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TELEFONICA AND CHINA NETCOM SIGN MPLS-VPN DATA SERVICE AGREEMENT TO ENHANCE THEIR COOPERATION

[June 19, 2007] China Netcom Group Corporation and Telefonica International Wholesale services, today jointly announced that the two parties have signed MPLS-VPN data service agreement early this month and will joint operate and expand their business on the global scale. This marks an enhanced and deep cooperation of the two parties in the field of telecommunications services, which reflects a new stage of their strategic partnership.

MPLS VPN is designed to reduce the deployment cost of enterprise Intranet by leveraging the strong transmission capacity of the public backbone network and provide high flexibility in network operation and management while addressing the customer's requirement for secure, real-time, broadband and convenient transmission. Currently, in the IP-based networks, MPLS VPN features high service integration, low cost, high utilization of resources, high flexibility and scalability, and guaranteed security.

MPLS VPN is an ideal choice for enterprises that have multiple sites and busy business interactions with high communication traffic and rely on network to provide high operation efficiency. These enterprises include web companies, IT companies, the financial industries, trade industries and news agencies etc. Such requirements will drive the growth of China Netcom and Telefonica in the relevant fields and allow win-win position.

Telefonica is an important strategic partner of China Netcom. By interconnecting through NNI in the U.S, two parties take their respective advantages in service and network to jointly provide customers with high quality MPLS VPN services that cover the entire Asia-Pacific region, Europe, North America and South America. Their partnership becomes a perfect model in the industry.

In June 2007, Spanish King started his visit to China, and during his stay, he visited the International Network Management Center of China Netcom. The two parties signed a series of telecommunication cooperation agreements, where the MPLS VPN agreement will drive partnership of the two parties to a wider area. This will lay a solid foundation for China Netcom to provide better fixed network communications services for Beijing 2008 Olympic Games.

About China Netcom Group Corporation

China Network Communication Group Corporation (hereinafter referred to as CNC) is a super large telecommunication enterprise in China, an official partner of the Beijing 2008 Olympic Games in the fixed-line communication and one of domestic and international well-known telecommunication carriers. CNC has the modern communication networks, which cover China and connect the world, with rational structures, advanced technologies and strong functions. Its business scope mainly involves domestic and international fixed-line telephone networks and facilities (including wireless local loops); voice, data, image and multimedia communications and information services of fixed-line telecommunication networks; system integrations and other services related to communication and information services. In 2006, the number of users of local telephones of CNC reached 121 million, the number of users accessing to the broadband was 16 million and the annual operating revenue was 96.86 billion yuan. About Telefonica.

Telefonica is one of the largest telecommunications companies in the world in terms of market capitalisation. Its activities are centered mainly on the fixed and mobile telephony businesses with broadband as the key tool for the development of both.

The company has a significant presence in 24 countries and a customer base that amounts more than 206 million accesses around the world. Telefonica has a strong presence in Spain, Europe and Latin America, where the company focuses an important part of its growth strategy.

About Telefonica International Wholesale Services

Telefonica International Wholesale Services is the organization within the Telefonica Group globally providing international wholesale services. Telefonica Wholesale, a leading player in the wholesale arena, offers customers with a specific and tailored care service as well as a wide range of services to support all their international needs including onnet termination with fixed and mobile operators of the Telefonica Group.



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