FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 2005
(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 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 registrant
in connection with Rule 12g3-2(b): 82-__________.)
N/A
China Netcom Group Corporation (Hong Kong) Limited
Building C, No. 156, Fuxingmennei Avenue
Xicheng District
Beijing, 100031 PRC
This Form 6-K consists of:
The announcement of 2005 interim results of China Netcom Group Corporation
(Hong Kong) Limited (the "Registrant"), made by the Registrant in English on
September 12, 2005.
SIGNATURE
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
under-signed, thereunto duly authorized.
CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED
By /s/ Zhang Xiaotie
------------------
By /s/ Oliver E Lixin
-------------------
Name: Zhang Xiaotie and Oliver E Lixin
Title: Joint Company Secretaries
Date: September 12, 2005
[GRAPHIC OMITTED]
CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED
[GRAPHIC OMITTED]
(incorporated in Hong Kong with limited liability under the Companies Ordinance)
(Stock Code: 906)
ANNOUNCEMENT OF 2005 INTERIM RESULTS
CHAIRMAN'S STATEMENT
Dear Shareholders,
In the first half of 2005, the Company's focus is "growth and efficiency".
While taking various measures to strengthen the leading position of our core
businesses, our Company constantly sought new drivers to the growth of our
businesses. We made further reforms in our various management systems, thereby
enhancing the Company's operational efficiency in a sustainable manner. In the
first half of 2005, our revenues reached RMB33,724 million, net profits reached
RMB6,358 million and profit per share reached RMB0.96.
In the first half of 2005, our Board strived to establish a system for our
Board that meets the standards of the recommended best practices in the Code on
Corporate Governance Practices, in order to align our governance structure with
international market practices. At the same time, our Company continued the
enhancement of our internal control system since the launch of the enhancement
project at the end of last year. As a corporation of our scale and size and
with a history of over a hundred years in operation, to fulfill the
requirements of the Sarbanes-Oxley Act in a short period of time is a huge
challenge, and we are determined to be prepared for this challenge. In the
first half of the year, our internal control project team continued to inspect
and check our internal control system from the company-level control and
process-level control perspectives, and formulated standard models for
improvement. In the second half of the year, such internal control standard
models will be put into trial in some of the branches of the Company.
In the first half of 2005, we continued to focus on executing our three core
strategies, "Broadband, Olympic and International". As construction for the
Olympic stadiums began in the first half of this year, our Company together
with our controlling shareholder, China Network Communications Group
Corporation, has commenced the comprehensive implementation of our Olympic
strategy. The Company will strive to achieve the strategic goal of "Broadband
Olympic" through technical, business and service innovation. The "Broadband
Olympic" strategy serves to bring rapid growth to our broadband content and
other value-added businesses in order to offset the declining growth of our
traditional businesses. Hence, the sustained growth in our future business can
be attained.
In order to further enhance the value of the Company, by means of mergers and
acquisitions to achieve external growth, our Company has commenced the
acquisition of major telecommunications assets and business operations held by
China Network Communications Group Corporation, the controlling shareholder of
the Company, in Shanxi Province, Jilin Province, Heilongjiang Province and
Neimenggu Autonomous Region in 2005. An Extraordinary General Meeting will be
held at a suitable time such that the transaction can be considered and
approved at the Extraordinary General Meeting. Our Board believes that such
acquisition will provide further room for the Company's expansion, improve the
Company's service capabilities, capture operating synergy between the Company
and the target company to be acquired, thereby creating additional value to the
Company's shareholders.
The Company has entered into a Memorandum of Understanding with Telefonica,
S.A. on 21 July 2005 to explore the establishment of a broad strategic
cooperation. Our Board believes that our cooperation with Telefonica, S.A. will
further enhance our managerial and operational skills and is important to our
future business development and innovation.
The Company will continue to focus on "growth and efficiency" in the second
half of the year and will persist in implementing the three core strategies.
While continuing to promote the development of our broadband business, the
implementation of our Olympic strategy and the effective cooperation with our
international partners, we will strive to maintain a stable development of our
core telecommunications businesses. We will further refine our corporate
governance and comprehensively implement a robust internal control system. We
will further develop our value-added services as the industry becomes
increasingly competitive. At the same time, we will capture opportunities for
new businesses, especially wireless businesses, to further develop the growth
potential of the Company's new businesses.
On 12 September 2005, our Board accepted Mr Keith Rupert Murdoch's resignation
from his positions as a non-executive director of our Company and the chairman
of the Compensation Committee, and Mr Keith Rupert Murdoch is appointed as an
adviser to the Board. I would like to take this opportunity, on behalf of the
Board, to express our highest regards and deepest gratitude to Mr Keith Rupert
Murdoch for his exceptional contribution to the Company. Also, we welcome Mr
Jose Maria Alvarez-Pallete as a non-executive director. We believe that Mr Jose
Maria Alvarez-Pallete's expertise in corporate operations and management will
further strengthen the professionalism of our Board, which will contribute to
maximising the returns for our shareholders.
Zhang Chunjiang
Chairman
Hong Kong, 12 September 2005
CHIEF EXECUTIVE OFFICER'S STATEMENT
Dear Shareholders,
In the first half of 2005, the telecommunications market in Mainland China was
very challenging. Not only was there intensified competition in the industry,
the market was also confronted with more uncertainties for its future
development. In such an environment, our Company, with the trust and support of
our Board, persisted in its goal in achieving "growth and efficiency". With the
concerted efforts of all our staff, we achieved considerable results in our
operations and management in the first half of 2005.
Financial Results
In the first half of 2005, we maintained a steady growth in our revenue,
achieved favourable results in cost control and recorded a substantial increase
in our operating results. For the first six months in 2005, we generated
revenue of RMB33,724 million (including amortisation of upfront connection fees
in the amount of RMB1,427 million). After excluding amortisation of upfront
connection fees, our revenue was RMB32,297 million, EBITDA* reached RMB17,605
million, EBITDA margin reached 54.5%, net profits amounted to RMB4,931 million
and profit margin reached 15.3%. Our operational efficiency was significantly
improved when compared to the same period last year.
