CONF
EXHIBIT 11
SECOND NETWORK IMPACT ON LOCAL TARIFFS
HK$ millions
43
5,424
(505-1,009)
(545-865)
3,913-4,097*
Telco's
international
revenues
2,481
Local
revenues
2,943
970-1,154
2,943
Total
Additional
Revenues
Revenue
Total
revenues
revenues
before
stimulated
lost to 2nd network**
loss from
2nd
by discount
Telco rebates**
network
to key customers
revenues after 2nd network
ESTIMATE
Total revenue drop of $1,327-1,511 million
• Tariff increase of 45% to 51% in local franchise services required
Net increase in revenues, including effect of discounts on both incoming and outgoing traffic
Assumes second network captures 20-40% of international traffic; if 2N captures 20% market share, Telco loses $505 million and $865 million in lost business and rebates respectively; if market shrae loss is 40%, the corresponding revenues losses would be $1,009 million and $545 million respectively
Source: Hong Kong Telecom; McKinsey analysis
McKinsey & Company, Inc.
CONFIDENTIAL