SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

China Unicom (Hong Kong) Limited

(Exact Name of Registrant as Specified in Its Charter)

75/F, The Center,
99 Queen’s Road Central, Hong Kong
(Address of principal executive offices)

     (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 þ  Form 40-F o

     (Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(1): o.)

     (Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(7): o.)

     (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 o  No þ

     (If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-___.)

 

 

EXHIBITS

Exhibit Number
1		Annual Results Announcement of China Unicom (Hong Kong) Limited for the year ended December 31, 2010.

FORWARD-LOOKING STATEMENTS

This announcement contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may include, without limitation, statements relating to the Company’s competitive position; the Company’s business strategies and plans, including those relating to the Company’s networks, services, products, as well as sales and marketing, in particular, such networks, services, products, sales and marketing in respect of the Company’s 3G business; the Company’s future business condition, future financial results, cash flows, financing plans and dividends; the future growth of market demand of, and opportunities for, the Company’s new and existing products and services, in particular, 3G services; and future regulatory and other developments in the PRC telecommunications industry.

The words “anticipate”, “believe”, “could”, “estimate”, “intend”, “may”, “seek”, “will” and similar expressions, as they relate to us, are intended to identify certain of these forward-looking statements. The Company does not intend to update any of these forward-looking statements.

The forward-looking statements contained in this announcement are, by their nature, subject to significant risks and uncertainties. In addition, these forward-looking statements reflect the Company’s current views with respect to future events and are not a guarantee of the Company’s future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of a number of factors, including, without limitation:

•

changes in the regulatory regime and policies for the PRC telecommunications industry, including changes in the regulatory policies of the Ministry of Industry and Information Technology, or the MIIT, the State-owned Assets Supervision and Administration Commission, and other relevant government authorities of the PRC;

•		changes in the PRC telecommunications industry resulting from the issuance of 3G licenses by the central government of the PRC;
•		effects of tariff reduction and other policy initiatives from the relevant PRC government authorities;

•

changes in telecommunications and related technologies and applications based on such technologies;

•

the level of demand for telecommunications services, in particular, 3G services;

•

competitive forces from more liberalized markets and the Company’s ability to retain market share in the face of competition from existing telecommunications companies and potential new market entrants;

•

effects of competition on the demand and price of the Company’s telecommunications services;

•

the availability, terms and deployment of capital and the impact of regulatory and competitive developments on capital outlays;

•

effects of the Company’s restructuring and integration following the completion of the Company’s merger with China Netcom Group Corporation (Hong Kong) Limited;

•

effects of the Company’s adjustments in its business strategies relating to the personal handyphone system, or PHS, business;

•

effects of the Company’s acquisition from its parent companies of certain telecommunications business and assets, including the fixed-line business in 21 provinces in southern China, in January 2009;

•

changes in the assumptions upon which the Company have prepared its projected financial information and capital expenditure plans;

•

changes in the political, economic, legal and social conditions in the PRC, including the PRC Government’s policies and initiatives with respect to economic development in light of the recent global economic downturn, foreign exchange policies, foreign investment activities and policies, entry by foreign companies into the PRC telecommunications market and structural changes in the PRC telecommunications industry; and

•

the recovery from the recent global economic downturn inside and outside the PRC.

Please also see the “Risk Factors” section of the Company’s latest Annual Report on Form 20-F, as filed with the U.S. Securities and Exchange Commission.

SIGNATURES

     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 undersigned, thereunto duly authorized.

Hong Kong Exchange and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(incorporated in Hong Kong with limited liability)
(Stock Code: 0762)

2010 ANNUAL RESULTS ANNOUNCEMENT

Notes:
(a)		Excluding deferred fixed-line upfront connection fees.
(b)		Excluding deferred fixed-line upfront connection fees and realised gain on changes in fair value of derivative financial instrument in 2009.

CHAIRMAN’S STATEMENT

In 2010, the Company focused on the implementation of “3G Leadership and Integrated Innovation Strategies” and actively optimized resource allocation to accelerate innovation and development. As a result, the Company achieved rapid growth in revenue and significant results in structural adjustments, while network capacity and service standards continued to improve, further enhancing its overall competitive strength.

FINANCIAL PERFORMANCE

In 2010, revenue of the Company totaled RMB171.30 billion, an increase of 11.3% compared with last year, of which, telecommunications service revenue was RMB162.00 billion. After excluding deferred upfront connection fee, revenue and telecommunications service revenue would be increased by 11.5% and 8.5% respectively compared with last year. Revenue from mobile business (Note 1) was RM89.55 billion, an increase of 24.4% compared with last year. Revenue from fixed-line business (Note 1) was RMB80.06 billion, a decline of 1.2% compared with last year after excluding deferred upfront connection fee.

Benefit from the rapid growth of revenue, in 2010, EBITDA of the Company was RMB59.59 billion, representing an increase of 2.2% over last year when compared on the same basis (Note 2). However, due to network scale expansion and the initial stage of the 3G business operation, the Company continued to face pressure on profit. Profit for the year was RMB3.85 billion, a decline of 55.0% over last year when compared on the same basis (Note 2). Basic earnings per share was RMB0.163.

As at 31 December 2010, operating cash flows of the Company was RMB66.34 billion, an increase of 14.9% compared with last year. Capital expenditure was RMB70.19 billion, a decline of 37.6% compared with last year. Debt-to-capitalisation ratio was 32.0% and net debt-to-capitalisation ratio was 24.6%. The Company’s debt-to-capitalisation structure remained solid.

Based on the Company’s financial position in 2010 and taking into account the development needs of the mobile and fixed-line broadband businesses, the Board recommends the payment of a final dividend of RMB0.08 per share for the year ended 31 December 2010.

