association are in the interests of the Company and its Shareholders as a whole, and recommends the Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

RECOMMENDATION

The Independent Board Committee, comprising all of the independent non-executive Directors of the Company, namely Mr. Wu Jichuan, Mr. Qin Xiao, Mr. Tse Hau Yin, Aloysius, Madam Cha May Lung, Laura and Mr. Xu Erming, has been formed to advise the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 25 to 26 of this circular.

The Company has appointed CICC to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions. A letter from CICC containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 27 to 44 of this circular.

The Board has passed resolutions to approve, amongst others, the Acquisition Agreement and the renewal of the Existing Continuing Connected Transactions. Save for Mr. Wang Xiaochu and Mr. Yang Jie, who have been recently appointed as directors of China Telecommunications Corporation and have therefore voluntarily abstained from voting on the relevant board resolutions in respect of, amongst others, the Acquisition Agreement and the renewal of Existing Continuing Connected Transactions, none of the Directors had a material interest in the transactions contemplated under the Acquisition Agreement and the Existing Continuing Connected Transactions and no Director was required to abstain from voting on the relevant board resolutions to approve the Acquisition Agreement and the renewal of the Existing Continuing Connected Transaction.

A-25

LETTER FROM THE BOARD

The Board (excluding the members of the Independent Board Committee, the opinion of which, after taking into account the advice from the Independent Financial Adviser, is included in the section headed “Letter from the Independent Board Committee” in this circular) is of the view that (i) the Acquisition Agreement and the transactions contemplated thereunder have been entered into in the ordinary and usual course of business of the Group, that they are on normal commercial terms, that the terms of the Acquisition Agreement have been determined through arm’s length negotiations between the parties, and that they, as well as the Final Consideration payable by the Company for the Acquisition, are fair and reasonable and in the interests of the Company and the Shareholders as a whole; and (ii) the terms of each of the Existing Continuing Connected Transactions and the transactions contemplated thereunder have been entered into in the ordinary and usual course of business of the Group, that they are on normal commercial terms, that they have been implemented in accordance with the terms contained therein, and that the terms, as well as the proposed Annual Caps applicable thereto, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolutions at the EGM in respect of, amongst others, the Acquisition and the renewal of the Existing Continuing Connected Transactions.

EXTRAORDINARY GENERAL MEETING

A notice convening the EGM is set out on pages 69 to 72 of this circular. The relevant forms of proxy and attendance slip are enclosed. Shareholders who intend to attend the EGM are required to return the attendance slip to the Company on or before 25 September 2012.

Pursuant to Rule 14A.54 of the Listing Rules, any connected person and any Shareholder and its associates with a material interest in the relevant connected transactions are required to abstain from voting on the relevant resolutions at the EGM. Accordingly, China Telecommunications Corporation and its associates are required to abstain from voting on the resolutions in respect of the Acquisition and the renewal of the Existing Continuing Connected Transactions at the EGM.

Whether or not Shareholders are able to attend the EGM, they are requested to complete and return the enclosed form of proxy to (for holders of domestic shares of the Company) the Company’s office of the General Affairs Office, 31 Jinrong Street, Xicheng District, Beijing 100033, PRC or (for holders of H shares) Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as practicable and in any event by not later than 24 hours before the time designated for holding the EGM. Completion and return of the form of proxy will not preclude Shareholders from attending and voting in person at the EGM should they so wish.

ADDITIONAL INFORMATION

Shareholders’ attention is drawn to the notice of the EGM set out on pages 69 to 72 of this circular and the additional information set out in the appendices to this circular.

By Order of the Board,

China Telecom Corporation Limited

Wang Xiaochu

Chairman and Chief Executive Officer

A-26

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LOGO

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 728)

30 August 2012

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION AND CONNECTED TRANSACTION IN RESPECT OF

THE ACQUISITION OF CERTAIN CDMA NETWORK ASSETS AND

ASSOCIATED LIABILITIES

AND

(2) RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

We refer to the circular (the “Circular”) dated 30 August 2012 issued by the Company to its shareholders of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter, unless the context otherwise requires.

On 22 August 2012, the Board announced that the Acquisition Agreement was entered into between the Company (as purchaser) and China Telecommunications Corporation (as vendor) for the acquisition of the Acquisition Target. Pursuant to the Acquisition Agreement, the Company has agreed to purchase, and China Telecommunications Corporation has agreed to sell, the Acquisition Target at the Initial Consideration of RMB84,595,410,000 (equivalent to approximately HK$103,671 million), which is subject to the Price Adjustment in accordance with the mechanism under the Acquisition Agreement to arrive at the Final Consideration.