Our free cash flow* maintained a steady growth, and reached RMB5,672 million as
at the end of June 2005, and our Capax reached RMB8,235 million for the same
period. Our capital structure became more solid as a result of the stable
growth in our operating results and our successful control of capital
expenditures. As at 30 June 2005, our interest-bearing debts reduced by
RMB9,502 million compared to the beginning of the year, and the total debt to
capitalisation ratio* decreased to 38.5%, representing a decrease of 5.8
percentage points.
2
Business Review
In 2005, we continued to fully leverage our advantages in local networks and
channels, and focused on the development of broadband services. We devoted
considerable efforts to enhance the loyalty of our fixed-line telephone
customers and further increase the growth in our PHS services to combat mobile
substitution. We vigorously fostered our value-added services to promote
sustained growth. While confronted with challenges to the fixed-line telephone
services, we achieved a comparatively favourable growth in our broadband
services and value-added services.
(1) Broadband and Internet Services
In the first half of 2005, we maintained a robust growth in our broadband
and Internet services. Our broadband and other Internet services
generated a revenue of RMB3,190 million, representing 9.9% of our total
revenue (excluding amortisation of upfront connection fees, same for the
following). As of 30 June 2005, the number of our broadband subscribers
reached 7.73 million, representing an increase of 84.6% over the same
period last year, and a market share of 87.6% in our northern service
region.
In 2005, the emphasis of our broadband services development is to realise
efficient growth brought by the increased economies of scale. While we
continued to increase the number of our broadband subscribers, we have
also taken measures to stabilise the revenue contribution of each
broadband subscriber. These measures include strengthening our marketing
efforts to business customers, enriching our broadband content and
providing our corporate customers and Internet caf|$$|Aae customers with
premium after-sales services so as to increase their loyalty.
(2) Fixed-line Telephone Services
Local Telephone Services
In the first half of 2005, our local telephone services business remained
stable and it generated a revenue of RMB16,899 million, representing
52.3% of our total revenue. As of 30 June 2005, the number of our local
telephone subscribers reached 85.24 million, representing an increase of
4.86 million subscribers compared to the end of last year, and a market
share of 93.8% in our northern service region. The growth in the local
telephone subscribers was primarily due to our PHS subscribers. In the
first half of 2005, the number of our PHS subscribers reached 18.11
million, representing an increase of 45.4% over the same period last
year.
In the first half of 2005, the growth of our fixed-line telephone
subscribers declined. Due to the impact of mobile substitution, the usage
volume of our fixed-line telephone services demonstrated a declining
trend compared to the same period last year. In order to maintain a
steady development of our local telephone services and increase the
utilisation rate of our local network resources, we strengthened our
efforts in expanding our subscriber base in urban and rural connecting
areas, rural areas and newly established urban residential communities in
2005. Furthermore, with the opportunities brought about by the
intelligence upgrade of our local network, we comprehensively promoted
the marketing of our new businesses and new bundled products in order to
retain existing customers and attract more customers.
Long Distance Services
In the first half of 2005, the revenue generated from our long distance
services reached RMB4,491 million, representing 13.9% of our total
revenue. As a result of a constant increase in the proportion of VoIP
usage in our long distance services, our average tariff has declined.
Despite a continued growth in the usage volume of our long distance
services, the revenue generated from long distance services decreased
moderately when compared to the same period last year.
3
Value-added Services
In the first half of 2005, the revenue generated from our value-added
services reached RMB1,346 million, representing 4.2% of our total
revenue. Value-added services, as one of our key revenue growth drivers,
continued to record robust growth. In 2005, we continued our promotion of
the development of our value-added services. With the opportunities
brought about by the intelligence upgrade of our local network, we
further promoted our value-added products such as caller identification,
telephone information, voice messaging, telephone Q-bar, 4006 service,
800 service and interactive telephone conferencing. As of 30 June 2005,
the penetration rate of our caller identification services reached 63.5%,
which was 5.3 percentage points higher than that at the end of 2004. The
usage of our telephone information services was 1,305 million minutes for
the six months, representing an increase of 14.2% over the same period
last year.
In the first half of 2005, the Company cooperated with SPs in an active
and comprehensive manner to vigorously develop value-added services for
PHS. The volume of PHS short message reached 1,993 million in the first
half of 2005, representing a growth of 56.8% over that for the whole year
of 2004. We formally launched our PHS "Personalised Ring" service at the
end of 2004 and acquired 2.66 million PHS "Personalised Ring" subscribers
as at the end of June 2005, with a penetration rate of 14.7%. As one of
our key service offerings, value-added services recorded robust growth,
demonstrating an enormous development potential.
(3) Business and Data Communication Services
In the first half of 2005, the revenue generated from our business and
data communication services reached RMB1,490 million, representing 4.6%
of our total revenue. Our business and data communication services
remained generally stable. Comparatively, in the first half of the year,
the usage volume of our managed data service achieved a higher growth
rate. The leased bandwidth of DDN, FR and ATM increased by 57.3%, 103.7%
and 118.9%, respectively over the same period last year. In terms of
leased line services, despite a substantial decline in the demand from
our carrier customers, the overall bandwidth of leased circuits still
grew moderately over the same period last year as a result of the
increase in number and demand of our business customers.
(4) International Services
In the first half of 2005, the revenue generated from our international
services reached RMB1,601 million, representing 5.0% of our total
revenue. In the first half of 2005, Asia Netcom, our wholly-owned
subsidiary, achieved a positive EBITDA. During the first six months, the
number of points of connection for our international managed data service
reached 3,800, our international leased line bandwidth reached 23.2G and
our international incoming traffic reached 921 million minutes,
representing an increase of 165.4%, 74.0% and 2.4%, respectively over the
same period last year.
4
Outlook for the Second Half of the Year
We achieved relatively satisfactory results in reducing costs and enhancing
efficiency in the first half of 2005, and we will continue to refine our
management and realise management efficiency in the second half of 2005. While
consistently taking measures to ensure a steady growth in our fixed-line
telephone services, we will launch a "reward points" system and further refine
our customer retaining efforts with a view to preserving and consolidating our
existing market in an active and efficient way. We will continue our efforts in
improving the PHS networks and increasing their utilisation. We will persist in
our massive efforts in marketing our broadband services and enlarging the scale
of our broadband subscriber base. Furthermore, we will further tap the
potentials of the value-added services and strengthen the marketing efforts on
our value-added products.
