China Netcom's Board Supports Parent Company's Share Subscription Agreement with PCCW

January 21, 2005
China Netcom Group Corporation (Hong Kong) Limited, ("China Netcom" or the "Company") (HKSE:906, NYSE:CN), a leading telecommunications company in China and the Asia-Pacific region, today announced that the Board gave consent to the Company's ultimate parent company, China Network Communications Group Corporation, in relation to the subscription agreement that it has entered into with PCCW Limited.

Reference is made to the joint announcement made by PCCW Limited ("PCCW") and the Company's ultimate parent company, China Network Communications Group Corporation ("China Netcom Group"), today. It was announced that China Netcom Group has entered into a subscription agreement (the "Subscription Agreement") with PCCW to subscribe for such number of new shares in PCCW representing 20 per cent. of the enlarged issued share capital of PCCW (the "Subscription").

The Board of Directors (the "Board") of China Netcom Group Corporation (Hong Kong) Limited (the "Company", together with its subsidiaries, the "Group") announces that the Board has given a written consent to China Netcom Group in relation to the Subscription Agreement, under the non-competition agreement between, inter alia, the Company and China Netcom Group dated 6 September 2004 (the "Non-competition Agreement").

The Directors of the Company, including Independent Non-executive Directors, who attended the relevant Board meeting, considered the following factors in giving the consent (1) PCCW currently has no competing business with the Group in mainland China, where the Group primarily operates; (2) only PCCW's international telecommunications businesses which are of a non-bilateral nature compete with the Group and revenues of the Group in this competing area are insubstantial, hence existing competition is not material; (3) PCCW has stated its plan to invest a substantial amount to expand its businesses in mainland China, including value-added telecommunications services; (4) the Subscription Agreement contains provisions whereby China Netcom Group will be notified when PCCW proposes to engage in activities which may compete with the Group so that China Netcom Group will have an opportunity to consult in good faith with PCCW with a view to determining to what extent it would be possible for the proposed activities to be restructured so that it does not constitute such competition; (5) however, as after completion of the Subscription, China Netcom Group will not gain control of PCCW at management or operational level, it is not in a position to dictate decisions made by PCCW to invest or not invest in any new business; and (6) under the Subscription Agreement, China Netcom Group will be granted certain rights giving it the opportunity to discuss with PCCW with respect to future business opportunities within mainland China and also the acquisition of strategic businesses or strategic business opportunities in mainland China that PCCW proposes to dispose of.

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