BUSINESS PERFORMANCE

In 2010, the Company’s overall business achieved rapid growth. Driven by its 3G business, the growth of the mobile business accelerated, and telecommunications service revenue exceeded that from fixed-line business for the first time, which accounted for 50.9% of the total telecommunications service revenue. Fixed-line business remained stable, and telecommunication service revenue accounted for 48.6% of the total telecommunications service revenue, declined from 53% of last year. The subscriber structure gradually improved while the business structure and revenue structure became more rationalized.

Mobile business

In 2010, telecommunications service revenue from mobile business was RMB82.36 billion, up by 18.0% compared with last year. Revenue structure continued to improve. Revenue from the mobile non-voice business accounted for 32.0% of telecommunications service revenue from mobile business, an increase of 4.4 percentage points compared with last year. The total number of mobile subscribers reached 167.426 million, an increase of 13.4% compared with last year. The overall ARPU of mobile subscribers was RMB 43.7, an increase of 5.0% compared with last year.

Growth of the 3G business accelerated: In 2010, the Company persisted in its unified 3G operating strategy in brands, services, package, tariffs, handset policies and service standards. The Company also devoted efforts to fully leverage on the advantage of the WCDMA industry chain and created an innovative business development model, and formed a differentiated competitive advantage in the 3G business area.

During the year, the Company proactively adapted to market changes and customer demands, enriched 3G package system, and gradually expanded its target subscriber base. At the same time, the Company actively created an open and collaborative environment, launched more than 100 customized 3G handset models and successfully introduced iPhone4, thereby meeting the demands of subscribers with different spending power on handsets and driving the rapid growth in subscribers. The Company also strived to make breakthroughs in developing the channel system, and established strategic partnerships with mainstream independent channels such as Suning and GOME. Independent channels of 3G business accounted for more than 40% of the sales for the year. The Company launched content application products such as e-reading and WO Store. The contents of mobile newspaper, mobile music and mobile TV were further enriched, leading to a substantial increase in subscriber penetration. The monthly average data usage per subscriber reached 178M, showing the gradual formation of customers’ data consumption habit.

In 2010, telecommunications service revenue of 3G business was RMB11.59 billion, with a quarterly average period-on-period growth of 40.2%. The net additions of 3G subscribers were 11.318 million, taking the subscriber number to 14.06 million, of which, subscribers with handset purchase accounted for 90.4%. The ARPU was RMB124.

The GSM business remained stable: In 2010, the Company actively changed the GSM business development model and leveraged on the advantage of full-service resources to vigorously promote the integrated business and enhance the effectiveness of development. Telecommunications service revenue of the GSM business reached RMB70.77 billion, an increase of 2.6% compared with last year. The net additions of GSM subscribers were 8.521 million, taking the total subscriber number to 153.366 million, an increase of 5.9% compared with last year. The ARPU was RMB39.5, a decrease of 4.1% compared with last year.

Fixed-line business

In 2010, excluding deferred upfront connection fee, telecommunications service revenue from fixed-line business was RMB78.70 billion, a decline of 0.4% compared with last year. The structure of the fixed-line business continued to improve. Revenue from the fixed-line non-voice business exceeded revenue from voice business for the first time, and accounted for 55.2% of telecommunications service revenue from fixed-line business, an increase of 7.1 percentage points compared with last year.

The fixed-line broadband business continued to grow rapidly: In 2010, the Company continued to upgrade broadband and enhance broadband speed, actively developed the incremental markets and stepped up efforts to market content applications. The fixed-line broadband business maintained a rapid growth and recorded revenue of RMB29.82 billion, an increase of 24.8% compared with last year. As at the end of 2010, the total number of fixed-line broadband subscribers was 47.224 million, an increase of 22.5% compared with last year. The ARPU was RMB57.1, largely in line with last year.

The decline in the fixed-line voice business (Note 3) slowed down: In 2010, the Company actively promoted the integrated business, implemented the sales and marketing of voice volume package and endeavored to slow down the decline in the fixed-line voice business (Note 3). The fixed-line voice business recorded revenue of RMB40.12 billion, a decline of 13.3% compared with last year. The total loss of local telephone subscribers was 6.187 million and the total number of subscribers was 96.635 million, of which, the loss of PHS subscribers was 5.319 million and the total number of subscribers was 13.423 million. The ARPU of local telephone subscribers was RMB 28.9, a decline of 8.0% compared with last year.

Integrated business and industry applications

In 2010, the Company stepped up efforts to develop and market industry application products, optimized the composition of corporate clients and enhanced front desk sales capability and the capability of providing industry application solutions. During the year, the Company launched 22 industry application products such as video monitoring, intelligent public transport and achieved breakthrough progress in the promotion of industry applications such as mobile office and mobile stocks, driving the rapid growth of the corporate client business.

For family customers, the Company focused on promoting integrated products such as airtime sharing and single bill payment, resulting in a rapid growth in subscribers of integrated service packages. At the end of the year, the Company launched “WO•Family” to offer integrated 3G and broadband service experience to subscribers, which would drive the growth of fixed-line broadband and mobile subscribers, enhance loyalty of fixed-line users and increase network value of fixed-line.

Network Building

In 2010, the Company exerted itself to strengthen the breadth and depth of the coverage of 3G networks, continued to enhance the GSM network and accelerated the broadband network upgrade and speed enhancement. As a result, the network capacity continued to strengthen, which provided strong support for business development. As at 31 December 2010, the number of 3G base stations was 183,000, an increase of 70.8% compared with last year. The number of GSM base stations was 329,000, an increase of 15.5% compared with last year. The 3G network coverage reached cities at county level and above throughout the country, as well as villages and towns in eastern developed area. The GSM network coverage reached all villages and towns except remote areas, as well as almost all administrative villages. The number of fixed-line broadband access ports was 65.83 million, an increase of 29.3% compared with last year, of which, ports with 20M or above accounted for 38%.