In the second half of the year, we will continue to leverage the various
opportunities brought about by new technologies to accelerate the development
of our businesses, upgrade our overall brand images and push forward the
development of our broadband content. We will also strengthen our cooperation
with international telecommunications operators with extensive experience in
international operations so as to further refine our operations and management
and develop our new businesses. We strive to provide even better services for
our customers and maximise the returns for our shareholders.
Tian Suning
Vice Chairman and Chief Executive Officer
Hong Kong, 12 September 2005
* For definitions of EBITDA, free cash flow and total debt to capitalisation
ratio, please refer to our Company's 2004 annual report.
5
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2005
(Expressed in Renminbi)
2005 2004
Note RMB RMB
million million
Unaudited Audited
Revenues 5 33,724 32,498
--------- -------
Operating expenses
Depreciation and amortisation (9,265) (9,552)
Networks, operations and support (5,549) (5,167)
Staff costs (4,200) (4,294)
Selling, general and administrative (4,402) (4,199)
Other operating expenses (541) (724)
--------- -------
Operating profit before interest income and dividend income 9,767 8,562
Interest income 87 32
Dividend income 28 7
--------- -------
Profit from operations 6 9,882 8,601
Finance costs 7 (1,226) (1,604)
Share of loss of associated companies - (1)
--------- -------
Profit before taxation 8,656 6,996
Taxation 8 (2,298) (2,121)
--------- -------
Profit for the period 6,358 4,875
========= =======
Basic earnings per share 10 RMB0.96 RMB0.89
========= =======
Diluted earnings per share 10 RMB0.96 RMB0.89
========= =======
6
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2005
(Expressed in Renminbi)
As at As at
30 June 31 December
2005 2004
RMB RMB
million million
Unaudited Restated
Assets
Current assets
Cash and bank deposits 8,790 10,053
Short-term investments 439 2,876
Accounts receivable 11 6,778 5,688
Inventories and consumables 502 941
Prepayments and other receivables 1,079 1,006
Due from holding companies and fellow subsidiaries 489 373
--------- -------
Total current assets 18,077 20,937
--------- -------
Non-current assets
Property, plant and equipment 122,689 124,787
Construction in progress 9,172 7,602
Lease prepayments for land 1,291 1,266
Intangible assets 926 316
Deferred costs 6,250 7,449
Deferred tax assets 2,881 2,394
Derivative assets 2 -
Other non-current assets 11 424
--------- -------
Total non-current assets 143,222 144,238
--------- -------
Total assets 161,299 165,175
========= =======
Liabilities and equity
Current liabilities
Accounts payable 12 13,281 14,653
Accruals and other payables 3,698 3,353
Short-term bank loans 13(a) 26,425 29,339
Current portion of long-term bank and other loans 13(b) 4,263 7,270
Due to holding companies and fellow subsidiaries 8,469 8,244
Current portion of deferred revenues 6,196 6,653
Current portion of provisions 2,480 2,596
Taxation payable 2,656 196
--------- -------
Total current liabilities 67,468 72,304
--------- -------
Net current liabilities (49,391) (51,367)
--------- -------
7
Total assets less current liabilities 93,381 92,871
--------- -------
Non-current liabilities
Long-term bank and other loans 13(b) 18,280 21,861
Deferred revenues 10,528 11,817
Provisions 2,080 2,143
Deferred tax liabilities 1,354 1,321
Derivative liabilities 83 -
Other non-current liabilities 22 564
--------- -------
Total non-current liabilities 32,347 37,706
--------- -------
Total liabilities 99,815 110,010
--------- -------
Financed by:
Share capital 2,181 2,181
Reserves 59,303 52,984
--------- -------
Shareholders' equity 61,484 55,165
--------- -------
Total liabilities & equity 161,299 165,175
========= =======
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2005
(Expressed in Renminbi)
Six months ended 30 June
2005 2004
RMB RMB
million million
Unaudited Audited
Net cash inflow from operating activities 13,907 14,075
Net cash outflow from investing activities (5,737) (8,128)
Net cash outflow from financing activities (9,433) (9,114)
--------- -------
Decrease in cash and cash equivalents (1,263) (3,167)
Cash and cash equivalents at beginning of period 10,033 6,283
--------- -------
Cash and cash equivalents at end of period 8,770 3,116
========= =======
8
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1 The group and principal activities
Background of the Group
China Netcom Group Corporation (Hong Kong) Limited (the "Company") was
incorporated in the Hong Kong Special Administrative Region ("Hong Kong")
of the People's Republic of China ("PRC") on 22 October 1999 as a limited
liability company under the Hong Kong Companies Ordinance.
Following the reorganization of the Company, China Netcom Holdings
Company Limited and China Netcom Communications Group Corporation ("China
Netcom Group") as set out in note 2 to the Group's financial statements
for the year ended 31 December 2004, the shares of the Company were
listed on The Stock Exchange of Hong Kong Limited on 17 November 2004 and
the American Depositary Shares Holders of the Company were listed on The
New York Stock Exchange Inc. on 16 November 2004.
Principal activities
The Group is a dominant provider of fixed line telephone services,
broadband, other Internet-related services, and business and data
communications services in six northern municipalities and provinces,
namely Beijing Municipality, Tianjin Municipality, Hebei Province, Henan
Province, Shandong Province and Liaoning Province in the PRC. The Group
also provides telecommunications services to selected business and
residential customers in one southern municipality and one southern
province, namely Shanghai Municipality and Guangdong Province in the PRC.
In addition, the Group operates a network and offers international data
services throughout the Asia Pacific countries and regions.
2 Basis of presentation
These unaudited consolidated condensed financial statements (the "interim
financial statements") have been prepared in accordance with Hong Kong
Accounting Standard ("HKAS") 34, "Interim Financial Reporting" issued by
the Hong Kong Institute of Certified Public Accountants (the "HKICPA")
and the disclosure requirements of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited.
The interim financial statements include the financial information of the
Company and its subsidiaries (collectively referred to as the "Group").