On 22 August 2012, the Board announced that the Company and China Telecommunications Corporation have agreed on 22 August 2012 to renew the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement in accordance with their respective provisions for a further term of three years expiring on 31 December 2015.

The Independent Board Committee was formed in order to make a recommendation to the Independent Shareholders as to, in its view, (i) whether the terms of the Acquisition Agreement pursuant to which the Acquisition will be made are fair and reasonable so far as the Independent Shareholders are concerned, and whether the Acquisition Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole; and (ii) whether the terms of and the proposed Annual Caps for each of the Existing Continuing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned, and whether the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole.

A-27

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

China International Capital Corporation Hong Kong Securities Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Acquisition Agreement and on the terms of and the proposed Annual Caps for the Existing Continuing Connected Transactions.

The terms of the Acquisition Agreement pursuant to which the Acquisition will be made, and the reasons for the Acquisition are set out in the Letter from the Board on pages 10 to 16 of the Circular.

The terms of, and the reasons for entering into the Existing Continuing Connected Transactions, and the proposed Annual Caps thereto are set out in the Letter from the Board on pages 19 to 23 of the Circular.

As your Independent Board Committee, we have discussed with the management of the Company the reasons for the Acquisition and the basis upon which the terms of the Acquisition Agreement have been determined, as well as the reasons for entering into the Existing Continuing Connected Transactions and the basis upon which their terms and the proposed Annual Caps have been determined.

We have also considered the key factors taken into account by the Independent Financial Adviser in arriving at its opinion regarding the Acquisition Agreement, the renewal of the Existing Continuing Connected Transactions and the transactions contemplated thereunder, as set out in the letter from the Independent Financial Adviser on pages 27 to 44 of the Circular, which we urge you to read carefully.

The Independent Board Committee, after taking into account, among other things, the advice of the Independent Financial Adviser, concurs with the views of the Independent Financial Adviser and considers that the terms of the Acquisition Agreement, and the terms of and the proposed Annual Caps for each of the Existing Continuing Connected Transactions are on normal commercial terms, are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Acquisition Agreement and the renewal of each of the Existing Continuing Connected Transactions and the transactions contemplated thereunder, as detailed in the notice of the EGM set out at the end of the Circular.

Yours faithfully,

Wu Jichuan

Qin Xiao

Tse Hau Yin, Aloysius

Cha May Lung, Laura

Xu Erming

Independent Board Committee

A-28

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter prepared by China International Capital Corporation Hong Kong Securities Limited setting out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in the Circular.

LOGO

29/F, One International Finance Centre

1 Harbour View Street

Central

Hong Kong

30 August 2012

To the Independent Board Committee and Independent Shareholders of

China Telecom Corporation Limited

Dear Sirs,

(1) MAJOR TRANSACTION AND CONNECTED TRANSACTION IN RESPECT OF

THE ACQUISITION OF CERTAIN CDMA NETWORK ASSETS AND

ASSOCIATED LIABILITIES

AND

(2) RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of (i) the Acquisition, (ii) the renewal of the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement, and the proposed Annual Caps for the three years ending 31 December 2013, 2014 and 2015 for the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement (collectively the “Transactions”), details of which are set out in the “Letter from the Board” contained in the circular dated 30 August 2012 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings herein, unless the context otherwise requires.

The Acquisition constitutes both a major and a connected transaction for the Company under the Listing Rules and, pursuant to the provisions thereof, is subject to, among other things, approval by the Independent Shareholders at the EGM.

As certain applicable percentage ratios (other than the profits ratio) of the proposed Annual Caps for the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement are expected to exceed the 5% threshold under Chapter 14A of the Listing Rules, such continuing connected transactions will fall under Rule 14A.35 of the Listing Rules and are subject to approval by the Independent Shareholders at the EGM.

A-29

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company will convene the EGM for the Shareholders to consider and if deemed fit, approve the resolutions in respect of the Transactions. Any vote of the Independent Shareholders at the EGM shall be taken by a poll. In accordance with the Listing Rules, China Telecommunications Corporation and its associates (as defined in the Listing Rules) will abstain from voting on the resolutions in respect of the Transactions at the EGM.

We have been appointed to act as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders in respect of the Transactions. This letter has been prepared and delivered for the purpose of assisting the Independent Board Committee in its duty to evaluate the abovementioned aspects and for no other reasons or purposes.

We were neither a party to the negotiations entered into by the Company in relation to the Transactions, nor were we involved in the deliberations leading up to the decision of the Directors to enter into the Transactions. We do not, by this letter, warrant the merits of the Transactions, other than to form an opinion, for the purpose of the Listing Rules, on whether the Transactions are fair and reasonable and that the entering into of the Transactions is in the ordinary and usual course of business, on normal commercial terms, and in the interests of the Company and its Shareholders as a whole.

