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ANNUAL REPORT 2019 Cutting Edge 5G Technology Enabling Uncharted New Applications UNIMAGINABLE EXPERIENCE

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ANNUAL REPORT 2019 Cutting Edge 5G Technology Enabling Uncharted New Applications UNIMAGINABLE EXPERIENCE CHINA UNICOM (HONG KONG) LIMITED HKEx : 762 | NYSE : CHU ANNUAL REPORT 2019 Cutting edge 5G technology enabling uncharted new applications UNIMAGINABLE EXPERIENCE Super fast speed 1 Gbps (AR, VR, 8K live broadcast, 3D, Cloud Games….) Massive connectivity 1 million connected devices per km2 by one base station (Internet of Things) Ultra reliable low latency 1 milli-second (Autonomous driving, robotic operation……) Huge synergy To co-build and co-share one 5G UNPRECEDENTED Enormous savings in construction and access network nationwide in China operating costs; network deployment with another operator pace, coverage, speed, bandwidth & SHARINGcapacity ALL DOUBLE UNRIVALLED EDGES 5G network Well-established Internet “co-build co-share” oriented mindset & operation Centralized IT system well-supports Leverage mixed-ownership open cooperation reform benefits Collaboration with 14 strategic investors UNLIMITED Poised to create new value OPPORTUNITIES To innovate and share a good smart living To empower businesses clients to grow and thrive To leverage unrivalled edges to increase own revenue and profit FORWARD-LOOKING STATEMENTS Certain statements contained in this report 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 are subject to 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. In addition, we do not intend to update these 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 and other filings with the U.S. Securities and Exchange Commission. 2 Company Profile 4 Performance Highlights Shareholding3 Structure CONTENTS 6 Major Events Chairman’s8 Statement 14 Business Overview Performance Highlights 18 5 Financial Overview 35 Corporate Culture 2Directors and Senior4 Management 38 3Recognition 6and Awards Corporate Governance Report CONTENTS 62 Report of the Directors 88 Independent Auditor’s Report 93 Consolidated Statement of Income 94 Consolidated Statement of Comprehensive Income 80 95 Consolidated Statement of Financial Position Human Resources Development 98 Consolidated Statement of Changes in Equity 99 Consolidated Statement of Cash Flows 102 Notes to the Consolidated Financial Statements 198 Financial Summary 200 Corporate Information 82 Social Responsibility 2 China Unicom (Hong Kong) Limited (the “Company”) was incorporated in Hong Kong in February 2000 and was listed on the New York Stock Exchange and The Stock Exchange of Hong Kong Limited on 21 June 2000 and 22 June 2000 respectively. On 1 June 2001, the Company was included as a constituent stock of the Hang Seng Index. The Company merged with China Netcom Group Corporation (Hong Kong) Limited on 15 October 2008. The Company was one of the “Fortune Global 500” companies for consecutive years, and ranked 262nd in “Fortune Global 500” for the year 2019. It was also voted as “Asia’s No.1 Most Honored Telecom Company” for the fourth consecutive year by Institutional Investor. COMPANY PROFILE The Company is committed to being a creator of smart living trusted by customers, connecting the world to innovate and share a good smart living, improving the quality of products and services continuously to fulfill customer needs. Future products and services will be developed in a “smart” way. Internet of Things, cloud computing, Big Data and other technologies will be used for the smart processing on data and information. The Company’s telecommunication network covers China and connects to the world. It provides full range and high quality information and telecommunication services, including mobile broadband, fixed-line broadband, mobile voice, fixed-line voice, ICT, data communications and other related value-added services. As at the end of 2019, the Company had mobile billing subscribers of about 318 million, of which 4G subscribers of about 254 million, fixed-line broadband subscribers of about 83 million, and fixed-line local access subscribers of about 54 million. As at 31 December 2019, the ultimate parent company of the Company, China United Network Communications Group Company Limited had an effective interest of 52.1% of the shares in the Company through China United Network Communications Limited (“A Share