These interim financial statements should be read in conjunction with the
Group's 2004 financial statements.
The interim financial statements have been prepared in accordance with
the same accounting policies adopted in the Company's 2004 financial
statements, except for the accounting policy changes that are reflected
in the 2005 annual financial statements. Details of these changes in
accounting policies are set out in note 3 below.
The Company was listed following a reorganisation which was effective for
accounting purposes on 30 June 2004. The financial information for the
six months ended 30 June 2004 are extracted from the Company's prospectus
for the initial public offering and were presented as if the Group had
been in existence throughout that period. Further details regarding the
Group's reorganisation are set out in note 2 to the Group's 2004
financial statements.
A significant percentage of the Group's funding requirements is achieved
through short term borrowings. Consequently, the balance sheet indicates
a significant working capital deficit. In the past, a substantial portion
of the Group's short term borrowings have been rolled over upon maturity.
Based on the Group's history of obtaining finance, its current finance,
its relationships with its bankers and its operating performance, the
directors consider that the Group will continue to be able to roll over
such short term financing, or will be able to obtain sufficient
alternative sources of financing to enable it to operate and meet its
liabilities as and when they fall due.
3 Changes in accounting policies
The HKICPA has issued a number of new and revised Hong Kong Financial
Reporting Standards and Hong Kong Accounting Standards ("new revised
HKFRSs") which are effective for accounting periods beginning on or after
1 January 2005.
As at 1 January 2005, the Group adopted the new and revised HKFRSs as
listed below, which are relevant to its operations. The comparative
figures in respect of the six months ended 30 June 2004 have been amended
as required and where necessary, in accordance with the relevant
requirements.
HKAS 1 Presentation of Financial Statements
HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 12 Income Taxes
9
HKAS 14 Segment Reporting
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 18 Revenue
HKAS 19 Employee Benefits
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 23 Borrowing Costs
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 28 Investments in Associates
HKAS 32 Financial Instruments: Disclosure and Presentation
HKAS 33 Earnings Per Share
HKAS 34 Interim Financial Reporting
HKAS 36 Impairment of Assets
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets
HKAS 38 Intangible Assets
HKAS 39 Financial Instruments: Recognition and Measurement
HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards
HKFRS 2 Share-based Payment
HKFRS 3 Business Combinations
The adoption of these new and revised HKFRSs by the Company did not have
any significant impact on its results of operations and financial
position, except for the adoption of HKFRS 2, HKFRS 3, HKAS 36, HKAS 17,
HKAS 32 and HKAS 39 as detailed below.
(a) HKFRS 2
In prior years, no employee benefit cost or obligation was recognised
when employees (including directors) were granted share options by the
Group over shares in the Company. When the share options were exercised,
equity was increased by the amount of the proceeds received.
With effect from 1 January 2005, in order to comply with HKFRS 2, the
Group recognises the fair value of such share options as an expense in
the consolidated income statement, or as an asset if the cost qualifies
for recognition as an asset under the group's accounting policies. A
corresponding increase is recognised in a capital reserve within equity.
This change in accounting policy has been accounted for retrospectively
as follows:
Effect of
As adoption
previously of new As
reported HKFRS restated
RMB RMB RMB
million million million
As at 31 December 2004
Reserves:
Retained earnings 4,985 (18) 4,967
Capital reserve 265 18 283
============= ============= =============
The adoption of HKFRS 2 resulted in:
Six months ended 30 June
2005 2004
RMB million RMB million
Increase in staff costs 48 -
============= =============
The company's share option scheme was introduced upon the listing of its
shares in October 2004. Accordingly, the adoption of HKFRS does not have
any impact to the Group's financial profit and loss account for the six
months ended 30 June 2004.
10
(b). HKFRS 3 and HKAS 36
In prior years:
- positive goodwill arising from acquisitions on or after 1 January
2001 was amortised to the consolidated income statement on a
straight-line basis over 20 years. Positive goodwill was stated in
the consolidated balance sheet at cost less accumulated
amortisation and any impairment losses; and
- negative goodwill which arose from acquisitions on or after 1
January 2001 was amortised over the weighted average useful life of
the depreciable/amortisable non-monetary assets acquired, except to
the extent it related to identified expected future losses as at
the date of acquisition. In such cases it was recognised in the
consolidated income statement as those expected losses was
incurred.
With effect from 1 January 2005, in order to comply with HKFRS 3 and HKAS
36, positive goodwill could no longer be amortised. Such goodwill is
tested annually for impairment, including in the year of its initial
recognition, as well as when there are indications of impairment.
Impairment losses are recognised when the carrying amount of the cash
generating unit to which the goodwill has been allocated exceeds its
recoverable amount.
With effect from 1 January 2005 and in accordance with HKFRS 3, if the
fair value of the net assets acquired in a business combination exceeds
the consideration paid (i.e. an amount arises which would have been known
as negative goodwill under the previous accounting policy), the excess is
recognised immediately in the consolidated income statement as it arises.
The change in the net book value of negative goodwill, as disclosed in
note 20 to the 2004 financial statements, arising from the above change
in accounting policy has been prospectively accounted for from 1 January
2005 as follows:
Before Effect of
adoption of adoption of
new HKFRS new HKFRS As restated
RMB million RMB million RMB million
As at 1 January 2005
Negative goodwill (Included in intangible assets) (166) 166 -
Retained earnings 4,985 166 5,151
============= ============= =============
The adoption of HKFRS 3 and HKAS 36 resulted in:
Six months
ended
30 June 2005
RMB million
Increase in amortisation expenses 7
=============
(c) HKAS17
In prior years, land use rights and buildings held for own use were
stated at cost less accumulated depreciation and impairment losses.
Depreciation was calculated to write-off the cost of such assets on a
straight-line basis over their estimated useful lives, to residual value.
With effect from 1 January 2005, in order to comply with HKAS 17, land
use rights held for own use are accounted for as operating leases where
the fair value of the interest in any buildings situated on the leasehold
land can be separately identified from the fair value of the land use
rights at either the time the lease was first entered into by the Group
or taken over from the previous lessee, or at the date of construction of
those buildings, if later.