Management Reform

In 2010, the Company persisted in management system and mechanism innovation, optimized the marketing structure targeting general public and corporate clients, and integrated the new product operation framework, which effectively enhanced the responsiveness to the market and product support capability. The Company implemented the ERP core system on a nationwide basis and established the local network evaluation system, which laid a solid foundation for implementing refined management and a scientific and effective resource allocation mechanism.

By adapting to the changes in the subscriber structure and consumption habit, the Company swiftly promoted reforms in customer service and took the initiative to implement the 3G-dedicated customer care model and established nationwide unified new channels for services such as online stores and mobile stores. The Company exerted itself to enhance service capability targeting high-end subscribers and strengthened integrated business and new business service capability, resulting in a continued enhancement in customer experience.

In 2010, with the wide promotion of the “WO” brand, the improvement in network quality and product and service experience, the influence of the Company’s “WO” brand continued to grow.

OUTLOOK

The information communication technology industry is experiencing significant innovations and reforms. The cross-sector integration of the industry and the rapid development of the mobile Internet have led to tremendous new business opportunities with an enormous development potential. The Company will firmly grasp this valuable strategic opportunity to further implement the “3G Leadership and Integrated Innovation Strategies” and endeavor to achieve new breakthroughs in the scale of development and an overall improvement in its comprehensive strength and quickly become an “innovation and service leader for information life”. In 2011, the Company’s major operating measures and objectives include:

The Company will strive to achieve breakthrough in 3G, broadband and other key businesses in terms of economies of scale, further increase its overall revenue and continue to improve its profitability. The Company will further optimize the product structure, enhance terminal driven and leverage on the advantage of integration to facilitate a breakthrough development of revenue and subscribers from 3G business. The Company will implement the sophisticated marketing of the GSM business and ensure the steady development of the GSM business. The Company will also maintain the rapid growth of the fixed-line broadband business so as to achieve continuous improvement in the structure of the fixed-line business. The Company will actively promote the integration of mobile and fixed-line business, provide enterprises, families and individuals with better variety of information services, so as to meet customer demands on comprehensive one-stop information service, and achieve economies of scale and new breakthroughs for its business integration and development of industry applications for key sectors.

By firmly grasping the great opportunity in the development of new technologies and new businesses in relation to information networks, the Company will expedite the development of the emerging information service industry and step up efforts in promoting key content application products such as mobile e-commerce, video, reading and social network. In addition, the Company will strengthen commercialization and application promotion of key technologies such as new generation mobile communication, next generation Internet, the Internet of Things and Cloud Computing. The Company aims to boost subscribers’ consumption in data services by providing differentiated services and diversified content applications, further increase the income contribution from the non-voice business and promote the transformation of the development of the Company.

Capitalizing on the opportunity of constructing information technology facilities for the next generation, the Company is devoted to continuously create the 3G premium network and accelerate the establishment of WLAN to maintain its leading position in the 3G network industry. Furthermore, the Company will continue to refine the GSM network, expedite the upgrading and speed enhancement of broadband and carry forward the establishment of the all-optical network. In 2011, the Company will launch HSPA+ in major cities and increase the network downlink rate from 14.4M at present to 21M.

The Company will also actively promote service innovation, and further enhance service capabilities; speed up the construction of information support system to provide a firm support for the continuous reformation of its sales services and management; deepen the implementation of cost evaluation management of local network to optimize the allocation of resources; and actively explore innovative systems and mechanisms to inject new vitality into the Company’s development.

Lastly, on behalf of the Board of the Company, I would like to express my sincere gratitude to the shareholders, the government and the community for their support to the development of the Company, and also to the management and all staff members of the Company for their unremitting efforts in the development of the Company.

Chang Xiaobing

Chairman and Chief Executive Officer

Hong Kong, 29 March 2011

Note 1: Revenue from mobile business and the fixed-line business represents revenues from external customers, excluding inter-segment revenue.

Note 2: The non-comparable factors below which are reflected in the figures of current year and last year are excluded: (1) deferred fixed-line upfront connection fees of RMB0.19 billion for 2010 and RMB0.49 billion for 2009, and (2) realised gain of RMB1.24 billion on changes in fair value of derivative financial instrument in 2009.

Note 3: The fixed-line business includes local voice, long-distance, fixed-line value-added and inter-network settlement businesses.

GROUP RESULTS

China Unicom (Hong Kong) Limited (the “Company”) is pleased to announce the consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2010, which were extracted from the audited financial statements of the Group as set out in the Company’s 2010 Annual Report.

CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2010
(All amounts in Renminbi (“RMB”) millions)

				As at 31 December
		Note		2010				2009
ASSETS
Non-current assets
Property, plant and equipment					366,060				351,157
Lease prepayments					7,607				7,729
Goodwill					2,771				2,771
Deferred income tax assets					4,840				5,202
Available-for-sale financial assets		6			6,214				7,977
Other assets					11,753				11,596
					399,245				386,432
Current assets
Inventories and consumables					3,728				2,412
Accounts receivable, net		7			9,286				8,825
Prepayments and other current assets					5,115				4,252
Amounts due from related parties					50				53
Amounts due from domestic carriers					1,261				1,134
Proceeds receivable for disposal of the CDMA business					—				5,121
Short-term bank deposits					273				996
Cash and cash equivalents					22,495				7,820
					42,208				30,613
Total assets					441,453				417,045
EQUITY
Equity attributable to owners of the parent
Share capital		8			2,310				2,310
Share premium		8			173,436				173,435
Reserves		9			(18,273	)			(18,088	)
Retained profits
- Proposed final dividend		17			1,885				3,770
- Others					46,483				45,038
					205,841				206,465
Non-controlling interests					—				2
Total equity					205,841				206,467

