Regulations Governing The Third Generation (3G) Mobile Telecommunication Services

1. Regulations Governing The Third Generation (3G) Mobile Telecommunication Services National Communications Commission Jan. 12, 2007

2. Outline • Introduction • Structure of Regulations • Rules Governing Application • Rules Governing Reviewing • Rules Governing Bidding • Rules Governing Establishment • Rules Governing Business Operation

3. Introduction In view of the forthcoming e-society and the Strategy for Constructing a Domestic Wireless Wide Band Environment, the government plans to release 170MHz band width for 3G mobile telecommunication services operators for consumers to enjoy wireless wide band 3G mobile communication services simultaneously with the people of other technologically advanced nations.

4. License Issuance Policy • Valid bids: 5 (nationwide), both new and incumbent operators • Licenses A, C, D band width: FDD 2X 15MHz；TDD 5MHz (2GHz channel) • License B band width: FDD 2X 10MHz；TDD 5MHz (2GHz channel) • License E band width: FDD 2X 20MHz (800MHz channel)

5. Term of license: Fifteen years (Expiring at the same time) • Mode of issuance: Qualification review + auction (open/simultaneous/ascending/multi-round bidding), to reflect the reasonablevalue of each license spectrum, and the openness and fairness of releasing licenses. • Bidding object: License fee (excluding frequency usage fee) • Term of payment of award price: In a lump sum or by installment (interest to be added on unpaid balance) • System: any terrestrial mobile communication system of IMT-2000 • Services: Voice and non-voice mobile communication services

6. Highlight of 3G licensing Rules FDD: Frequency Division Duplex TDD: Time Division Duplex

7. Specific Technology and Technological Neutrality • If Taiwan is capable of the R&D of specified technology, it would be advantageous to industrial development. • If not, then allow many feasible technologies to appear according to technological neutrality. However, the shortcoming is that it would generate various specifications and would not able to achieve economies of scale. • The Commission shall adopt a neutral ground on 3G technology and will refrain from interfering as much as possible. Operators may settle disputes through negotiation. Except matters that involve people’s rights and interest and market order that requires the involvement, supervision, and management of the Commission, others should revert to market mechanism.

8. FDD lower chain Channel Distribution of Each License • 2GHzChannel Distribution 1935 1945 1960 1975 2010 2015 2020 2025 2110 2165 2125 2135 2150 1915 1920 A B C D A B C D A B C D FDD upper chain TDD FDD lower chain TDD 800MHzChannel Distribution 870 825 845 890 E E FDD upper chain

9. License Term • The operator should acquire the 3G concession license for 3G services before December 31, 2005 • License operation duration is approximately 13~16 years according to the difference of the date of concession license acquired by each operator (Assumed Calculating Date ofLicense duration) ‘02.2 ‘04.01.01 ‘05.12.31 2012.1 2018.12.31 (Maximum duration of establishment approval) (Termination date of the installment payment of bid amount) (Date of first payment of bid amount) (Termination date of license validity）

10. Structure of Regulations Begin Application acceptance No Application documents complete or not D C B A Can supplementdocument? Yes B’ No Reviewing applicant’s documents A Yes No Qualified to bid or not Paid awarding price is not refundable Reviewing fee and bid deposit are not refundable Refund bid deposit；reviewing fee not refundable Refund reviewing fee and bid deposit Can supplementdocument? Yes No Applicant’s bid Yes B’ B No Winning bidder? Violated bid rules? Yes No Yes Applicant’s establishment B C No Meeting operation condition No Overdue establishment period? Yes Begin operating D Yes End

11. Rules Governing Application(1/3) - Qualification of Applicant • Applicant’s Qualification • The applicant shall be a company limited by shares that has been incorporated in accordance with the Company Law • Its chairman and one-half or more of the directors and controllers(supervisors) shall have the nationality of the Republic of China • Total number of shares held directly by foreign nationals shall be  20%, and total shares held directly and indirectly shall be  60%

12. Rules Governing Application(2/3) - Documents to be Submitted by the Applicant • Submittals • Application. • Business Plan. • A photocopy of the receipt of remittance record of bid deposit. • A photocopy of the receipt of remittance record of reviewing fee. • Amount of bid deposit ─ NT$1 Billion • Reviewing fee ─ Amount of reviewing fee is NT$200,000.