Any pre-paid land premiums for acquiring the land use rights, or other
lease payments, are stated at cost and are written off on a straight-line
basis over the respective periods of the rights.
Any buildings held for own use which are situated on such land leases
continue to be presented as part of property, plant and equipment.
The new accounting policy has been adopted retrospectively and land use
rights have been reclassified from "Property, plant and equipment" or
"Construction in progress" to "Lease prepayments for land" on the face of
the consolidated balance sheet. The reclassification has no impact on the
Group's net assets as at the period end/year end nor on the Group's
profit attributable to equity shareholders for the periods presented. The
amortisation charges in the consolidated income statement in
11
respect of land use rights are is now recorded as "Amortisation of lease
prepayments for land", which is included in the line item "Depreciation
and amortisation" on the face of the consolidated income statement.
Effect of
As adoption
previously of new As
reported HKFRS restated
RMB million RMB million RMB
million
As at 31 December 2004
Land and buildings 14,238 (795) 13,443
Construction in progress 8,073 (471) 7,602
Lease prepayments for land - 1,266 1,266
============= ============= =============
(d) HKAS 32 and HKAS 39
HKAS 32 and HKAS 39 establish principles for disclosure, presentation,
recognition and measurement of financial instruments, including
non-derivative financial assets, non-derivative financial liabilities and
derivative instruments for hedging activities.
Under HKAS 39, financial instruments will be carried at either amortised
cost or fair value, depending on their classification. Movements in fair
value will be either charged to net profit or loss or taken to equity in
accordance with the standard. In addition, all derivatives, including
those embedded in non-derivative host contracts are recognised in the
balance sheet at fair value.
This change in accounting policy has been prospectively accounted for
from 1 January, 2005 as follow:
Effect of
Before adoption adoption of new
of new HKFRS HKFRS As restated
RMB million RMB million RMB million
As at 1 January 2005
Contract receivable (Included in non-current assets) 408 (408) -
Contract payable (Included in non-current liabilities) (533) 533 -
Discount on foreign currency exchange forward contracts 59 (59) -
(Included in defferred costs)
Derivative assets - 9 9
Derivative liabilities - (74) (74)
Retained earnings 4,985 1 4,986
============= ============= =============
The adoption of HKAS 39 resulted in:
Six months ended
30 June 2005
RMB million
Decrease in profit before taxation 15
=============
12
(e) Summary of impact of changes in accounting policies
The impact of the changes to accounting policies as set out in notes (a)
to (d) above on the Group's profit and equity was as follows:
2005
RMB million
Six months ended 30 June
(a) HKFRS2 48
(b) HKFRS3 and HKAS36 7
(d) HKAS32 and HKAS39 15
-------------
Decrease in profit before taxation 70
=============
As at 1 January
(b) HKFRS3 and HKAS36 166
(d) HKAS32 and HKAS39 1
-------------
Increase in total equity 167
=============
4 Segmental Reporting
Business segments provide services that are subject to risks and returns
that are different form other business segments. Geographical segments
provide services within a particular economic environment that is subject
to risks and returns that different from those of segments operating in
other economic environments. Currently the Group has one business
segment, the provision of fixed line telecommunications services. Less
than 10% of the Group's assets and operations are located outside the
PRC. Accordingly, no business and geographical segment information is
presented.
5 Revenues
Revenues represent the turnover of the Group and are derived from the
provision of fixed line telecommunications and related services, net of
the PRC business taxes and government levies. The Group's revenues by
business nature can be summarised as follows:
The Group's revenues by geographical location of the customers can be
summarised as follows:
Six months ended 30 June
2005 2004
RMB million RMB million
Unaudited Audited
Domestic telecommunications services (Being revenues generated from customers
located in the PRC)
Local usage fees 9,299 9,443
Monthly telephone service 6,998 6,936
Upfront installation fees 602 641
DLD usage fees 4,038 4,509
ILD usage fees 453 673
Value-added services 1,346 1,019
Interconnection fees 2,332 1,719
Upfront connection fees 1,427 1,774
Broadband service 2,799 1,815
Internet-related service 391 613
Managed data service 573 546
Leased line income 917 1,021
Other services 948 514
------------- ------------
32,123 31,223
13
International telecommunications services (Being revenues generated from
customers located outside the PRC, including Hong Kong and Macau Special
Administrative Regions and Taiwan)
------------- ------------
Total 33,724 32,498
============= =============
6 Profit from operations
Profit from operations is stated after charging or crediting the
following:
Six months ended 30 June
2005 2004
RMB million RMB million
Unaudited Audited
Charging
Depreciation:
- Owned property, plant and equipment 9,034 9,398
- Leased property, plant and equipment 79 91
Loss on disposal of fixed assets (included in networks operations and support - 80
expenses)
Amortisation of intangible assets 137 51
Amortisation of lease prepayments for land 15 13
Cost of inventories 384 180
Bad debt expenses 279 478
Unrealised loss on short-term investments - 7
============= =============
Crediting
Gain on disposal of fixed assets (included in networks operations and support 2 -
expenses)
Foreign exchange gain, net 118 15
Gain on disposal of short-term investments 28 -
============= =============
7 Finance costs
Six months ended 30 June
2005 2004
RMB million RMB million
Unaudited Audited
Interest expenses on:
- Bank and other loans wholly repayable within five years 1,358 1,814
- Bank and other loans wholly repayable after more than five years 86 42
----------- ----------
1,444 1,856
Less: Interest expenses capitalised in construction-in-progress (107) (258)
----------- ----------
1,337 1,598
Foreign exchange (gain), net (118) (15)
Bank charges 7 12
Amortisation of discount on foreign currency exchange forward contracts - 9
1,226 1,604
----------- ----------
Interest expenses were capitalised in construction in progress using the 3.91%-4.88% 3.65%-5.45%
following annual interest rates
=========== ===========
14
8 Taxation
Six months ended 30 June
2005 2004
RMB million RMB million
Unaudited Audited
PRC enterprise income tax ("EIT") 2,752 1,389
Deferred taxation (454) 732
------------- -------------
Taxation charges 2,298 2,121
============= =============
The provision for EIT is calculated based on the statutory income tax
rate of 33% on the assessable profit of each of the entities in the PRC
as determined in accordance with the relevant income tax rules and
regulations in the PRC.
