EXHIBIT 5.4 ECONOMIES OF SCALE AND INTEGRATION : SUMMARY
Data show Net Present Value (in 1988) of construction and operating costs to the year 2007, and number of connections made by that year.
CABLE TV NETWORK 930,000 connections
2ND TELECOMS NETWORK
220,000 connections
HK$2,470m
HK$1,140m
HK$445m
HK$47m
HK$196m
MAIN TELECOMS NETWORK
4.0 million connections
Economies of scale: Costs saved by combining main and 2nd telecoms networks
Economies of integration (1): Costs saved by combining cable TV with main telecoms network
Economies of integration (2): Costs saved by combining 2nd telecoms network with cable TV network
=
17.2% of 2nd telecoms network costs
18.1% of cable TV network costs
= 4.1%
of 2nd telecoms network costs
112
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