				As at 31 December
		Note		2010				2009
LIABILITIES
Non-current liabilities
Long-term bank loans					1,462				759
Promissory notes		10			15,000				—
Convertible bonds		11			11,558				—
Corporate bonds					7,000				7,000
Deferred income tax liabilities					22				245
Deferred revenue					2,171				2,562
Other obligations					162				187
					37,375				10,753
Current liabilities
Accounts payable and accrued liabilities		12			97,659				104,072
Taxes payable					1,484				912
Amounts due to ultimate holding company					229				308
Amounts due to related parties					5,191				5,438
Amounts due to domestic carriers					873				1,136
Payables in relation to disposal of the CDMA business					—				7
Commercial papers		13			23,000				—
Short-term bank loans		14			36,727				63,909
Current portion of long-term bank loans					58				62
Dividend payable		17			431				331
Current portion of deferred revenue					1,042				1,397
Current portion of other obligations					2,637				2,534
Advances from customers					28,906				19,719
					198,237				199,825
Total liabilities					235,612				210,578
Total equity and liabilities					441,453				417,045
Net current liabilities					(156,029	)			(169,212	)
Total assets less current liabilities					243,216				217,220

CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
(All amounts in RMB millions, except per share data)

				Year ended 31 December
		Note		2010				2009
Revenue		15			171,298				153,945
Interconnection charges					(13,727	)			(12,955	)
Depreciation and amortisation					(54,433	)			(47,587	)
Networks, operations and support expenses					(26,383	)			(23,728	)
Employee benefit expenses					(23,327	)			(21,931	)
Other operating expenses					(48,269	)			(36,723	)
Finance costs					(1,749	)			(1,036	)
Interest income					142				91
Realised gain on changes in fair value of derivative financial instrument		16			—				1,239
Other income — net					1,221				962
Profit before income tax					4,773				12,277
Income tax expenses		5			(922	)			(2,721	)
Profit for the year					3,851				9,556
Profit attributable to:
Owners of the parent					3,851				9,556
Non-controlling interests					—				—
					3,851				9,556
Earnings per share for profit attributable to owners of the parent during the year
Basic earnings per share (RMB)		18			0.16				0.40
Diluted earnings per share (RMB)		18			0.16				0.40

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
(All amounts in RMB millions)

		Year ended 31 December
		2010				2009
Profit for the year			3,851				9,556
Other comprehensive loss:
Changes in fair value on available-for-sale financial assets			(1,777	)			(71	)
Tax effect on changes in fair value on available-for-sale financial assets			437				33
Changes in fair value on available-for-sale financial assets, net of tax			(1,340	)			(38	)
Currency translation differences			6				—
Other comprehensive loss for the year, net of tax			(1,334	)			(38	)
Total comprehensive income for the year			2,517				9,518
Total comprehensive income attributable to:
Owners of the parent			2,517				9,518
Non-controlling interests			—				—
			2,517				9,518

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2010
(All amounts in RMB millions)

				Year ended 31 December
		Note		2010				2009
Cash flows from operating activities
Cash generated from operations		(a)			69,260				63,990
Interest received					148				93
Interest paid					(2,025	)			(1,681	)
Income tax paid					(1,039	)			(4,669	)
Net cash inflow from operating activities					66,344				57,733
Cash flows from investing activities
Purchase of property, plant and equipment					(75,555	)			(78,130	)
Proceeds from disposal of property, plant and equipment and other assets					375				611
Dividends received from available-for-sale financial assets					416				177
Consideration for purchase of entities and businesses under common control					—				(3,896	)
Decrease/(increase) in short-term bank deposits					723				(659	)
Purchase of other assets					(2,573	)			(3,411	)
Proceeds/(payment) for disposal of the CDMA business in 2008					5,121				(5,039	)
Net cash outflow from investing activities					(71,493	)			(90,347	)

				Year ended 31 December
		Note		2010				2009
Cash flows from financing activities
Proceeds from commercial papers					22,928				—
Proceeds from short-term bank loans					114,182				96,204
Proceeds from long-term bank loans					800				—
Proceeds from issuance of promissory notes					14,954				—
Proceeds from issuance of convertible bonds					12,145				—
Proceeds from related party loans					—				2,114
Repayment of commercial papers					—				(10,000	)
Repayment of short-term bank loans					(141,364	)			(43,075	)
Repayment of long-term bank loans					(51	)			(1,406	)
Repayment of capital element of finance lease					(36	)			—
Payment of prior year profit transfer					(64	)			(266	)
Consideration for off-market share repurchase					—				(8,802	)
Dividends paid to owners of the parent		17			(3,670	)			(4,572	)
Net cash inflow from financing activities					19,824				30,197
Net increase/(decrease) in cash and cash equivalents					14,675				(2,417	)
Cash and cash equivalents, beginning of year					7,820				10,237
Cash and cash equivalents, end of year					22,495				7,820
Analysis of the balances of cash and cash equivalents:
Cash balances					6				7
Bank balances					22,489				7,813
					22,495				7,820

		Year ended 31 December
		2010				2009
Profit before income tax			4,773				12,277
Adjustments for:
Depreciation and amortisation			54,433				47,587
Interest income			(142	)			(91	)
Finance costs			1,736				828
Gain on disposal of property, plant and equipment and other assets			(11	)			(91	)
Gain on non-monetary assets exchange			(10	)			(38	)
Share-based compensation costs			56				27
Provision for doubtful debts			2,583				2,355
Realised gain on changes in fair value of derivative financial instruments			—				(1,239	)
Dividends from available-for-sale financial assets			(485	)			(215	)
Changes in working capital:
Increase in accounts receivable			(3,044	)			(1,839	)
Increase in inventories and consumables			(1,316	)			(1,320	)
Decrease /(increase) in other assets			755				(125	)
Increase in prepayments and other current assets			(868	)			(1,539	)
Decrease in amounts due from related parties			3				75
Increase in amounts due from domestic carriers			(127	)			(160	)
Increase in accounts payable and accrued liabilities			1,615				3,480
Increase in taxes payable			1,328				1,179
Increase in advances from customers			9,187				4,805
Decrease in deferred revenue			(746	)			(1,639	)
Decrease in other obligations			—				(2,101	)
(Decrease)/increase in amounts due to ultimate holding company			(78	)			413
(Decrease)/increase in amounts due to related parties			(112	)			1,942
(Decrease)/increase in amounts due to domestic carriers			(263	)			180
Decrease in payables in relation to disposal of the CDMA business			(7	)			(761	)
Cash generated from operations			69,260				63,990

