RELATIONSHIP WITH PCCW

INFORMATION ON PCCW

PCCW is the listed technology flagship of the PCCW Group. PCCW is one of Asia’s leading integrated communications companies. PCCW is developing a full spectrum of broadband Internet capabilities, and is aiming to become a premier provider of , digital technology and new media services. Since the merger of PCCW and HKT in August 2000, businesses of the PCCW Group have been functionally organised into telecommunications services; mobility and connectivity services; broadband interactive services; business-to-business services; data centre services; web hosting services; ventures; and services.

Data centres/web hosting services is one of the core business units of the PCCW Group. The data centre business of PCCW is carried out principally under the brand name “Powerb@se”. Currently. Powerb@se operates a data centre business with approximately 300,000 sq.ft. of facilities in six locations in Hong Kong.

PCCW’S INTERESTS IN iLINK.NET

iLink.net is one of the investments of PCCW under CyberVentures. As of the Latest Practicable Date, PCCW owned 40.84% of iLink Holdings through its indirect wholly-owned subsidiary, Media Touch. When the MT Convertible Note is converted in full, PCCW will own 47.90% of the outstanding share capital of iLink Holdings immediately after the completion of the Capitalisation Issue, the Share Adjustment and the Placing. Despite the fact that PCCW has nominated a number of Directors on the Board, such Directors represent a minority of the Board and, the day-to-day operation and management of iLink.net are independent of PCCW.

The PCCW Group is currently iLink.net’s largest customer. For the ten-month period from 1st January, 2000 to 31st October, 2000, revenue from such sources accounted for approximately 40% of iLink.net’s total revenues.

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OTHER INTERESTS OF PCCW IN DATA CENTRE BUSINESSES

Other than its interests in Powerb@se and iLink.net, PCCW also has interests in the following entities which are engaged in the data centre or related business:

● a 42.5% interest in BCDC

BCDC was established in the PRC as an equity joint venture company on 24th July, 2000. BCDC is principally engaged in the provision of site management services to enterprises engaging in e-business in Beijing and plans to develop its data centre businesses in three phases with a total floor area of approximately 65,000 sq.ft. The first phase of approximately 22,000 sq.ft. was completed and launched in November 2000. BCDC is owned as to 42.5% by Hongkong Telecom Data Centre Services (Beijing) Limited, an indirect wholly-owned subsidiary of PCCW, and the balance of 57.5% is owned by three independent third parties, namely, 42.5% by ,7.5%by and 7.5% by . BCDC currently targets both local and multinational corporations and major ISPs in the PRC. PCCW has nominated 3 out of 7 directors to the board of BCDC. The day-to-day operation of BCDC is run by an independent management team of BCDC.

● a 50% interest in the Data Centre JV

As part of the strategic alliance between PCCW and Telstra completed on 7th February, 2001, the Telstra Data Centre JV has been formed as a joint venture to own and operate a network of Internet data centres. It is the intention of PCCW and Telstra that the Telstra Data Centre JV will be the non-exclusive vehicle for the execution of their Internet data centre strategy throughout the Asia-Pacific region and, potentially, globally. Wherever practicable and subject to commercial agreement on each occasion, Internet data centres will be co-located with the Telstra IP Backbone JV’s POPs/carrier hotels outside of PCCW’s and Telstra’s home markets of Hong Kong and Australia, respectively, to take maximum advantage of synergies between the businesses. The initial geographic focus of the Telstra Data Centre JV will be the Asia-Pacific region, outside each of PCCW’s and Telstra’s home markets.

An approved business plan for Telstra Data Centre JV is being prepared. It is however intended that the Telstra Data Centre JV will focus initially on core hosting services including co-location, dedicated server, shared server and custom/complex hosting to enterprise customers, ASPs, ISPs and internet content providers. The Telstra Data Centre JV will review opportunities to provide a range of higher value services than those currently provided by Powerb@se. These may include but are not limited to managed services, professional services, ASP services and other related services.