BASIS OF ADVICE

In formulating our opinion and recommendation with regards to the Transactions, we have reviewed, among others, the Circular, the Acquisition Agreement, the agreements relating to the Existing Continuing Connected Transactions, and the financial information relating to the Acquisition. We have considered information, statements, opinions and representations, given in writing and orally, by the Company and China Telecommunications Corporation relating to the Transactions. We have also reviewed research studies, market data and publicly available information as we deemed necessary. We have relied, without assuming any responsibility for independent verification, on the information and the facts about the Acquisition Target, the Existing Continuing Connected Transactions and the Company as supplied by the Company, as well as research studies, market data and publicly available information. We have assumed that all statements, information, opinions and representations made to us or contained or referred to in the Circular provided by the Company are true, accurate, and complete in all material respects at the time they were made and continue to be so as at the date hereof and that we have relied on the same.

We have been advised by the Company that all material relevant information has been supplied to us and believe that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We have assumed that all statements of belief, opinion and intention made by the Company as set forth in the Circular were reasonably made after due and careful enquiries and that there are no other facts or representations, the omission of which would make any statement, information, opinion or representation in the Circular, including this letter, misleading in any material respects.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion and recommendation. We are not aware of, and have no reason to suspect that, any facts or circumstances, which would render the information provided or the representations made to us untrue, inaccurate or misleading in any material respects, nor do we suspect that any material facts have been omitted or withheld from the information supplied in the Circular. We have not, however, carried out any independent verification of the information provided to us by the Company, or conducted any form of investigation into the commercial viability or the future prospects of the Acquisition Target, or the operational characteristics of the Acquisition Target, or the businesses and affairs of the Company, China Telecommunications Corporation and their respective associates. We have made no physical inspection of the Acquisition Target. We have further assumed that all material governmental, regulatory, or other consents and approvals necessary for the effectiveness and implementation of the Transactions have been or will be obtained without any delay, limitation, restriction or condition or otherwise which may have any adverse effect on the CDMA business of the Company, the Acquisition Target or the contemplated benefits of the Company.

A-30

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our opinion is necessarily based upon the financial, economic, market, regulatory, legal and other conditions as they exist on, and the facts, information and opinions made available to us as of the date of this letter. We disclaim any undertaking or obligation to advise any person of any change or subsequent development in any fact or matter affecting the opinions expressed herein which may come or be brought to our attention after the date hereof and we do not have any obligation to update, revise, or reaffirm this letter.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation regarding the Transactions, we have taken into account the following principal factors and reasons:

1.	Overview of the Acquisition

According to the announcement of the Company dated 22 August 2012 in relation to the Acquisition, the Company had entered into the Acquisition Agreement on 22 August 2012, pursuant to which the Company agreed to purchase, and China Telecommunications Corporation, the Company’s controlling shareholder, agreed to sell the Acquisition Target at the Initial Consideration of RMB84,595,410,000 (equivalent to approximately HK$103,671 million), which is subject to the Price Adjustment in accordance with the mechanism described in the Acquisition Agreement to arrive at the Final Consideration.

As stated in the Acquisition Agreement, the Final Consideration will be payable in cash by the Company to China Telecommunications Corporation as follows: (i) RMB25,500 million (equivalent to HK$31,250 million) will be payable within five Business Days following the Completion Date and (ii) the Deferred Payment will be payable on or before the fifth anniversary of the Completion Date after all the conditions precedent for completion set out in the Acquisition Agreement have been fulfilled or otherwise waived by the Company and China Telecommunications Corporation.

A-31

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.	Introduction of the Acquisition Target

Based on the information provided by China Telecommunications Corporation, the capital expenditure incurred by it in relation to the CDMA Network located in 30 provinces, municipalities and autonomous regions (which do not include Xizang Autonomous Region) in the PRC for the three years ended 31 December 2009, 2010 and 2011 and the six months ended 30 June 2012 was approximately RMB53,200 million, RMB26,800 million, RMB21,500 million and RMB7,000 million respectively and the capital expenditure planned for the year ending 31 December 2012 is approximately RMB18,900 million.

The Acquisition Target comprises the following assets and associated liabilities relating to the CDMA Network:

(i)

(ii)

As at 31 March 2012, the total carrying amount of the Assets was approximately RMB111,206 million, in which the carrying amount of property, plant and equipment was approximately RMB93,046 million and the carrying amount of construction in progress was approximately RMB11,663 million. As at 31 March 2012, the carrying amount of Associated Liabilities amounted to approximately RMB30,032 million, and were all current liabilities.