NOTES (All amounts in RMB millions unless otherwise stated)

1. GENERAL INFORMATION

China Unicom (Hong Kong) Limited (the “Company”) was incorporated as a limited liability company in the Hong Kong Special Administrative Region (“Hong Kong”), the People’s Republic of China (the “PRC”) on 8 February 2000. After disposal of the CDMA business to China Telecom Corporation Limited (“China Telecom”) on 1 October 2008, the merger with China Netcom Group Corporation (Hong Kong) Limited (“China Netcom”) on 15 October 2008 and the launch of WCDMA mobile business on 1 October 2009, the principal activities of the Company are investment holding and the Company’s subsidiaries are principally engaged in the provision of cellular and fixed-line voice and related value-added services, broadband and other Internet-related services, information communications technology services, and business and data communications services in the PRC. The GSM cellular voice, WCDMA cellular voice and related value-added services is referred to as the “Mobile business”, the services aforementioned other than the Mobile business is hereinafter collectively referred to as the “Fixed-line business”. The Company and its subsidiaries are hereinafter referred to as the “Group”. The address of its registered office is 75th Floor, The Center, 99 Queen’s Road Central, Hong Kong.

The shares of the Company were listed on the Stock Exchange of Hong Kong Limited (“SEHK”) on 22 June 2000 and the American Depositary Shares (“ADS”) of the Company were listed on the New York Stock Exchange on 21 June 2000.

The substantial shareholders of the Company are China Unicom (BVI) Limited (“Unicom BVI”) and China Netcom Group Corporation (BVI) Limited (“Netcom BVI”). The majority of equity interests in Unicom BVI is owned by China United Network Communications Limited (“A Share Company”, a joint stock company incorporated in the PRC on 31 December 2001, with its A shares listed on the Shanghai Stock Exchange on 9 October 2002). The majority of the equity interest in A Share Company is owned by China United Network Communications Group Company Limited (a state-owned enterprise established in the PRC, hereinafter referred to as “Unicom Group”). Netcom BVI is a wholly-owned subsidiary of Unicom Group. As a result, the directors of the Company consider Unicom Group to be the ultimate holding company.

The financial figures in respect of the announcement of the Group’s results for the year ended 31 December 2010 have been agreed by the Group’s auditor, PricewaterhouseCoopers, to the amounts set out in the Group’s audited consolidated financial statements for the year. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and consequently no assurance has been expressed by PricewaterhouseCoopers on the announcement.

(a) Acquisitions of certain assets and businesses from Unicom Group and China Network Communications Group Corporation in 2009

On 31 January 2009, China United Network Communications Corporation Limited (“CUCL”, a wholly-owned subsidiary of the Company) completed the acquisition from Unicom Group and China Netcom Communications Group Corporation (“Netcom Group”, which merged with Unicom Group in January 2009) of (i) the fixed-line business, but not the underlying telecommunications networks, across the 21 provinces in Southern China and related non-current assets and liabilities (hereinafter referred to as the “Fixed-line Business in Southern China”) and the local access telephone business and related assets in Tianjin Municipality operated by Netcom Group and Unicom Group and/or their respective subsidiaries and branches; (ii) the backbone transmission assets in Northern China owned by Netcom Group and/or its subsidiaries (“Target Assets”); (iii) a 100% equity interest in Unicom Xingye Science and Technology Trade Company Limited (“Unicom Xingye”) owned by Unicom Group; (iv) a 100% equity interest in China Information Technology Designing & Consulting Institute Company Limited (“CITDCI”) owned by Unicom Group and (v) a 100% equity interest in New Guoxin Telecom Corporation of China Unicom (“New Guoxin”) owned by Unicom Group at a consideration of approximately RMB4.43 billion. The businesses and assets described in (i), (iii), (iv) and (v) above are hereinafter collectively referred to as the “Target Business” and the acquisition of the Target Business is referred to as the “2009 Business Combination”.

(b) Lease of telecommunications networks in Southern China from Unicom New Horizon Mobile Telecommunications Company Limited

In connection with the 2009 Business Combination, on 16 December 2008, CUCL, Unicom Group, Netcom Group and Unicom New Horizon Mobile Telecommunications Company Limited (“Unicom New Horizon”, a wholly-owned subsidiary of Unicom Group) entered into an agreement (the “Network Lease Agreement”) in relation to the lease (the “Lease”) of the fixed-line telecommunications networks of the 21 provinces in Southern China (“Telecommunications Networks in Southern China”) by CUCL from Unicom New Horizon on an exclusive basis immediately following and subject to the completion of the 2009 Business Combination. Under the Network Lease Agreement, CUCL shall pay annual leasing fees of RMB2.0 billion and RMB2.2 billion for the two financial years ended 31 December 2009 and 31 December 2010, respectively. The initial term of the Lease is two years effective from January 2009 and the Lease is renewable at the option of CUCL with at least two months’ prior notice on the same terms and conditions, except for the future lease fee which will remain subject to further negotiations between the parties, taking into account, among others, the then prevailing market conditions in Southern China. Moreover, in connection with the Lease, Unicom New Horizon has granted to CUCL an option to purchase the Telecommunications Networks in Southern China and the purchase price will be referenced to the then appraised value of the networks determined by an independent appraiser.