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PCCW and Telstra each holds 50% of the Telstra Data Centre JV and each has appointed three directors to the board of Telstra Data Centre JV. Each of PCCW and Telstra is entitled to remove or replace any director appointed by each of them but may not remove or replace any director appointed by the other party. The chairman and deputy chairman will be appointed and removed by the board of the Telstra Data Centre JV. The board of the Telstra Data Centre JV will also appoint the chief executive officer, chief financial officer and chief operating officer of the Telstra Data Centre JV.

Major decisions of the board of the Telstra Data Centre JV will require a majority of votes that includes the affirmative vote of at least one director appointed by each of the shareholders who holds not less than 35% equity interest in the Telstra Data Centre JV. Major decisions of the Telstra Data Centre JV cannot be undertaken without the prior consent of each of the shareholders who holds not less than 35% equity interest. For so long as they hold not less than 35% equity interest in the Telstra Data Centre JV, either PCCW or Telstra may initiate deadlock resolution procedures in situations where it does not agree with a decision of the board of the Telstra Data Centre JV. The chief executive officers of PCCW and Telstra must then meet to try to resolve the deadlock. If the deadlock has not been resolved within 20 business days, the matter may be referred to mediation in Sydney by PCCW, or in Hong Kong by Telstra. The mediator will have no power to make a decision that is binding.

The Telstra Data Centre JV will not be accounted for as a subsidiary of PCCW and its financial results will not be consolidated into those of PCCW.

As shown above, PCCW does not have absolute control over BCDC or the Telstra Data Centre JV in respect of either the board or the shareholders’ voting rights, and is not the single largest shareholder of either BCDC or of the Telstra Data Centre JV. The day-to-day operation and management of BCDC and of the Telstra Data Centre JV are vested with each of their management teams, and are independent from PCCW and from each other.

DELINEATION BETWEEN THE BUSINESS OF POWERB@SE AND iLINK.NET

In terms of the delineation of the data centre businesses in Hong Kong, Powerb@se and iLink.net presently target different sectors of customers. In particular, Powerb@se is a managed service provider which provides large scale bandwidth, facility space and shared, dedicated and complex hosting services, leveraging on the IP backbone and telecommunications infrastructure of PCCW. In addition, Powerb@se also plans to provide network, bandwidth, central processing units and data storage on demand. Its principal customers are multinational corporations and international telecommunications companies which require secure and dedicated bandwidth. In contrast, iLink.net’s objective is to become an Internet application solution provider offering comprehensive Internet application solutions, including a wide range of data centre and ASP services. In addition, iLink.net’s customer base principally consists of small to medium sized enterprises in Hong Kong. The management of PCCW and iLink.net are independent of each other.

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To reflect the different sectors that Powerb@se and iLink.net serve and to demonstrate the delineation between the data centre business controlled by PCCW and the business conducted by iLink.net, PCCW and iLink Holdings have entered into an agreement providing for the following cooperation arrangements with effect from the Listing Date subject to prospective customers’ ultimate requirements and final decisions:

● PCCW will grant a right of first refusal to iLink Holdings, pursuant to which PCCW will refer to iLink Holdings prospective data centre business customers who require Internet connectivity, server hosting and co-location services (i) with a bandwidth of 384 kbps or less; or (ii) with professional consulting services, software applications and ASP services; and

● iLink Holdings will grant a right of first refusal to PCCW, pursuant to which iLink Holdings will refer to PCCW its prospective customers who require Internet connectivity, server hosting and co-location services with a bandwidth of over 384 kbps, secure private vault environment and multiple-country connectivity access.

An arbitration committee will be formed which will consist of one independent non-executive director of iLink Holdings and one independent non-executive director of PCCW. In the event that there is any dispute on the cross-referral of business, the committee will have the right to make a final decision, subject to the agreement of the prospective customer.