13. Rules Governing Application(3/3)- Content of Business Plan • Operating items • Service area • General description of telecommunication facilities • Financial structure • Technological capability and development plan • Fee schedule and calculation method • Personnel and organization structure and shareholding status • Scheduled date of commencement of operation Enforced in accordance with Paragraph 2, Article 13 of the Telecommunication Act

14. Rules Governing Reviewing(1/7)- Major Reviewing Conditions • Using the IMT-2000 communication technology of ITU or not • Whether the scheduled total paid-in capital registered by the company after winning the bid has attained New Taiwan Dollars Six Billion or not • Percentage of foreign capital • Nationality of chairman • Cross-shareholding status of stockholders • Is it the same bidder? • Is it an associated bidder?

15. Rules Governing Reviewing (2/7)- Limited to the Same Applicant • The same applicant shall not apply for two or more applications of this Service • In case any of the following situations occurs for different applicants, such applicants will be deemed as the same applicantNote: • Where one applicant holds more than one half (1/2) voting shares of another applicant’s total issued voting share, or one applicant’s investment amount exceeds one half of the total capital of another applicant’s capital. • Where one half or more directors of applicant are the same with one half or more of another applicant’s directors. • Where one half or more of the total issued voting shares or total capital of one applicant and that of another applicant are held or owned by the same shareholder(s). • Where the different applicants are both controlled by a third party at the same time. • Where the controlling and subordinating relationship exists among the controlling companied of different applicants. Note: The number of shares shall be calculated in accordance with Article 369-11 of the Company Law

16. Rules Governing Reviewing (3/7)- Limited to the Same Applicant • If the application filed by the applicant has any of the following conditions, no amendment is allowed and the application shall not be processed • Where one shareholder or subscriber of one applicant holds the shares of another applicant, except where its shareholding ratio in one applicant is not restricted, its shareholding ratio in any other applicants shall not exceed ten percent (10%)

17. Rules Governing Reviewing (4/7) - Graph of the Same Applicant Figure 2 Figure 1 Applicant X X Control Control Control Applicant Y Applicant Y1 Applicant Y2 Applicant X and Applicant Y Deemed as the same applicant Applicant Y1 and Applicant Y2 Deemed as the same applicant

18. Rules Governing Reviewing (5/7) - Graph of the Same Applicant Figure 3 Figure 4 Article 369-2 of the Company Law Or Article 369-3 of the Company Law Controlling subordinating relationship Controlling subordinating relationship (Applicant) X1 (Applicant) X2 X1 X2 Shareholding Shareholding Controlling relationship Controlling relationship Applicant Y • In case X1 and X2 are applicants, they shall be deemed as the same applicant. The shares held by X1 and X2 in Y shall be calculated by consolidation (determined as a single stockholder), and X1+X2 and Y shall be determined (according to Figure 1) as the same applicant or not in accordance with Article 369-2 and Article 369-3 of the Company Law. • If any one of X1 and X2 is an applicant, the shares held by X1 and X2 in Y shall be calculated by consolidation (determined as a single stockholder), and X1+X2 and Y shall be determined (according to Figure 1) as the same applicant or not in accordance with Article 369-2 and Article 369-3 of the Company Law. • If both X1 and X2 are not applicants, then there is no problem. Applicant Y1 Applicant Y2 Applicant Y1 and Applicant Y2 Are deemed as the same applicant

19. Rules Governing Reviewing (6/7)- Limited to Associated Applicants • Any concurrence of the following situations between or among different applicants shall be deemed as Associated Applicants: • Where one applicant holds shares of the other applicant and such shareholding ratio reaches fifteen percent (15%) of the total capital of such other applicant. • Where the same group of shareholders hold shares of different applicants and such shareholding ratio reaches one-third (1/3) of the total capital of each applicant. • Remedy The Associated Bidders shall negotiate to have one of the Associated Bidders to be the qualified applicant within the specific period of time as specified by the Commission. In case the negotiation cannot be completed, a lot drawing will take place to decide the qualified bidder at a time and place as specified by the Commission. Those who did not participate in the lot drawing shall be considered as withdrawing their applications. Note: The number of shares shall be calculated in accordance with Article 369-11 of the Company Law.