On 29 October 2010, CUCL and Unicom New Horizon entered into a new network lease agreement (“2011-2012 Network Lease Agreement”) to renew the Lease for a term of two years expiring on 31 December 2012 on the same terms and conditions as the Network Lease Agreement dated on 16 December 2008, except that the annual fee payable by CUCL for the Lease for the two years ending 31 December 2011 and 2012 is RMB2.4 billion and RMB2.6 billion, respectively.

2. STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IASs”) and Interpretations issued by the IASB. Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the HKICPA, are consistent with IFRSs. These financial statements also comply with HKFRSs as well as the applicable disclosure provisions of the Rules Governing the Listing of Securities on the SEHK and the requirements of the Hong Kong Companies Ordinance.

3. BASIS OF PREPARATION

The consolidated financial statements have been prepared under the historical cost convention, modified by the revaluation of property, plant and equipment (other than buildings and telecommunications equipment of the Mobile business), available-for-sale financial assets and derivative financial instrument at fair value through profit or loss.

(a) Business Combination of Entities and Businesses under Common Control and Purchase of Target Assets

The 2009 Business Combination was considered a business combination of entities and businesses under common control as the Target Business before and after the acquisition was under the control of Unicom Group, the Group’s ultimate holding company.

Under HKFRSs, the 2009 Business Combination was accounted for using merger accounting in accordance with the Accounting Guideline 5 “Merger accounting for common control combinations” (“AG 5”) issued by the HKICPA. Upon the adoption of IFRSs by the Group in 2008, the Group adopted the accounting policy to account for business combinations of entities and businesses under common control using the predecessor values method, which is consistent with HKFRSs. Accordingly, the acquired assets and liabilities are stated at predecessor values, and were included in the consolidated financial statements from the beginning of the earliest period presented as if the entities and businesses acquired had always been part of the Group.

Under IFRSs/HKFRSs, the purchase of the Target Assets in 2009 of approximately RMB0.53 billion was accounted for as an asset purchase in accordance with IAS/HKAS 16 “Property, plant and equipment” in the period of purchase.

(b) Restatement of the Consolidated Financial Statements for the Years Ended 31 December 2008 and 2007

The Group previously recognised the 2009 Business Combination at historical cost or predecessor values as if such business had always been part of the Group during all the periods presented, and (i) included all the assets, liabilities, revenue and expenses directly related to the 2009 Business Combination, except for the Telecommunications Networks in Southern China and associated loans that were not acquired (“Excluded Assets and Liabilities”) and the related depreciation and finance costs, and (ii) supplemented such information with disclosure of the assets and related liabilities, and the related charges that were excluded, together with details of the lease payments that were made to Unicom New Horizon following the completion of the 2009 Business Combination.

As part of a review of the Company’s 2009 Form 20-F in 2010, the Staff of Division of Corporation Finance of the Securities and Exchange Commission (“DCF”) raised questions on the accounting treatment of the 2009 Business Combination. The Company has discussed with the DCF and determined to include all Excluded Assets and Liabilities and the related charges in the financial statements for the historical periods prior to the completion of the 2009 Business Combination, instead of disclosing such information in the notes to the financial statements. Accordingly, the Company has amended and restated the financial statements for the historical periods prior to the completion of the 2009 Business Combination. As a result, this presentation of the financial statements for the historical periods prior to the completion of the 2009 Business Combination includes Excluded Assets and Liabilities and the related charges incurred in the generation of the reported revenues, although the Excluded Assets and Liabilities were not acquired in the 2009 Business Combination. Upon the completion of the 2009 Business Combination, the Excluded Assets and Liabilities were deemed to be disposed of, which had been recorded as a distribution from reserves to Unicom Group.

The total assets and liabilities associated with the Telecommunications Networks in Southern China as at 31 December 2008, which were approximately RMB31,566 million and RMB42,060 million respectively, had been included in the restated consolidated balance sheet as at 31 December 2008 and had been subsequently recorded as a distribution from reserves to Unicom Group in January 2009 upon the completion of the 2009 Business Combination. In addition, the depreciation and amortisation, impairment loss on property, plant and equipment, other operating expenses, finance costs and other income associated with the Excluded Assets and Liabilities for the year ended 31 December 2008, which were approximately RMB3,886 million, RMB657 million, RMB249 million, RMB846 million and RMB44 million, respectively (2007: approximately RMB3,650 million, RMB323 million, RMB171 million, RMB499 million and RMB2 million, respectively), had been included in the restated consolidated statement of income for the years ended 31 December 2008 and 2007.

The 2009 Business Combination was completed on 31 January 2009 and therefore the consolidated statement of income for the year ended 31 December 2009 would have included the depreciation and amortisation charges of approximately RMB308 million and finance costs of approximately RMB26 million associated with the Excluded Assets and Liabilities for the period from 1 January 2009 to 31 January 2009. However, considering the amounts were not material, the Company did not restate the consolidated statement of income for the year ended 31 December 2009. In addition, the aforementioned restatement did not have any significant impact on the consolidated financial statements for the year ended 31 December 2010.

(c) Going Concern Assumption

As at 31 December 2010, current liabilities of the Group exceeded current assets by approximately RMB156.0 billion (2009: approximately RMB169.2 billion). Given the current global economic conditions and the Group’s expected capital expenditures in the foreseeable future, management has comprehensively considered the Group’s available sources of funds as follows:

•    The Group’s continuous net cash inflows from operating activities;

•    Revolving banking facilities of approximately RMB114.0 billion, of which approximately RMB88.4 billion was unutilised as at 31 December 2010; and

•    Other available sources of financing from domestic banks and other financial institutions given the Group’s credit history.

