China Netcom

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China Network Communications (China Netcom) was created in 2002 by the government in an effort to break the monopoly of state-run China Telecom in the fixed line service market. China Netcom was composed of three entities: China Telecom's operations in North China, Jitong Communications (a former data service operator), and the original Netcom (a broadband developer and wholesaler). So, in 2002, China Telecom split into China Telecom-South and China Telecom-North. China Telecommunications Corporation (the new China Telecom) took the 21 southern and western provincial telecom corporations that were run under the former China Telecom, while the remaining 10 northern provincial telecom corporations, together with China Netcom and China Jitong, were merged to form a new China Netcom. Both China Telecom and China Netcom provided basic and long distance telephone services to residential consumers. China Netcom Corporation Ltd offered broadband telecommunications to both residential and commercial customers in nine provinces and two municipalities in northern China. Services included Internet broadband access and integrated telecom services, both for the international and domestic markets. In February 2001, the state-owned company closed a US$325 million private equity placement with large international investors including Goldman Sachs, News Corporation, and state-owned Chinese banks Bank of China and China Construction Bank. The group’s investment in China Netcom represented approximately 12% of China Netcom Corp. China Netcom launched its broadband fiber optic network, CNCNet, in October 2000. The backbone network had 40G of overall capacity and 8490 km of fiber cable. In December of 2003, China Netcom signed a US$20 million contract to build an optical network aimed at enhancing the information infrastructure in Beijing with French telecommunications equipment supplier Alcatel SA (ALA). In November 2004, Netcom launched an IPO in Hong Kong and New York and raised US$1.14 billion through the sale of 1.203 million shares, representing a 16.2% stake. The company planned to use the funds to expand network coverage and prepare for new services like 3G. By the end of 2005, the public shareholding of China Netcom had risen to 20%. In June 2005, Telefonica bought a 3% stake in China Netcom for EUR 240 million, or (US$300 million). Then, the company upped its holdings to 5% in September 2005. By the end of 2005, Netcom had 115 million fixed line customers, 27.34 million Xiao Ling Tong customers (a quasi mobile service), and 11.47 million broadband customers. In July 2006, Netcom issued RMB10 billion or USD 1.153 billion worth of commercial paper, with a maturity period of 365 days and at interest rate of 3.35%. In August 2006, Netcom sold one of its subsidiaries, Asia Netcom, to Ashomore Emerging Markets Investment Portfolio and Spinnaker Global Fund Opportunity Ltd for USD 168.8 million. http://www.cnc.net.cn/b_enews/enews/enews20010219.html Email sent IR@china-netcom.com sent 8/4/2003 None