CONFIDENTIAL
· 2 -
5. Both banks identify the preferred course as an early (prob-
ably summer 1980) sale of shares in a new subsidiary to set up
and run Cable and Wireless's Hong Kong operation, to be followed
by the later consideration of a sale of shares in the main
company. Both banks estimate the capitalisation of the Hong
Kong operation at over £400 million, but it is thought unlikely
that a flotation on the Hong Kong market would raise more than
£50 million. However, it is possible that the Hong Kong Govern-
ment, local institutions or overseas investors might be interested
in taking up shares.
6. The Governor of Hong Kong, who was consulted informally,
attaches importance to the British Government retaining a 51%
share interest in Cable and Wireless in order to guarantee the
colony's future external communications services.
7. The current position is that Barings have now been commissioned
by the Department of Industry to carry out a detailed study of
the financial benefits to be gained by a sale as compared with the
status quo.
The study is expected soon. If Ministers subsequently
decide to proceed with the idea of a sale of shares, it will be
necessary to conduct formal negotiations with the Hong Kong
Government and to consult a number of other overseas governments.
September 1979
CONFIDENTIAL