In addition, the Group will continue to optimise its fund raising strategy from the short, medium and long-term perspectives and maintain reasonable financing costs through appropriate financing portfolio.

Based on the above considerations, the Board of Directors is of the opinion that the Group has sufficient funds to meet its working capital requirements and debt obligations. As a result, the consolidated financial statements of the Group for the year ended 31 December 2010 have been prepared under the going concern basis.

(d) Critical Accounting Estimates and Judgment

Except for those new/revised standards and amendments to standards adopted for the first time for the financial year beginning 1 January 2010 which are detailed in Note 2 “Summary of significant accounting policies”, to the consolidated financial statements as set out in the Group’s 2010 annual report, the significant accounting policies adopted and critical accounting estimates and judgment made in the preparation of the annual financial statement for the year ended 31 December 2010 are consistent with those used in preparing the annual financial statements for the year ended 31 December 2009.

4. SEGMENT INFORMATION

The Chief Operating Decision Maker (“CODM”) has been indentified as the Board of Directors (“the BOD”) of the Company which regularly reviews the Group’s internal reporting in order to assess performance and allocate resources, and determines the operating segments based on these reports. The BOD considers the business from the provision of services perspective instead of the geographic perspective. Accordingly, the Group’s operations comprise two operating segments based on the various types of telecommunications services, mainly provided to customers in Mainland China.

The major operating segments of the Group are classified as follows:

•    Mobile business — the provision of GSM and WCDMA cellular and related services in all 31 provinces, municipalities and autonomous regions in Mainland China;

•    Fixed-line business — the provision of fixed-line telecommunications and related services, domestic and international data and Internet related services, and domestic and international long distance and related services in all 31 provinces, municipalities and autonomous regions in Mainland China.

The CODM evaluates results of each operating segments based on revenue and costs that are directly attributable to the operating segments. The unallocated amounts primarily represent corporate and shared service expenses that are not directly allocated to one of the aforementioned operating segments. The unallocated amounts also included other statement of income items such as employee benefit expenses, interest income, income tax expenses, finance costs and other income, which cannot be directly identified to specific operating segments. Segment assets primarily comprise property, plant and equipment, other assets, inventories and receivables. Segment liabilities primarily comprise operating liabilities.

Revenue between segments are carried out on terms comparable to those transactions conducted with third parties or at standards promulgated by relevant government authorities. Revenue from external customers reported to the CODM is measured in a manner consistent with that in the consolidated statement of income.

4.1 Operating Segments

		2010
														Reconciling items
		Mobile				Fixed-line								Unallocated
		Business				business				Subtotal				amounts				Eliminations				Total
Telecommunications service revenue			82,362				78,896				161,258				737				—				161,995
Information communication technology services and other revenue			15				1,046				1,061				955				—				2,016
Sales of telecommunications products			7,173				114				7,287				—				—				7,287
Total revenue from external customers			89,550				80,056				169,606				1,692				—				171,298
Intersegment revenue			205				4,233				4,438				742				(5,180	)			—
Total revenue			89,755				84,289				174,044				2,434				(5,180	)			171,298
Interconnection charges			(14,452	)			(3,706	)			(18,158	)			—				4,431				(13,727	)
Depreciation and amortisation			(23,358	)			(28,830	)			(52,188	)			(2,317	)			72				(54,433	)
Networks, operations and support expenses			(3,102	)			(9,409	)			(12,511	)			(13,876	)			4				(26,383	)
Employee benefit expenses			—				—				—				(23,517	)			190				(23,327	)
Other operating expenses			(22,056	)			(8,491	)			(30,547	)			(18,032	)			310				(48,269	)
Finance costs			—				—				—				(1,985	)			236				(1,749	)
Interest income			—				—				—				378				(236	)			142
Other income — net			—				—				—				1,221				—				1,221
Segment profit/(loss) before income tax			26,787				33,853				60,640				(55,694	)			(173	)			4,773
Income tax expenses																							(922	)
Profit for the year																							3,851
Attributable to:
Owners of the parent																							3,851
Non-controlling interests																							—
																							3,851
Other information:
Provision for doubtful debts			(1,927	)			(649	)			(2,576	)			(7	)			—				(2,583	)
Capital expenditures for segment assets (a)			29,620				34,393				64,013				6,176				—				70,189

		2009
														Reconciling items
		Mobile				Fixed-line								Unallocated
		business				business				Subtotal				amounts				Eliminations				Total
Telecommunications service revenue			69,769				79,549				149,318				275				—				149,593
Information communication technology services and other revenue			252				1,611				1,863				326				—				2,189
Sales of telecommunications products			1,970				193				2,163				—				—				2,163
Total revenue from external customers			71,991				81,353				153,344				601				—				153,945
Intersegment revenue			219				4,237				4,456				1,587				(6,043	)			—
Total revenue			72,210				85,590				157,800				2,188				(6,043	)			153,945
Interconnection charges			(13,104	)			(4,292	)			(17,396	)			—				4,441				(12,955	)
Depreciation and amortisation			(17,847	)			(28,264	)			(46,111	)			(1,505	)			29				(47,587	)
Networks, operations and support expenses			(2,496	)			(7,780	)			(10,276	)			(13,471	)			19				(23,728	)
Employee benefit expenses			—				—				—				(22,104	)			173				(21,931	)
Other operating expenses			(11,671	)			(8,783	)			(20,454	)			(17,465	)			1,196				(36,723	)
Finance costs			—				—				—				(1,214	)			178				(1,036	)
Interest income			—				—				—				269				(178	)			91
Realised gain on changes in fair value of derivative financial instrument			—				—				—				1,239				—				1,239
Other income — net			—				—				—				962				—				962
Segment profit/(loss) before income tax			27,092				36,471				63,563				(51,101	)			(185	)			12,277
Income tax expenses																							(2,721	)
Profit for the year																							9,556
Attributable to:
Owners of the parent																							9,556
Non-controlling interests																							—
																							9,556
Other information:
Provision for doubtful debts			(1,494	)			(858	)			(2,352	)			(3	)			—				(2,355	)
Capital expenditures for segment assets (a)			56,984				46,494				103,478				8,996				—				112,474

