China Netcom Invests in PCCW

BEIJING and HONG KONG -- China Network Communications Group Corporation ("China Netcom Group"), one of China's major telecommunications companies, and PCCW Limited ("PCCW"), the leading communications provider in Hong Kong, today announced a strategic alliance to jointly develop their respective businesses in mainland China and internationally.

China Netcom Group has agreed to pay approximately US$1 billion (HK$7.9 billion) in cash, at HK$5.90 per share, for a 20 percent stake in the enlarged share capital of Hong Kong-listed PCCW Limited. China Netcom Group will acquire its stake in PCCW by subscribing to 1,343,571,766 new shares.

China Netcom Group intends to be a committed investor in PCCW, participating with existing management in shaping the future strategy of the company, through membership of the Board of Directors and existing Board and management committees.

As part of the agreed transaction, and subject to PCCW shareholder approval, China Netcom Group will nominate directors to three new seats on the board of PCCW. Furthermore, one of the three will also become a Deputy Chairman of PCCW.

With these new appointments, both PCCW and China Netcom Group believe that the appropriate representation is in place to maximize value for all shareholders.

In order to take advantage of the high development potential in the PRC telecommunications industry, PCCW will earmark up to HK$5 billion to pursue opportunities in China in the telecommunications area and set up a PRC Business Development Committee, which will be comprised of two nominees each from PCCW and from China Netcom Group.

Mr. Zhang Chunjiang, General Manager of China Netcom Group said: "We are most excited that this is a win-win transaction which will create growth opportunities for both parties. Furthermore, we believe that with PCCW being the leading telecommunications operator in Hong Kong, its advanced management system, its professional management team and operation experience in highly competitive markets will enable China Netcom Group to accelerate innovations in our business management and enhance our marketing expertise."

PCCW Chairman Richard Li said: "I am delighted to welcome China Netcom Group as a new PCCW shareholder and look forward to a mutually beneficial co-operation. The main purpose of this strategic relationship with China Netcom Group - a major Chinese state-owned telecommunications company and a broadband leader is to create long-term value for our shareholders through actively pursuing new business opportunities."

China Netcom Corp. Ltd.

PCCW Ltd.