The cooperation arrangement applies to all the data centre businesses of PCCW over which it has absolute control by the fact that it or its subsidiaries holding 35% or more of the share capital of the companies owning the relevant data centre businesses and it or its subsidiaries being the single largest shareholder of such companies. The cooperation arrangement, however, will be terminated if PCCW or its subsidiaries (i) cease to hold 35% or more of the share capital of the companies owning the relevant data centre businesses or (ii) cease to be the single largest shareholder of companies owning such data centre businesses or (iii) cease to hold 35% or more of the issued share capital of iLink Holdings. Reference to “share capital” in this paragraph is a reference to share capital conferring voting power at general meetings of the relevant company. Currently, the cooperation arrangement applies only to the business operations of Powerb@se in Hong Kong as it is the only territory where both the PCCW Group and iLink Holdings own data centre business operations in circumstances where PCCW has absolute control. The cooperation arrangement will also apply to the business operations of Powerb@se and iLink.net outside Hong Kong provided that a prospective customer of either party requires the relevant services in a territory where the other party carries on data centre business. Please also refer to the paragraph “PCCW’s interest in other data centres may conflict with iLink.net’s own interest and the interests of other shareholders” under the section headed “Risk factors” in this prospectus.

POTENTIAL CONFLICT OF INTERESTS

As it is expected that iLink.net will open a data centre in Beijing in April 2001 and it is intended that iLink.net will operate additional data centres in the Asia-Pacific region during the period from the Latest Practicable Date to 31st December, 2003 under its implementation schedule as

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set out in the section headed “Statement of business objectives” in this prospectus, iLink.net may compete with BCDC in Beijing and may compete with the Telstra Data Centre JV in the Asia-Pacific region in offering data centre services to customers. In this regard, it should be noted that PCCW does not have absolute control over any of iLink.net, BCDC or the Telstra Data Centre JV either at the board or in terms of shareholders’ voting rights, and the day-to-day operation and management of these three entities are independent of PCCW.

The Directors have been informed by PCCW that as it has no absolute control over BCDC or the Telstra Data Centre JV, it would not be appropriate for the cooperation arrangement mentioned above to cover BCDC, the Telstra Data Centre JV or other entities to be formed (if any) which are or will be engaged in the data centre business over which PCCW has no absolute control and is not the single largest shareholder. In this respect, the Directors have been informed by PCCW that as PCCW has no absolute control over these entities, PCCW or any of its subsidiaries is only one of the shareholders or parties to such joint ventures, the day-to-day operation and management of these entities are vested with the respective management teams and each entity has its own strategies, business focus and plan, it would not be practicable or appropriate for PCCW to intervene with the business operations and development of these entities only for its own interests. In light of the potential conflict of interests, PCCW has undertaken to the Stock Exchange and iLink Holdings that:

● In respect of business or investment opportunities originated from PCCW

PCCW will refer such opportunities to iLink Holdings so long as such opportunities are within the business scope of iLink Holdings and fall within the delineation criteria discussed above. In the event that PCCW also refers such business and/or investment opportunities to any of the other entities that it has over 35% equity interest (conferring voting power at general meetings) but has no absolute control, and are engaged in data centre businesses, PCCW has adopted the policy to provide equal opportunities to iLink Holdings and these entities, and not to afford any preference to one over the others.

The Board, including independent non-executive Directors, will hold meetings to discuss and/or resolve these business and/or development opportunities. The Directors nominated by PCCW to the Board will, however, abstain from voting in such meetings. In addition, if such opportunities are subject to the approval of iLink Holdings’ shareholders, PCCW undertakes to vote for the relevant resolutions.

● In respect of business or investment opportunities identified by both iLink Holdings and any of the other entities described above

The Board, including independent non-executive Directors, will hold meetings to discuss and/or resolve these business and/or development opportunities. The Directors nominated by PCCW to the Board will, however, abstain from voting in such meetings. In addition. if such opportunities are subject to the approval of iLink Holdings’ shareholders, PCCW undertakes to vote for the relevant resolutions.

