China Netcom Announces 2005 Interim Results.

HONG KONG -- China Netcom Group Corporation (Hong Kong) Limited (HKSE: 0906; NYSE: CN):

--Net profit up by 27.9% to RMB 4.93 billion

--EBITDA increased by 10.7% to RMB 17.61 billion

--EBITDA margin increased to 54.5%

--Net profit margin increased to 15.3%

--Broadband subscribers grew by 84.6%

--PHS subscribers grew by 45.4%

China Netcom Group Corporation (Hong Kong) Limited ("China Netcom" or "the Company") (HKSE: 0906; NYSE: CN), a leading telecommunications company in China and the Asia-Pacific region, today announced its first half results ending 30 June 2005.

In the period under review, the Company achieved continuous revenue growth, significant control of capital expenditure and a substantial improvement in operating efficiency. The Company's revenue increased by 6.8% over the same period last year to RMB 32.30 billion. EBITDA was up by 10.7% to RMB 17.61 billion, and net profit increased by 27.9% to RMB 4.93 billion.

Additionally, the Company's profitability also improved significantly with EBITDA margin at 54.5% compared to 52.6% for the first half of 2004 and net profit margin of 15.3% compared to 12.7% for the first half of 2004.

"We are pleased with our results for the first half which were achieved in a very challenging market environment. Profit increased 27.9 percent as we improved operating efficiency and continued to focus on our three core strategies, 'Broadband, Olympic and International,'" Chairman Zhang Chunjiang commented. "The Beijing Olympics will dramatically accelerate the deployment of broadband services in China and we are uniquely positioned to capitalize on this opportunity through technical, business and service innovation. This will bring rapid growth to our broadband business and other value-added services and help offset declining growth in our traditional businesses, thereby providing sustainable growth in the future. Additionally, the Company and Telefonica, S.A. recently agreed to jointly explore broad strategic cooperation opportunities. While our strong operating results and profitability demonstrate our ability to increase shareholder value, we believe that our shareholders will further benefit from these two recent strategic decisions," concluded Chairman Zhang.

Vice Chairman and Chief Executive Officer Edward Tian added, "Our strong results, particularly the progress we made in our cost control efforts, demonstrate a sharp focus on execution in order to unlock shareholder value. Our focus on growth and efficiency enabled us to improve competitiveness through continuous increase in operating efficiency and proactive marketing efforts."

Broadband and Internet Services

The growth of broadband and internet services remained strong in the first half of 2005. Broadband subscribers grew to 7.73 million, a remarkable increase of 84.6% compared to the same period last year. Broadband service revenues surged by 54.2% to RMB 2.80 billion, representing 8.7% of total revenue for the period under review.

Fixed-line Telephone Services

Local telephone services remained stable throughout the first six months of 2005 and revenues from Local Telephone Services were RMB 16.90 billion, accounting for 52.3% of total revenue. The number of local telephone subscribers reached 85.24 million, representing an increase of 4.86 million subscribers compared to the end of last year. The growth in local telephone subscribers was primarily due to the Company's Personal Handphone System (PHS) services. In the first half of 2005, the number of PHS subscribers reached 18.11 million, an increase of 45.4% compared to the same period last year. The market share of local telephone services in the Northern service region was 93.8%.

Revenues from long distance services were RMB 4.49 billion in the first half of 2005, which accounted for 13.9% of total revenues. Average tariff for long distance service fell slightly due to the increasing use of VoIP. Despite continued growth in the usage volume of domestic long-distance services, revenues generated from these services decreased moderately compared with the same period last year.

Revenues from value-added services were RMB 1.35 billion in the first half of 2005, which represented 4.2% of total revenue. The business remained one of the major growth drivers for the Company. The penetration rate of caller identification was 63.5%, an increase of 5.3 percentage points compared to 31 December 2004. The usage of telephone information services was 1,305 million minutes for the first six months of 2005, an increase of 14.2% over the same period last year.

Business and Data Communication Services

In the first half of 2005, revenues from business and data communication declined slightly to RMB 1.49 billion and accounted for 4.6% of total revenue. During the six month period, managed data services experienced a modest increase with the total leased bandwidth of the DDN, FR and ATM increasing 57.3%, 103.7%, 118.9% respectively compared to the same period last year. Demand for leased line services from carrier customers decreased substantially. However, due to the increase in number and demand from business customers, the overall bandwidth of leased line grew moderately compared to the first half of 2004.

International Telecommunication Services

Revenue from international telecommunication services reached RMB 1.60 billion in the first half of 2005 and accounted for 5% of total revenue. During the period under review, the Company's wholly owed subsidiary Asia Netcom achieved positive EBITDA ahead of plan. In the first six months, points of connection for international managed data reached 3,800, an increase of 165.4% over the same period last year, bandwidth of international leased line services reached 23.2G, an increase of 74.0% over the same period last year and international incoming voice traffic reached 921 million minutes, an increase of 2.4% over the same period last year.

Outlook

In the second half of 2005, China Netcom will continue to leverage the various opportunities brought about by new technologies to accelerate the development of its businesses, upgrade its brand image and push forward with the development of broadband content. The Company will also strengthen its cooperation with international telecom operators with extensive experience in operations so as to further refine its operations and management and develop new businesses. The Company will also work to improve customer service and maximize shareholder return.

* Unless otherwise stated, all financial data used exclude upfront connection fees

** 2004 US pro-forma financial information is prepared in accordance with Article 11 of Regulation S-X under the Securities Act of 1933 issued by The Securities & Exchange Commission of United States of America 

Notice: An archived webcast to discuss China Netcom's results will be posted on Tuesday, 13 September, 2005 on the Company's website at www.china-netcom.com.

About China Netcom:

China Netcom Group Corporation (Hong Kong) Limited ("China Netcom") is a leading fixed-line telecommunications operator in China and a leading international data communications operator in the Asia-Pacific region. Its northern service region in China consists of Beijing Municipality, Tianjin Municipality, Hebei Province, Henan Province, Shandong Province and Liaoning Province. Its southern service region in China consists of Shanghai Municipality and Guangdong Province. China Netcom is the dominant provider of fixed-line telephone services, broadband and other Internet-related services, and business and data communications services in its northern service region in China. China Netcom primarily targets business and residential customers in selected high-density areas in its southern service region in China. China Netcom is also the only telecommunications company in China that operates an extensive network and offers international data services in the Asia-Pacific region.

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts, that address activities, events or developments that China Netcom Group Corporation (Hong Kong) Limited ("China Netcom") expects or anticipates will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. China Netcom's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the level of demand for telecommunications services; competitive forces in more liberalized markets; the effects of tariff reduction initiatives; changes in the regulatory policies and other risks and factors beyond China Netcom's control. In addition, China Netcom makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.