As stated in Appendix II of the Circular, the Assets and the Retained Assets constituted the CDMA network assets located in 30 provinces, municipalities and autonomous regions in the PRC and jointly generated the Capacity lease revenue for the Network Branches under the Telecom CDMA Lease. The Directors consider that it is impractical to allocate the Capacity lease revenue to the Retained Assets except on an arbitrary basis. Routine repairs and maintenance expenses, water, electricity and other utilities charges have been incurred for all network assets, including the Assets and the Retained Assets, held by the Network Branches. These repairs and maintenance expenses, water, electricity and other utilities charges incurred were not specifically recorded for each individual asset by the Network Branches. As such, it is impractical to allocate such expenses to the Retained Assets except on an arbitrary basis. The carrying amount and respective depreciation and amortisation of the Retained Assets can be quantified from the accounting records provided by China Telecommunications Corporation. As at 31 March 2012, the carrying amount of the Retained Assets was about 4% of the carrying amount of the Assets. During the three years ended 31 December 2011 and the six months ended 30 June 2012 (the “Track Record Period”), the depreciation and amortisation for each year/period accrued for the Retained Assets was less than 3% of the depreciation and amortisation in the unaudited statements of income and expenditure in Appendix II of the Circular. Thus, the Directors have decided not to disclose such financial information in relation to the Retained Assets. In addition, as mentioned in the Circular, as part of the CDMA network assets, the Retained Assets will be leased by the Company after the completion of the Acquisition. Considering the above, the Directors consider that the unaudited statements of income and expenditure set out in Appendix II of the Circular have been properly compiled to present the financial performance of the Acquisition Target during the Track Record Period.

A-32

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The unaudited financial information of the Acquisition Target for the Track Record Period is set out below (and also in Appendix II of the Circular), which has been prepared by the Directors based on the relevant information provided by China Telecommunications Corporation.


	For the year ended 31 December									For the six months ended 30 June
	2009			2010			2011			2012
	RMB			RMB			RMB			RMB
	millions			millions			millions			millions

Operating revenues (Note 1)		8,080			12,891			18,349			11,341
Operating expenses
Depreciation and amortisation		(6,589	)		(10,742	)		(13,226	)		(7,213	)
Network maintenance and others		(7,460	)		(7,174	)		(8,846	)		(3,586	)


Operating (losses)/profit		(5,969	)		(5,025	)		(3,723	)		542

Note 1:

the operating revenues represent the Capacity lease revenue earned from the Company under the Telecom CDMA Lease, net of the PRC business tax.

According to the unaudited financial information set out above, the Acquisition Target has turned loss into a profit during the six months period of 2012.

A-33

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.	Reasons for and benefits of the Acquisition

In 2008, CDMA Network assets were acquired by China Telecommunications Corporation at the same time as the acquisition of CDMA business by the Company, and this provided the Company with an immediate entry into, and benefit from, the fast-growing, attractive and profitable PRC mobile telecommunications market. The Company and China Telecommunications Corporation entered into the Telecom CDMA Lease, under which the Company has the exclusive right to use and operate the CDMA Network to provide the CDMA service in the Listed Service Areas and has been granted an option to purchase the CDMA Network at any time during the term of the Telecom CDMA Lease or within one year after the expiry of the Telecom CDMA Lease.

As stated in the “Letter from the Board” in the Circular, the Board is of the opinion that the Acquisition represents an opportunity for the Company to (i) enhance the value of the Company and the Shareholders as the future lease fee savings as a result of the Acquisition are expected to exceed the incremental costs of owning the Assets and other costs arising from the Acquisition, (ii) remove the need to renew the Telecom CDMA Lease and the risk of potential increases in mobile network lease fee rate, (iii) have a more direct control over the future investment decisions of the CDMA Network and further focus on network optimisation and capacity expansion to better serve the market demands, (iv) fully integrate the assets and services of the Company’s CDMA Service to improve the operating efficiency and value of mobile business, (v) realize business synergies to enhance Shareholders’ value and (vi) enhance the transparency of mobile business operation and development and be expected to significantly reduce the transaction amount of continuing connected transactions in the future. Further details of the reasons for and the benefits of the Acquisition are set out in the “Letter from the Board” in the Circular.

The Company believes in order to realise the above benefits, it will need to continue to enhance its data network capacities and operations focused on the rapid proliferation 3G smart devices and content development.

Based on the reasons and benefits set out in the “Letter from the Board” in the Circular, there would be no reason for us to doubt the commercial rationale of the Acquisition.

4.	Basis of consideration

As stated in the “Letter from the Board” in the Circular, the Initial Consideration for the Acquisition is RMB84,595,410,000 (equivalent to approximately HK$103,671 million), and is subject to the Price Adjustment in accordance with the mechanism described in the Acquisition Agreement to arrive at the Final Consideration.