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The undertaking will lapse if the PCCW Group ceases to hold 35% or more of the issued share capital of iLink Holdings.

REASONS FOR THE EXCLUSION OF OTHER DATA CENTRE BUSINESSES AND INTERESTS OF PCCW IN iLINK.NET

PCCW agreed to invest in iLink.net in September 1999. Since then, the business of iLink.net has developed substantially. As iLink.net is one of the investments under the portfolio of CyberVentures, it has always been the intention of PCCW to obtain a listing of iLink.net on a stock exchange. In addition, as it is also in the interests of the other shareholders of iLink Holdings for iLink Holdings to obtain a listing on a stock exchange, iLink.net has been actively pursuing a listing of the Shares on GEM since early 2000. On the other hand, PCCW acquired the data centre businesses of Powerb@se and BCDC only as a result of its merger with HKT in August 2000 and the agreements relating to the strategic alliance with Telstra were not signed until October 2000 and have recently been completed on 7th February, 2001.

Furthermore, as mentioned above, PCCW does not have absolute control over BCDC or the Telstra Data Centre JV in respect of either the board or the shareholders’ voting rights, and is not the single largest shareholder of either BCDC or of the Telstra Data Centre JV. Accordingly, PCCW does not have the board discretion to group the two businesses with that of iLink.net.

The Directors have been informed by PCCW that the establishment of the Telstra Data Centre JV forms part of the strategic alliance of PCCW and Telstra completed on 7th February, 2001. The principal basis of this alliance involves the merger of some of the global wholesale businesses and assets of the PCCW Group and the Telstra Group, which creates an IP backbone joint venture that operates a global IP backbone business and the purchase by Telstra of a 60% stake in a newly formed company which owns the Hong Kong wireless communications business of PCCW.

The Directors have also been informed by PCCW that PCCW is in the process of reviewing its data centre businesses. In light of such review and the requirements of the GEM Listing Rules, PCCW continues to be of the view that it will be beneficial to PCCW and iLink.net for iLink Holdings to obtain a listing of its Shares on the GEM as soon as practicable.

FUTURE INTENTION REGARDING THE DATA CENTRE BUSINESS AND INTERESTS

As referred to above, the Directors have been informed by PCCW that PCCW is in the process of reviewing its data centre businesses. Upon completion of this review and depending on the synergy of the businesses, PCCW may draw up a plan to rationalise such businesses. PCCW may or may not combine its other data centre businesses and/or interests with that of iLink.net and there is no specific timetable with which PCCW intends to or does not intend to rationalise the data centre businesses. However, PCCW has indicated that it will, when necessary, make prompt announcement of any change if and when such a plan is finalised. There can be no assurance that the plan of any such rationalisation will not conflict with the interests of iLink Holdings and its shareholders other than PCCW. In addition, PCCW undertakes that any plan to

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rationalise the data centre business of iLink.net and the data centre business owned by PCCW would, where applicable, comply with the respective requirements of the GEM Listing Rules and the Main Board Listing Rules and, where applicable, would be subject to the approval of the independent shareholders of iLink Holdings and/or PCCW.

The Stock Exchange has stated that if after its listing, iLink Holdings proposes to acquire all or part of the interests of any data centre businesses or interests of PCCW (other than PCCW’s interest in iLink.net) such acquisition must comply with the requirements of the GEM Listing Rules.

POTENTIAL COMPETITION

In view of the continuous development in the Internet industry, iLink.net may compete with PCCW in the future as PCCW, through HKT, has the capability to provide a full range of telecommunications and Internet related services and associated consultancy services currently provided by iLink.net.

CONNECTED TRANSACTIONS BETWEEN iLINK.NET AND THE PCCW GROUP

Particulars of various connected transactions entered and to be entered into between members of iLink.net and members of the PCCW Group are set out in the paragraph “Connected transactions” under the section headed “Business” in this prospectus.

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