Company”), China Unicom (BVI) Limited and China Unicom Group Corporation (BVI) Limited; the strategic investors, employee restrictive incentive shares and the public shareholders of A Share Company had an effective interest of 27.8% of the shares in the Company through A Share Company’s shareholding in China Unicom (BVI) Limited. The remaining 20.1% of the shares in the Company were beneficially owned by public shareholders. CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2019 3 SHAREHOLDING STRUCTURE CHINA UNITED NETWORK COMMUNICATIONS GROUP COMPANY LIMITED Employee Restrictive Strategic Incentive Other Public Investors Shares Shareholders 100% 36.7% 35.2%* 2.6% 25.5% China Unicom CHINA UNITED NETWORK Group Corporation (BVI) Limited COMMUNICATIONS LIMITED 17.9% 82.1% ** China Unicom Public 26.4% (BVI) Limited Shareholders 53.5% 20.1% CHINA UNICOM (HONG KONG) LIMITED * The shares of China United Network Communications Limited held by strategic investors represented the shares acquired by the strategic investors introduced by the mixed-ownership reform from non public share issuance and transfer of existing shares. ** Excluded the interest regarding the pre-emptive right owned by China Unicom Group Corporation (BVI) Limited in 225,722,791 shares of the Company. As at 31 December 2019 4 PERFORMANCE HIGHLIGHTS KEY FINANCIAL DATA 2019 2018 Change YoY Operating Revenue (RMB billions) 290.51 290.88 –0.1% Of which: Service Revenue 264.39 263.68 0.3% EBITDA1 (RMB billions) 94.36 84.91 11.1% As % of Service Revenue 35.7% 32.2% 3.5pp Net Profit2 (RMB billions) 11.33 10.20 11.1% Basic EPS (RMB) 0.370 0.333 11.1% Free Cash Flow3 (RMB billions) 26.4 47.5 –44.5% Note 1: EBITDA represents profit for the year before finance costs, interest income, share of net profit of associates, share of net profit of joint ventures, other income-net, income tax expenses, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies. Note 2: Net profit represented profit attributable to equity shareholders of the Company. Note 3: Excluded the impact of adoption of IFRS/HKFRS 16 on free cash flow in 2019 (i.e. free cash flow = operating cash flow – CAPEX – capital element of lease rentals paid.) 2019 Note 4: Calculated the cumulative free cash flow generated since 2017. 12.4% 2018 8.7% 2017 6.4% INDUSTRY INTERNET REVENUE AS PERCENTAGE OF SERVICE REVENUE CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2019 5 PERFORMANCE HIGHLIGHTS 2019 11.33 2018 10.20 2019 116.8 2018 90.4 2017 42.9 2017 1.83 CUMULATIVE FREE CASH NET PROFIT2 FLOW3, 4 (RMB BIL) (RMB BIL) 6 MAJOR MARCH 2019 APRIL 2019 Established a JV, Yunjing Wenlv, with Tencent China Unicom’s Big Data service company, to develop smart culture tourism products Smart Steps, introduced JD Digits as strategic investor China Unicom’s IoV subsidiary, Smart Connection Technology, introduced 9 strategic investors, including the largest automobile companies in China such as FAW, Dongfeng Motor, GAC, etc. CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2019 7 EVENTS MAY 2019 SEPTEMBER 2019 NOVEMBER 2019 China Unicom’s Yunnan branch expanded Entered into agreement with China Telecom Officially commenced offering mobile socialised operational cooperation to the of cooperation on 5G network “co-build number portability (MNP) service entire province, symbolising mixed-ownership and co-share” to deploy one 5G access nationwide reform officially implemented at provincial network nationwide branch level OCTOBER 2019 JUNE 2019 Officially launched 5G commercial service Ministry of Industry and Information and announced 5G service packages Technology (MIIT) granted the permit to operate 5G digital cellular mobile communications service 8 CHAIRMAN’S STATEMENT Dear Shareholders, 2019 was a crucial year for China Unicom to implement high- quality development transformation. During the year, the Company actively responded to the complex environment and the short-term pains arising from transformation, deeply practised the new development philosophy, adhered to rational and orderly competition with self-discipline, implemented the “co-build and co-share” of 5G network, and deeply advanced the mixed-ownership reform. China Unicom’s “Five New” establishment continued to make inroads and achieved breakthrough in certain key strategic areas. WANG XIAOCHU Chairman and CEO CHINA UNICOM (HONG KONG) LIMITED ANNUAL REPORT 2019 9 OVERALL RESULTS
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