Taxation on profits derived from certain subsidiaries outside the PRC,
including Hong Kong, has been calculated on the estimated assessable
profit at the rates of taxation ranging from 17.5% to 30%, prevailing in
the countries in which those entities operates.
The reconciliation between the Group's actual tax charge and the amount
which is calculated based on the weighted average statutory tax rate is
as follows:
Six months ended 30 June
2005 2004
RMB RMB
million million
Unaudited Audited
Profit before taxation 8,656 6,996
============= =============
Weighted average statutory tax rate 33% 33%
Tax calculated at the weighted average statutory tax rate 2,856 2,309
Non-taxable income (Note below) (570) (587)
Expenses not deductible for tax purposes 63 112
Tax losses not recognised/(utilised) 4 231
Others (55) 56
------------- -------------
Tax charges 2,298 2,121
============= =============
Note: Non-taxable income comprises primarily upfront connection fees
charged to customers and amortised over the customer
relationship period.
9 Profit distributions and allocations
(a) Dividends
Six months ended 30 June
2005 2004
HKD million RMB million HKD million RMB million
Unaudited Unaudited Audited Audited
Final dividend paid, of HK$0.037 per ordinary share 245 259 - -
=========== =========== =========== ===========
Notes:
(i) On 6 April 2005, the directors proposed a final dividend of
HK$0.037 per ordinary share for the year ended 31 December
2004, which was paid on 10 June 2005 and has been reflected
as an appropriation of retained earnings for the six months
ended 30 June 2005.
15
(ii) No interim dividend has been proposed by the directors for
the period ended 30 June 2005. The payment of any future
dividends will be determined by the Board of Directors.
(b) Appropriation to statutory reserve
According to a PRC tax approval document issued by Ministry of
Finance and State Administration of Taxation to China Netcom
(Group) Company Limited ("CNC China"), the Group's primary
operating subsidiary, the Group's upfront connection fees are not
subject to EIT and an amount equal to the upfront connection fees
recognised in the income statement should be transferred from
retained earnings to a statutory reserve. As at 31 December 2004,
the aggregated upfront connection fees recognised in the income
statement amounted to RMB 3,378 million, which was transferred to
the statutory reserve in accordance with the aforementioned
approval document.
For the six months ended 30 June 2005, the Company has not made
other appropriations to the statutory reserve which will be made at
year end.
10 Earnings per share
Basic earnings per share is computed using the weighted average number of
ordinary shares outstanding during the year. Diluted earnings per share
is computed using the weighted average number of ordinary shares and
potential ordinary shares outstanding during the year.
The following table sets forth the computation of basic and diluted net
earnings per share:
Six months ended 30 June
2005 2004
(in RMB millions, except
-7 share and per share data)
Unaudited Audited
Numerator:
Profit for the periods 6,358 4,875
Denominator:
Weighted average number of ordinary shares outstanding and shares used in 6,593,529,000 5,492,258,218
computing basic earnings per share
Weighted average number of potential ordinary shares:
Diluted equivalent shares arising from convertible Preference shares - 7,741,782
Diluted equivalent shares arising from share option 34,754,749 -
------------- -------------
Shares used in computing diluted earnings per share 6,628,283,749 5,500,000,000
------------- -------------
Basic earnings per share RMB0.96 RMB0.89
============= =============
Diluted earnings per share RMB0.96 RMB0.89
============= =============
16
11 Accounts receivable
Amounts due from the provision of fixed line telecommunications service
to residential and business customers are due within 30 days from the
date of billing. Residential customers who have accounts overdue by
more than 90 days will in normal circumstances have their services
disconnected. Accounts receivable from other telecommunications
operators and customers are due between 30 to 90 days from the billing
date.
The ageing analysis of accounts receivable based on the billing date is
as follows:
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
0-30 days 4,965 4,479
31-90 days 1,315 861
Over 90 days 1,801 1,404
------------ -------------
Total 8,081 6,744
------------ -------------
Less: Allowance for doubtful debts (1,303) (1,056)
------------ -------------
Net carrying amounts 6,778 5,688
============= =============
Included in the accounts receivable are amounts due from other
state-owned telecommunication operators amounting to RMB 1,009 million
(2004: RMB 789 million).
12 Accounts payable
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
0-30 days 4,165 6,122
31-60 days 1,269 1,833
61-90 days 864 925
91-180 days 1,989 2,115
Over 180 days 4,994 3,658
------------- -------------
13,281 14,653
============= =============
Included in accounts payable are amounts due to other state-owned
telecommunication operators amounting to RMB 2,010 million (2004: RMB
1,781 million).
17
13 Bank and other loans
(a) As at 30 June 2005, the short term bank loans were unsecured and comprise:
Currency Interest rate and final maturity 30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Renminbi denominated Variable interest rates ranging from 4.54% to 26,274 29,220
5.02% per annum with maturity through 6 January
2006
US Dollar denominated Variable interest rates ranging from 3.98% to 151 119
4.70% per annum with maturity through 29 November
2005
------------- -------------
26,425 29,339
============= =============
(b) The Group's long term bank and other loans comprise:
30 June 2005 31 December
2004
RMB million RMB million
Note Unaudited Audited
Bank and other loans (i) 21,257 27,571
Finance lease obligations (ii) 1,286 1,560
------------- -------------
22,543 29,131
Less: Current portion (4,263) (7,270)
------------- -------------
18,280 21,861
============= =============
(i) Long term bank and other loans
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Loans
Unsecured 19,158 25,228
Secured 2,099 2,343
------------- -------------
Total 21,257 27,571
------------- -------------
Less: Current portion (4,101) (7,060)
------------- -------------
Long-term loans 17,156 20,511
============= =============
18
The Group's long term bank and other loans (excluding finance lease
liabilities) were repayable as follows:
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Within one year 4,101 7,060
In the second year 6,083 6,550
In the third to fifth year 8,154 11,196
After the fifth year 2,919 2,765
------------- ------------
21,257 27,571
============= ============
As at 30 June 2005, bank loans amounting to RMB 2,099 million
(2004: RMB 2,343 million) were secured by the followings:
(i) Certain property, plant and equipment amounting to RMB 3
million (2004: RMB 22 million) in respect of loans amounting
to RMB 1 million (2004: RMB 3 million);
(ii) Corporate guarantees granted by China Netcom Group to the
extent of RMB 1,782 million (2004: RMB 1,888 million); and
(iii) Corporate guarantees granted by third parties to the extent
of RMB 316 million (2004: RMB 452 million).