		31 December 2010
														Reconciling items
		Mobile				Fixed-line								Unallocated
		business				business				Subtotal				amounts				Eliminations				Total
Total segment assets			170,839				225,769				396,608				46,446				(1,601	)			441,453
Total segment liabilities			74,141				48,386				122,527				114,184				(1,099	)			235,612

										31 December 2009
														Reconciling items
		Mobile				Fixed-line								Unallocated
		business				business				Subtotal				amounts				Eliminations				Total
Total segment assets			170,577				213,172				383,749				34,470				(1,174	)			417,045
Total segment liabilities			74,411				51,066				125,477				85,948				(847	)			210,578

 

5. TAXATION

Hong Kong profits tax has been provided at the rate of 16.5% (2009: 16.5%) on the estimated assessable profits for the year. Taxation on profits from outside Hong Kong has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Group operates, the Company’s subsidiaries mainly operated in the PRC and the applicable standard enterprise income tax rate is 25% (2009: 25%).

		2010				2009
Provision for income tax on the estimated taxable profits for the year
- Hong Kong			18				45
- Outside Hong Kong			328				2,282
			346				2,327
Deferred taxation			576				394
Income tax expense			922				2,721

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS

		2010				2009
Equity securities issued by corporates			6,214				7,977
Analysed by place of listing:
Listed in the PRC			127				188
Listed outside the PRC			6,087				7,789
			6,214				7,977

For the year ended 31 December 2010, changes in fair value on available-for-sale financial assets amounted to approximately RMB1,777 million (2009: approximately RMB71 million). The changes in fair value, net of tax impact of approximately RMB437 million (2009: approximately RMB33 million) was recorded in the consolidated statement of comprehensive income.

7. ACCOUNTS RECEIVABLE, NET

The aging analysis of accounts receivable is as follows:

		2010				2009
Within one month			6,625				6,384
More than one month to three months			1,316				1,235
More than three months to one year			3,054				2,936
More than one year			2,271				2,340
			13,266				12,895
Less: Provision for doubtful debts			(3,980	)			(4,070	)
			9,286				8,825

The normal credit period granted by the Group is on average between 30 days to 90 days from the date of billing.

There is no significant concentration of credit risk with respect to customer receivables, as the Group has a large number of customers.

8. SHARE CAPITAL

		2010				2009
		HKD millions				HKD millions
Authorised:
30,000,000,000 ordinary shares of HKD0.10 each			3,000				3,000

						Ordinary
						shares, par
						value of
		Number of				HKD0.10
		shares				each HKD				Share				Share
Issued and fully paid:		millions				millions				capital				premium				Total
At 1 January 2009			23,768				2,376				2,329				166,784				169,113
Issuance of shares for mutual investment by the Company and Telefónica (Note a)			694				69				60				6,651				6,711
Off-market share repurchase (Note b)			(900	)			(90	)			(79	)			—				(79	)
At 31 December 2009			23,562				2,355				2,310				173,435				175,745
Issuance of shares upon exercise of options			—				—				—				1				1
At 31 December 2010			23,562				2,355				2,310				173,436				175,746

Note a: On 21 October 2009, the Company issued 693,912,264 ordinary shares of HKD0.10 each at a price of HKD11.17 per share in exchange for 40,730,735 Telefónica S.A. (“Telefónica”) treasury shares at a price of Euro17.24 each.

Note b: Pursuant to a special resolution passed at the extraordinary general meeting held on 3 November 2009, the Company repurchased 899,745,075 shares, being all the shares previously owned by SK Telecom Co., Ltd, by way of an off-market share repurchase. The total consideration of HKD9,991,669,058, being HKD11.105 for each share, was satisfied in cash upon completion. The total consideration of HKD9,991,669,058 (equivalent to RMB8,801,661,273) was charged to retained profits. The repurchased shares were cancelled subsequently.

In addition, pursuant to Section 49H of the Hong Kong Companies Ordinance, an amount equivalent to the par value of the shares cancelled of HKD89,974,508 (equivalent to RMB79,258,544) was transferred from share capital to the capital redemption reserve.

9. RESERVES

						Employee								Available-
		Capital				share-based								for-sale
		redemption				compensation				Revaluation				fair value				Statutory				Other
		reserve				reserve				reserve				reserve				reserves				Reserve				Total
Balance at 1 January 2009 (As previously reported)			—				540				161				44				22,992				(39,201	)			(15,464	)
Adjusted for 2009 Business Combination (Note 3 (b))			—				—				—				—				—				(10,494	)			(10,494	)
Balance at 1 January 2009 (As restated)			—				540				161				44				22,992				(49,695	)			(25,958	)
Other comprehensive loss for the year, net of tax			—				—				—				(38	)			—				—				(38	)
Transfer of assets and liabilities under common control to Unicom Group in relation to 2009 Business Combination			—				—				—				—				—				10,494				10,494
Consideration for 2009 Business Combination under common control (Note 1(a))			—				—				—				—				—				(3,896	)			(3,896	)
Transfer to retained profits in respect of depreciation on revalued assets			—				—				(55	)			—				—				—				(55	)
Transfer to statutory reserves			—				—				—				—				490				—				490
Appropriation to statutory reserves			—				—				—				—				769				—				769
Equity-settled share option schemes:
-Value of employee services			—				27				—				—				—				—				27
Off-market share repurchase			79				—				—				—				—				—				79
Balance at 31 December 2009			79				567				106				6				24,251				(43,097	)			(18,088	)