20. Rules Governing Reviewing (7/7) - Graph of Associated Applicants Figure 2 Figure 1 Applicant X X (the same stockholder) Shareholding  15% Shareholding>33.3% Shareholding>33.3% Applicant Y Applicant Y1 Applicant Y2 Applicant X and Applicant Y Are deemed as associated applicants Applicant Y1 and Applicant Y2 Are deemed as associated applicants

21. Rules Governing Bidding (1/5)- Mode of Bidding • The mode of bidding will be processed by the way of open, simultaneous, ascending, and multi-round bidding methods. Note 1 • The bidding process will be carried out by submitting the bid electronically through the intranet of the DGT. • The bidding process shall be conducted by separating each bidder. • The beginning and ending time of each round and the maximum price and minimum price during the first bid of each license will be announced by the Commission thirty minutes prior to the starting time of bid submission of each round. Note 2 • Aborting or revoking the bid • The Commission may abort the bid if the number of applicants or bidders for operation of the Service is less than five (5). • The Commission may declare revoking the bid if the number of valid bids submitted by the participants during the first round is less than five (5). • According to administrative procedure, the date of auction shall be announced separately after revoking the bid. Note 1: To assist the bidders in understanding the bidding process, the Commission will conduct a tutorial conference with respect to the bidding process at the bidding location seven (7) days before the bidding date Note 2: The first minimum bid value of each license will be the base price of the license plus 1% increment to the base price of that license. The first maximum bid value will be the base price of the license plus 7% increment to the base price of that license.

22. Rules Governing Bidding (2/5)- Rules of Bidding Begin B A The competent authority shall announce the beginning and ending time of bidding for each round. The competent authority shall announce the minimum price and maximum price limit of the first bid of each license24 Yes Is it the first round? No No Is the bidder’s bidding price valid? Note 1 Yes Is it a temporary waiver? Yes No No The bidder is the Temporary Winning Bidder of that license. Set the Temporary Winning Price of that license. Set the minimum and maximum price of that license. Has bidding ended? Yes No Is it the winning bidder? No Has that round ended? Confiscate bid deposit Yes Yes Pay the award price Yes Was the bid invalid? Note2 B Refund bid deposit No A End Note 1: Valid bid: This refers to a bidder who is not a Temporary Winning Bidder whose license bidding and bidding price selected complies with the ＞minimum price and ＜ maximum price. Note 2: Invalid bid: This refers to a bidder who did not submit a bid or the bid submitted is invalid.

23. Rules Governing Bidding (3/5)- Rules of Bidding • For each round, each bidder may only submit its bid on one of the licenses • The bidder who submits the highest bid with respect to a license will be the Temporary Winning Bidder and the bid thereby submitted will be the Temporary Winning Price. Temporary Winning Bidder shall not submit a bid with respect to any license. Except the Temporary Winning Bidder, each bidder is limited to one bid for each round • Bidder’s bid for each license: • Upper limit: The Temporary Winning Price plus 7% of the Temporary Winning Priceof each license • Lower limit: The Temporary Winning Price plus 1% of the Temporary Winning Priceof each license • The last six digits of bid should be zero • The bidder is not allowed not to place a bid during the first round; otherwise, all bids submitted in the first round are invalid • Aside from the first round, each bidder is entitled to no more temporary waivers in the bidding process • The Commission may announce the suspension of the bidding process, and decide the manner of follow-up depending on the circumstances • The bidding process shall come to an end when all the qualified bidders no longer offer any bids during the bidding process