(b) (ii) Finance lease obligations
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Obligation under finance leases 1,286 1,560
Less: current portion (162) (210)
------------- -------------
1,124 1,350
============= =============
During the year ended 31 December 2004, the Group entered into a
finance lease arrangement with a related party for certain existing
fixed assets in return for funding of RMB 1,085 million. The net
book value of such fixed assets amounted to RMB 857 million (2004:
RMB 954 million). The lease obligation payable to the related party
as at 30 June 2005 amounted to RMB 1,051 million (2004: RMB 1,070
million).
The Group's liabilities under finance leases are analysed as follows:
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Within one year 193 390
In the second year 1,110 662
In the third to fifth year, inclusive 36 580
------------- ------------
1,339 1,632
Less: future finance charges on finance leases (53) (72)
------------- ------------
Present value of finance lease liabilities 1,286 1,560
============= =============
The present value of finance lease liabilities is as follows:
Within one year 162 210
In the second year 1,088 776
In the third to fifth year, inclusive 36 574
------------- ------------
19
1,286 1,560
============= =============
14 Commitments
(a) Capital commitments
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Contracted but not provided for Land and buildings 36 47
Telecommunications networks and equipment 1,136 986
------------- -------------
1,172 1,033
============= =============
Authorised but not contracted for
Land and buildings 233 2
Telecommunications networks and equipment 2,220 1,778
------------- -------------
2,453 1,780
============= =============
(b) Operating lease commitments
The Group has future minimum lease payments under non-cancellable
operating leases in respect of premises and equipment as follows:
30 June 2005 31 December
2004
RMB million RMB million
Unaudited Audited
Not later than one year 873 793
Later than one year and not later than five years 1,640 1,129
Later than five years 1,893 1,510
------------- -------------
4,406 3,432
============= =============
15 Related party transactions
China Netcom Group, the Group's parent company, is a state-controlled
enterprise directly controlled by the PRC government. The PRC government
is the Company's ultimate controlling party. Neither China Netcom Group
nor the PRC government publishes financial statements available for
public use.
All state-controlled enterprises, their subsidiaries, their key
management and their close family, and their employees (collectively
referred as "state-owned parties") are ultimately related parties of the
Group. The Group has extensive transactions including provision and
receiving of services, leasing of assets and obtaining finances, with
these state-owned parties in its ordinary course of business. These
transactions are carried out at terms similar to those with other
non-state-owned parties and have been reflected in the Financial
Information.
The Group's operations are subject to the supervision of and regulation
by the PRC Government. The Ministry of Information Industry (the "MII"),
pursuant to the authority delegated by the PRC's State Council, is
responsible for formulating the telecommunications industry policies and
regulations for all telecommunication operators in China. As a
state-owned telecommunication operator, the Group has extensive
transactions with other state-owned telecommunication operators in its
ordinary course of business. These transactions are carried out in
accordance with the rules and regulations stipulated by the MII of the
PRC Government and disclosed below.
The Group has extensive transactions with other members of the China
Netcom Group. As a result of this relationship, it is possible that the
terms of the transactions between the Group and other members of the
China Netcom Group are not the same as those that would result from
transactions with other related parties or wholly unrelated parties.
Management believes that meaningful information relative to related party
disclosures has been adequately disclosed.
20
Six months ended 30 June
2005 2004
RMB million RMB million
Unaudited Audited
Interconnection income
- from fellow subsidiaries 142 -
- from other state-owned telecommunication operators 2,190 1,719
------------- -------------
Sub total 2,332 1,719
============= =============
Interconnection charges
- to fellow subsidiaries (277) -
- to other state-owned telecommunication operators (524) (357)
------------- -------------
Sub total (801) (357)
============= =============
Rental income from properties leased to fellow subsidiaries - 2
============= =============
Purchase of materials
- from fellow subsidiaries (433) (528)
- from related company (101) (670)
------------- -------------
Sub total (534) (1,198)
============= =============
Receipt of engineering, project planning, design, construction and information
technology services
- from fellow subsidiaries 592 321
- from related company 80 564
------------- -------------
Sub total 672 885
============= =============
Ancillary telecommunications support services
- from fellow subsidiaries (100) (207)
- from related company (11) (232)
------------- -------------
Sub total (111) (439)
============= =============
Payment of operating lease rentals of premises
- to fellow subsidiaries (292) (7)
- to related company - (5)
------------- -------------
Sub total (292) (12)
============= =============
Common corporate services income received from ultimate holding company 28 -
============= =============
Common corporate services expenses paid to ultimate holding company (117) -
============= =============
Support services
- from ultimate holding company (2) -
- from fellow subsidiaries (290) (187)
- from related company (1) (149)
------------- -------------
Sub total (293) (336)
============= =============
Rental income for lease of telecommunications facilities to other stated-owned 613 519
telecommunication operators
============= =============
Payment of operating lease rentals of telecommunications facilities to ultimate (118) -
holding company
============= =============
21
Payment for purchase of long-term telecommunications capacity to ultimate (91) -
holding company
============= =============
Payment for lease of long-term telecommunications capacity to ultimate holding (52) -
company
============= =============
Management fee received from ultimate holding company 55 -
============= =============
Notes:
(i) The Group entered into finance lease arrangement with a related
party and details have been set out in Note 13 (b) (ii).
(ii) China Netcom Group, the Company's ultimate holding company, entered
into an agreement (the "Sponsorship Agreement") with Beijing
Organisation Committee ("BOCOG") which designated China Netcom
Group as the exclusive fixed-line telecommunications services
partner in the People's Republic of China ("PRC") to sponsor the
2008 Beijing Olympic Games. China Netcom Group allocated the
sponsorship fee to its members based on the estimated future
benefits derived from the Sponsorship Agreement to respective
members and the Company sponsor a portion of the required support
under the Sponsorship Agreement through providing
telecommunications goods and services to BOCOG amounting to RMB 480
million. Accordingly, an intangible assets and a payable to the
ultimate holding company of the said amount have been recognised on
the Company's balance sheet.