A-34

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Final Consideration will be payable in cash by the Company to China Telecommunications Corporation as follows: (i) RMB25,500 million (equivalent to HK$31,250 million) will be payable within five Business Days following the Completion Date and (ii) Deferred Payment will be payable on or before the fifth anniversary of the Completion Date after all the conditions precedent for completion have been fulfilled or otherwise waived by the Company and China Telecommunications Corporation. The payment will be funded from the Company’s internal resources and relevant debt financing sources.

In formulating our opinion, we have analysed the purchase price of the Acquisition by using a series of valuation methodologies, including (i) the comparable company analysis, (ii) the comparable transaction analysis, and (iii) the discounted cash flow (“DCF”) analysis. We have also conducted internal rate of return analysis of China Telecommunications Corporation’s investment in the CDMA Network, and reviewed relevant information, including but not limited to the appraised value of the Assets.

(i)

Comparable company analysis

We note that the Acquisition Target is a group of assets and associated liabilities instead of a standalone company and it was historically operated by the Network Branches and generated revenue under the Telecom CDMA Lease. During the Track Record Period, the Acquisition Target demonstrated the characteristics of strong revenue growth and relatively high percentage of fixed assets.

As at 31 March 2012, the carrying amount of property, plant and equipment as well as projects under construction was approximately RMB104,709 million, accounting for 94% of the total carrying amount of the Assets. According to Appendix II of the Circular, the operating revenues, which are 28% of the audited CDMA Service Revenue under the Telecom CDMA Lease, are RMB8,080 million and RMB18,349 million for 2009 and 2011 respectively, representing a compound annual growth rate of 51%.

A-35

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given the fact that there is not any listed company available which could be regarded as fully comparable to the Acquisition Target, we have selected two groups of comparable companies, listed telecommunication companies and listed telecom infrastructure companies, each of which displays certain common characteristics with the Acquisition Target. We have examined both groups of comparable companies when evaluating the fairness of the purchase price of the Acquisition Target.

We have primarily examined the EV/EBITDA ratio, which is the commonly used valuation metrics in telecommunication industry. (EV represents enterprise value and is calculated as purchase price plus net debt of the Acquisition Target; EBITDA represents earnings before interest income, interest expense, taxation, depreciation and amortisation.) The calculation of EBITDA is based on the financial information in Appendix II of the Circular, which has been properly compiled to present the financial performance of the Acquisition Target operated by Network Branches for the Track Record Period.

When selecting the comparable telecommunication companies, we started from a full list of telecommunication operators in the developing economies in Asia¹ and did not include Asian telecommunication operators with fixed-line business explicitly as one of their principal line of businesses due to the different business nature of mobile and fixed-line businesses. Therefore the comparable telecommunication companies set out below are mobile operators covering all the developing economies in Asia. To make the comparison more valid, we have taken into account the impact of different EBITDA growth rates.

1	Excluding Middle East region, same as below.

A-36

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the table below, the median and mean of 2011 EV/EBITDA of major Asian mobile operators is 7.2 times and 8.0 times, the corresponding median and mean 2010-2011 EBITDA Growth is 6.9% and 13.1%.

Ticker

Place of
Listing

2011
EV/EBITDA⁽¹⁾

2010-2011
EBITDA
Growth
Rate

China Mobile

941-HK

Hong Kong

4.7x

4.9

Bharti Airtel Limited

644232

India

6.4x

18.5

XL Axiata Tbk PT

B0LD0W

Indonesia

6.7x

1.2

Far EasTone Telecommunications Co., Ltd.

4904-TW

Taiwan

9.6x

2.1

Taiwan Mobile Co., Ltd.

3045-TW

Taiwan

10.1x

(1.4

Digi.com Berhad

608624

Malaysia

12.7x

15.8

Globe Telecom, Inc.

628486

Philippines

5.7x

4.3

Total Access Communication Public Co Ltd

689931

Thailand

6.1x

9.1

Advanced Info Service PCL

641256

Thailand

10.2x

8.9

Idea Cellular Limited

532822-IN

India

6.3x

34.4

PT Bakrie Telecom Tbk

BTEL-ID

Indonesia

8.9x

(14.0

Reliance Communications Ltd.