24. Rules Governing Bidding (4/5)- Method and Schedule of Paying Award Price • A winning bidder may choose to pay the award price in a lump sum or in installments. The method payment of the award price shall not be changed once decided. • A winning bidder who chooses to make payment in a lump sum shall complete the payment within thirty (30) days from the day that the name of winning bidders are publicly announced. • If the winning bidder chooses to make the payment in installments, the winning bidder shall pay the award price and interest accrued thereon in accordance with the following conditions: • Paying thirty percent (30%) of the award price within thirty (30) days from the day the name of winning bidders are publicly announced. • Starting from the year following the deadline for payment as stated in the preceding Item, paying a portion of the award price calculated at the payment percentage set forth in the Schedule and the interest on the unpaid award price due for the preceding year, between January 16 and January 31 of each year, provided that interest due for the first year is accrued from the day after the deadline stipulated in the first sentence of preceding Item to December 31 of that year. • When the winning bidder is paying the down payment, performance guarantee issued by a domestic bank shall be submitted as security for the balance of the award price and the interest thereon, which guarantee shall continue for a term of ten years and 3 months commencing from the payment date of the performance guarantee .

25. Rules Governing Bidding (5/5)- Installment of Award Price Interest Rate: Calculated according to the basic annual loan interest rate of the Bank of Taiwan Paid Last Year.

26. Rules Governing Establishment • As soon as the winning bidder had paid the award price, the Commission shall issue an establishment approval. • The establishment approval shall be valid till December 31, 2004, and may be extended for another year. • The winning bidder shall submit the following documents during the period of establishment: • The winning bidder shall apply for the erection of system upon receipt of paid-in capital in the amount of New Taiwan Dollars Six Billion, and upon completion of amendment to corporate registration. • After having erected more than 250 bases, and completed the installation of switching facilities and the connection of telecommunication facilities, the winning bidder shall apply for the technical examination of the system and obtain a qualification certificate of the system passing technical examination. • Document evidencing the competent authority’s consent to the service charges. • Document evidencing the MOTC’s approval of the code of business operational regulations of the company. • Document evidencing the Commission’s approval of a sample of the service contract between the Operator and users.

27. Rules Governing Business Operation (1/2) • Upon completion of the establishment period, the winning bidder shall apply to the Commission for issuance of a concession license. • A concession license shall be valid until December 31, 2018. • The Operator shall commence business operations within six (6) months from the day that a concession license is obtained. • The Operator shall provide free 110 and 119 Emergency Calls.

28. Rules Governing Business Operation (2/2) • Basic telecommunication services The Operator shall contribute to the Telecommunication Universal Service Fund in accordance with the Regulations Governing the Telecommunication Universal Service. • Network roaming service • If the 3G Operator has Mobile Telephone Service network, it shall provide its Mobile Telephone Service network to the new 3G Operator (who has no Mobile Telephone Service network) for network roaming service. Such roaming service shall be arranged through negotiations among relevant operators. • Rules for number portability service • Operators shall provide number portability service in accordance with provisions stipulated in the Regulations Governing Number Portability Service.

29. Other Rules • Co-built or co-locatedNote • The Operator shall ensure that, within one year from the day a concession license is obtained, its base stations, which are co-built or co-located with base stations of other operators, constitute at least five percent (5%) of the total number of base stations already built. • The Operator shall ensure that, within two years from the day a concession license is obtained, its base stations, which are co-built or co-located with base stations of other operators, constitute at least ten percent (10%) of the total number of base stations already built. • Radio coverage The Operator shall ensure that the radio coverage of its base stations reaches 50% of population within the the operation area thereof within three years from the day that a system build-out permit is obtained. • Radio frequency charges The Operator shall pay charges for the use of frequency according to the schedule stipulated by the Commission commencing from 2003. Note: If it is impossible for an operator of License E to co-build with other operators, it shall ensure that at least 10%of its base stations already built shall be co-located with the base stations of other operators and at least 20% of its base stations already build shall be co-located with the base stations of other operators within two years.

30. Schedule for Processing 3G and Bidding Two months for processing the application Half month for reviewing the qualification Oct. 19, 2001 Dec. 18, 2001 Jan. 2, 2002 Jan, 2002 Jan. 16, 2002 Announcement of qualified bidders Tutorial of bidding procedure Deadline for processing the application Announcement of the 3G Management Rules and processing the application Start bidding

31. Thank You