(iii) As at 30 June 2005, China Netcom Group granted corporate guarantee
to the Group as set out in Note 13 (b) (i).
16 Significant subsequent events
(a) The Company has undertaken to The Stock Exchange of Hong Kong
Limited to use its best efforts to release the guarantees granted
by China Netcom Group, or failing such, to arrange for the
settlement of the relevant loans, within six months from its
listing on 17 November 2004. The balance of such loans amounted to
RMB1,782 million as at 30 June 2005. After the balance sheet date,
all the bank loans guaranteed by China Netcom Group have been
repaid and the related bank guarantees have been released.
(b) On 12 September 2005, the Company entered into an agreement to
acquire the entire equity interest in China Netcom Group New
Horizon Communications Corporation (BVI) Limited from China Netcom
Group, its ultimate holding company, for a total cash consideration
of RMB 12.8 billion, subject to certain conditions. China Netcom
Group New Horizon Communications Corporation (BVI) Limited
currently operates the fixed line telecommunication businesses in
four provinces/ autonomous regions, namely Shanxi Province, Jilin
Province, Heilongjiang Province and Inner Mongolia Autonomous
Region in the PRC. This proposed acquisition is subject to the
approval of the Company's shareholders. Further details can be
found in the Company's announcement issued on 12 September 2005.
Supplementary financial information
Restated consolidated income statement for the year ended 31 December 2004
The restated consolidated income statement for the year ended 31 December 2004
due to the adoption of new accounting policies set out in note 3 to the interim
financial report is set out below.
For the year ended 31
December 2004
RMB million Restated
Revenues 64,922
------------
Operating expenses
Depreciation and amortisation (18,754)
Networks, operations and support (11,591)
Staff costs (8,059)
Selling, general and administrative (9,566)
Other operating expenses (1,534)
------------
22
Operating profit before interest income and dividend income 15,418
Interest income 76
Dividend income 17
------------
Profit from operations 15,511
Finance costs (2,932)
Share of loss of associated companies (1)
------------
Profit before taxation 12,578
Taxation (3,348)
------------
Profit for the year 9,230
=============
Profit before taxation decreased by RMB18 million is a result of the
retrospective adoption of HKFRS 2 (note 3(a)).
INTERIM DIVIDEND
The board of directors of the Company has resolved that no interim dividend be
paid for the six months ended 30 June 2005.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the six months ended 30 June 2005, neither the Company nor any of its
subsidiaries purchased, sold or redeemed any of the Company's listed
securities.
AUDIT COMMITTEE
The Audit Committee reviewed with management the accounting principles and
practices adopted by the Company and discussed auditing, internal control and
financial report matters including the review of the unaudited interim
financial statements for the six months ended 30 June 2005.
COMPLIANCE WITH THE CODE PROVISIONS SET OUT IN THE CODE ON CORPORATE GOVERNANCE
PRACTICES
The Company has, since October 2004, established an audit committee, a
compensation committee, a strategic planning committee and a corporate
governance committee. In compliance with the relevant code provisions of the
Code on Corporate Governance Practices as set out in Appendix 14 to the Listing
Rules (the "Code on Corporate Governance Practices"), the board of directors of
the Company adopted written terms of reference in respect of each of the audit
committee, the compensation committee, the strategic planning committee and the
corporate governance committee on 1 February 2005.
At the time when the compensation committee was established, it comprised an
executive director, a non-executive director and an independent non-executive
director. In compliance with the relevant code provisions of the Code on
Corporate Governance Practices, Mr. Victor Cha Mou Zing and Mr. Hou Ziqiang,
two of the independent non-executive directors of the Company, were appointed
by the board of directors of the Company on 1 February 2005 as additional
members of the compensation committee.
Save as disclosed above and other than the requirements relating to the
preparation and content of a Corporate Governance Report (which will come into
effect in respect of the Company's annual report for the financial year ending
31 December 2005), the Company has complied with the code provisions of the
Code on Corporate Governance Practices throughout the six months ended 30 June
2005.
23
Under the amended Corporate Governance Rules of New York Stock Exchange, Inc.
(the "NYSE"), foreign issuers (including China Netcom Group Corporation (Hong
Kong) Limited) listed on the NYSE are required to disclose a summary of the
significant differences between their domestic corporate governance rules and
NYSE corporate governance rules that would apply to a U.S. domestic issuer. A
summary of such differences will appear on our website at
http://www.china-netcom.com/english/inv/Corporate_Governance_Differences.htm.
COMPLIANCE WITH THE MODEL CODE
The Company has adopted the Model Code as set out in Appendix 10 to the Listing
Rules. All directors have confirmed, following enquiry by the Company, that
they have complied with the required standard set out in the Model Code
throughout the period from 1 January 2005 to 30 June 2005.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this announcement 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 involve 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. 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.
PUBLICATION OF INTERIM RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG
KONG LIMITED AND THE COMPANY
The 2005 Interim Report will be despatched to shareholders as well as made
available on The Stock Exchange of Hong Kong Limited's website at
http://www.hkex.com.hk and the Company's website at
http://www.china-netcom.com.
The 2005 interim financial information set out above does not constitute the
Group's statutory financial statements for the six months ended 30 June 2005
but is extracted from the financial statements for the six months ended 30 June
2005 to be included in the 2005 Interim Report.
As at the date of this announcement, the board of directors of the Company
comprises Mr. Zhang Chunjiang, Dr. Tian Suning, Mr. Zhang Xiaotie and Mr. Miao
Jianhua as executive directors, Mr. Jiang Weiping, Ms. Li Liming, Mr. Jose
Maria Alvarez-Pallete and Mr. Yan Yixun as non-executive directors, and Mr.
John Lawson Thornton, Mr. Victor Cha Mou Zing, Dr. Qian Yingyi, Mr. Hou Ziqiang
and Mr. Timpson Chung Shui Ming as independent non-executive directors.