<P><FONT size=5><U>高盛：China Telecom Service</U></FONT></P>
<P><FONT size=5><U>Excitement over restructuring newsflow may be premature</U></FONT></P>
<P><FONT size=5><U>Jun 11th 5页</U></FONT></P>

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<P>SCMP reports that SASAC has approved China Unicom split<BR>The June 9 South China Morning Post reported that “China’s State-owned<BR>Assets Supervision and Administration Commission (SASAC) has<BR>approved the dividing of China Unicom...according to Shanghai Securities<BR>News citing unnamed sources.” The story outlines the following scenario,<BR>which is not new in terms of recent market expectations: China Telecom<BR>(CT) gets China Unicom (CU) CDMA, CU GSM merges with China Netcom<BR>(CNC) and China Mobile (CM) purchases China Railcom (CRC, NC). It also<BR>cites CNC’s recent Rmb2 bn bond issuance and CT’s AGM approval to give<BR>management flexibility to issue new shares as supporting evidence.<BR>But this may be a misquote, and SASAC is not the decision-maker<BR>The original Chinese version of the Shanghai Securities News article (from<BR>June 7) (<a href="http://www.cnstock.com/paper_new/html/2007" target="_blank" >http://www.cnstock.com/paper_new/html/2007</A>-<BR>06/07/content_54984612.htm) actually translates as “SASAC may have<BR>preliminarily set its telecom restructuring plan,” i.e. does not say anything<BR>has been “approved”. Moreover, we highlight that SASAC is not the final<BR>decision-maker on restructuring – it may have its own plans/proposals, but<BR>any final decisions are likely to require consensus from SASAC, National<BR>Development &amp; Reform Commission (NDRC) and Ministry of Information<BR>Industry (MII) and ultimately can only be approved by the State Council.</P>