532712-IN

India

4.9x

19.7

Axiata Group Berhad

6888-MY

Malaysia

7.7x

1.2

MAXIS BERHA

6012-MY

Malaysia

12.3x

0.3

Grameenphone Ltd

GP-BD

Bangladesh

4.7x

28.7

Tata Teleservices (Maharashtra) Limited

532371-IN

India

10.7x

75.4

Median

7.2x

6.9

Mean

8.0x

13.1

Acquisition Target (Initial Consideration)

8.9x

66.2

Acquisition Target (Maximum Final Consideration)

9.2x

66.2

(1)

Based on the 30-trading-day average closing price up to the date of announcement of the Acquisition. The 30-trading-day average closing price is based on the average closing price of the 30 trading days up to the date of announcement of the Acquisition retrieved from FactSet.

Based on the financial information in Appendix II of the Circular, the EBITDA of the Acquisition Target for the year 2010 and 2011 were RMB5,717 million and RMB9,503 million respectively². The 2011 EV/EBITDA ratios implied by the Initial Consideration and the Maximum Final Consideration are 8.9 times and 9.2 times respectively, which are higher than median and mean trading multiples of listed comparable companies. We noted that the EBITDA growth rate of the Acquisition Target is 66.2% for the period 2010-2011, significantly higher than that of the peer companies. Among the comparable companies, Tata Teleservices (Maharashtra) Limited experienced a similar high EBITDA growth as the Acquisition Target did and its 2011 EV/EBITDA ratio is 10.7 times. Taking into account the higher EBITDA growth rate of the Acquisition Target, we consider the premium of the implied EV/EBITDA of the purchase price is reasonable.

2	Calculated as Operating (losses)/profit plus Depreciation and amortisation

A-37

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

When selecting the comparable telecom infrastructure companies, we examined the tower companies, which possess similarities with the Acquisition Target with respect to their operations, business model, capital expenditure requirements, and operational scale. Similar to the Acquisition Target, tower companies invest, operate and manage telecommunications infrastructure while receiving lease revenue from telecommunications operators. The assets of tower companies include wireless towers, broadcast towers and distributed antenna system (DAS) networks. Tower companies lease space or physical capacity on towers and DAS to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries via long-term contracts and receive lease fee as the main revenue. Historically, the Acquisition Target enjoys higher EBITDA growth than tower companies.

Ticker

Place of Listing

2011
EV/EBITDA⁽¹⁾

2010–2011
EBITDA
Growth
Rate

Tower companies

American Tower Corp

AMT

United States

22.0x

18.4

Crown Castle International Corp.

CCI

United States

19.4x

12.3

SBA Communications Corporation

SBAC

United States

24.2x

17.2

GTL Infrastructure Limited

B1GYMK

India

14.2x

165.2

PT Sarana Menara Nusantara Tbk

TOWR-ID

Indonesia

16.3x

22.9

Tower Bersama Infrastructure Tbk PT

TBIG-ID

Indonesia

26.7x

55.4

Solusi Tunas Pratama Tbk PT

SUPR-ID

Indonesia

18.0x

(4.3

Median

19.4x

18.4

Mean

20.1x

41.0

Acquisition Target (Initial Consideration)

8.9x

66.2

Acquisition Target (Maximum Final Consideration)

9.2x

66.2

(1)

As set out in the table above, the median and mean of 2011 EV/EBITDA of the tower companies is 19.4 times and 20.1 times, which is higher than the EV/EBITDA implied by the purchase price as stated above.

Based on above analysis, the 2011 EV/EBITDA ratios implied by the Initial Consideration and the Maximum Final Consideration are 8.9 times and 9.2 times respectively. The EV/EBITDA ratios are higher than the median and mean trading multiples of major Asian mobile operators in developing economies, but similar to that of those Asian mobile operators with comparable growth rate. The EV/ EBITDA is lower than the median and mean trading multiples of the tower companies. Therefore, the implied valuation multiples of the Acquisition are reasonable when compared with the EV/EBITDA ratios of the above groups of comparable companies. Although the selected mobile operators and tower companies possess similarities with the Acquisition Target, it should be noted that the business, operations and prospects of Acquisition Target are not entirely the same as that of those comparable companies mentioned above. As such, the valuation ratios should be referenced with care.

A-38

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii)

Comparable transaction analysis

We consider precedent acquisitions by Chinese telecom operators from their respective connected parties during the last ten years (since the Company’s IPO in 2002) the closest comparable transactions to the Acquisition, as the understanding of the capital markets to Chinese telecommunications companies has been relatively mature. Consistent with precedent transactions, the appraised value of the assets and liabilities is one of the factors in arriving at the purchase price. We examined the multiple of purchase price over book value (“P/B”, book value refers to the value of net assets, i.e. the total carrying amount of the Assets minus the carrying amount of the Associated Liabilities). Below sets forth those most comparable transactions with the implied P/B ratios:


Announcement Date	Target	Acquirer	Historical P/B Ratio⁽¹⁾

31-Mar-08	Beijing Telecom	China Telecom Corp Ltd		1.3x
16-Nov-07	Telecommunication assets of Guizhou province	China Unicom Ltd		2.1x
12-Sep-05	Telecommunication assets in 4 provinces and autonomous regions	China Netcom Group Corporation (Hong Kong) Limited		1.6x
28-Apr-04	Telecommunication assets in 10 provinces and autonomous regions	China Mobile (Hong Kong) Ltd		1.2x
13-Apr-04	Telecommunication assets in 10 provinces and autonomous regions	China Telecom Corp Ltd		1.4x
20-Nov-03	Telecommunication assets in 9 provinces and autonomous regions	China Unicom Ltd		1.4x
27-Oct-03	Telecommunication assets in 6 provinces and autonomous regions	China Telecom Corp Ltd		1.5x
20-Nov-02	Telecommunication assets in 9 provinces and autonomous regions	China Unicom Ltd		2.1x
16-May-02	Telecommunication assets in 8 provinces and autonomous regions	China Mobile (Hong Kong) Ltd		2.3x
Median				1.5x
Mean				1.7x
Acquisition Target (Initial Consideration)				1.04x
Acquisition Target (Maximum Final Consideration)				1.08x

(1)

From shareholders’ circulars; Historical P/B calculated using latest audited book value before announcement of the transaction.

(2)

In the descending order of announcement date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the financials stated in the “Letter from the Board” in the Circular, the historical 2011 P/B ratios implied by the Initial Consideration and the Maximum Final Consideration are 1.04 times and 1.08 times respectively. The valuation ratio of the Acquisition Target is slightly lower than that of precedent transactions. Therefore we conclude that the valuation of the Acquisition Target is reasonable when compared with the P/B ratios of the above comparable transactions.

(iii)

Discounted cash flow analysis

On an on-going basis, we have used DCF analysis as one of several valuation methodologies, taking into account the characteristics of the market, competition in the sector, regulatory environment, the Acquisition Target’s cost structure and capital expenditure requirements as well as the profile of the subscriber bases.

Our forecast of the Acquisition Target is based on, among others, the overall Mainland China mobile market and the competitive landscape, the Company’s business conditions and opinions of research analysts. We include DCF analysis result as part of our consideration of the overall fairness of the purchase price.

Under the Telecom CDMA Lease, China Telecommunications Corporation has granted to the Company the Purchase Option to purchase the CDMA Network whereby the Company has an option to purchase the CDMA Network at any time before 31 December 2012, or within one year after the termination or expiry of the Telecom CDMA Lease. The purchase price shall not be higher than such price as would, taking into account all lease fee payments made by the Company under the Telecom CDMA Lease and all discounts for delay, enable China Telecommunications Corporation to recover its investment in the CDMA Network together with an internal rate of return on its investment of 8%. We have conducted an internal rate of return analysis of China Telecommunications Corporation’s investment in the CDMA Network, using the following cash inflows and outflows. Cash outflows mainly include the purchase cost of CDMA Network to China Telecommunications Corporation, capital expenditures and other operating cash outflows of the Acquisition Target since China Telecommunications Corporation’s investment. Cash inflows mainly include lease fee payments made by the Company under the Telecom CDMA Lease, other operating cash inflows and the purchase price of the Acquisition. The internal rate of return would not be expected to be higher than 8%.

On the basis of the above analysis, we consider as the date hereof that the purchase price of the Acquisition Target is fair and reasonable so far as the Independent Shareholders are concerned.

We have also examined the Deferred Payment mechanism. The Company may, from time to time, prepay all or part of the Deferred Payment at any time after the Completion Date without penalty until the fifth anniversary of the Completion Date. The Company will pay interest on the Deferred Payment to China Telecommunications Corporation at half-yearly intervals and the interest will accrue from the day following the Completion Date. The interest rate will be set at a 5 basis points premium to the yield of the 5-year super AAA rated Medium Term Notes most recently published by the National Association of Financial Market Institutional Investors before the Completion Date and will be adjusted once a year in accordance with the last yield of the 5-year super AAA rated Medium Term Notes published by the National Association of Financial Market Institutional Investors at the end of each year.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have compared historical yield at issuance of the Company’s Medium Term Notes with yield of the 5-year super AAA rated Medium Term Notes most recently published by the National Association of Financial Market Institutional Investors before the issuance. The historical yield at issuance of the Company’s Medium Term Notes was generally in line with market yield. Therefore, we consider the interest rate as determined by the Deferred Payment mechanism has reasonably reflected the cost of the Company for debt financing of a similar amount and tenure. For reference, the yield of 5-year super AAA rated Medium Term Notes published by the National Association of Financial Market Institutional Investors on 20 August 2012 was 4.35%. We conclude that the Deferred Payment mechanism is fair and reasonable.

5.	Financial effects of the Acquisition

As stated in the “Letter from the Board” contained in the Circular, the future lease fee savings as a result of the Acquisition are expected to exceed the incremental costs of owning the Assets such as depreciation, financial charges, maintenance and other costs arising from the Acquisition, and therefore the Acquisition is expected to have a positive effect on the earnings of the Group in the future.

The unaudited pro forma financial information of the Group, which illustrates the financial impact of the Acquisition on the Group’s assets and liabilities, is set out in Appendix III of the Circular.

6.	Reasons for renewal of Existing Continuing Connected Transactions

6.1

Renewal of Existing Continuing Connected Transactions

6.1.1 Engineering Framework Agreement

The Company and China Telecommunications Corporation entered into the Engineering Framework Agreement on 30 August 2006, and entered into the Engineering Framework supplemental agreement to amend the terms of the continuing connected transactions contemplated under the Engineering Framework Agreement on 27 July 2008 and 25 August 2010, respectively. The Engineering Framework Agreement will expire on 31 December 2012 under its current terms and can be renewed for further periods of three years.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company and China Telecommunications Corporation determine the charges payable for the services under the Engineering Framework Agreement by reference to the market rates. The charges payable for the design or supervision of engineering projects with a value over RMB500,000 (equivalent to approximately HK$612,745), or engineering construction projects with a value over RMB2,000,000 (equivalent to approximately HK$2,450,980) shall be determined by the tender award price.

The Company and China Telecommunications Corporation agreed on 22 August 2012 to renew the Engineering Framework Agreement in accordance with its provisions for a further term of three years expiring on 31 December 2015. No later than 30 days prior to the expiry of the Engineering Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Engineering Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.

6.1.2 Ancillary Telecommunications Services Framework Agreement

The Company and China Telecommunications Corporation entered into the Ancillary Telecommunications Services Framework Agreement on 30 August 2006, and entered into the Ancillary Telecommunications Services Framework supplemental agreement to amend terms of the continuing connected transactions contemplated under the Ancillary Telecommunications Services Framework Agreement on 27 July 2008 and 25 August 2010, respectively. The Ancillary Telecommunications Services Framework Agreement will expire on 31 December 2012 under its current terms and can be renewed for further periods of three years.

The charges payable for the services under the Ancillary Telecommunications Services Framework Agreement are calculated on the following basis:

(i)

the government-prescribed prices (if any);

(ii)

where there are no government-prescribed prices but there are government-guided prices, the government-guided prices;

(iii)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv)

where none of the above is applicable, the prices are to be agreed between the parties based the reasonable costs incurred in providing the services plus reasonable profit margin (for this purpose, “reasonable costs” means such costs as confirmed by both parties after negotiations).

The Company and China Telecommunications Corporation agreed on 22 August 2012 to renew the Ancillary Telecommunications Services Framework Agreement in accordance with its provisions for a further term of three years expiring on 31 December 2015. No later than 30 days prior to the expiry of the Ancillary Telecommunications Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Ancillary Telecommunications Services Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.

6.2

Reasons for and Benefits of the Renewal of the Existing Continuing Connected Transactions

The Company believes that the historical unique relationship and long-term cooperation between China Telecommunications Corporation and/or its associates and the Group has enabled China Telecommunications Corporation and/or its associates to gain a comprehensive and deep understanding of the Group’s network features and general business needs. Compared to third parties, China Telecommunications Corporation and/or its associates can more aptly ensure that high quality service is provided at a competitive price, thus lowering service costs. The Group will receive high quality service and can effectively lower its operational expenses.

We understand that the renewal of the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement is aimed at ensuring the Company to have related continuous, stable and quality services to facilitate its development in the telecommunications business.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6.3

Reasons for the Annual Caps of the Existing Continuing Connected Transactions

As stated in the “Letter from the Board” contained in the Circular, the historical amounts, Annual Caps or revised Annual Caps (as the case may be) for the four years ending 31 December 2012, 2013, 2014 and 2015, for each of the transactions contemplated under the Engineering Framework Agreement and the Ancillary Telecommunications Services Framework Agreement are set out below:

Agreements

Audited
historical
amount for
the year
ended

31 December
2010

Audited
historical
amount for
the year
ended

31 December
2011

Unaudited
historical
amount for
the period
from

1 January to
30 June 2012

Annual Caps
for the year
ending

31 December
2012

Revised
Annual Caps
for the year
ending

31 December
2012

Annual Caps
for the year
ending

31 December
2013

Annual Caps
for the year
ending

31 December
2014

Annual Caps
for the year
ending

31 December
2015