But the report does not deal with one butstanding difficulty, namely, the amount
HON MR. AS B. LOWE,"
THE HONGKONG DAILY PRESS, FRIDAY, OCTOBER 18TH, 1922,
depreciation to be borne by the subscribers according to which capital value is decided upon. Afy contention is that tha Company, being a public utility company protected by a virtual monopoly, is not entitled to charge the subscribers, on the ples of reorganisation, with any greater rate than is sufficient to meet, ranning expenses plus reasonable, dividends and
The hardship of doubled rateă does not The Hon. Mr. Lowe said: Sir,- risa affect the richer Hongs and their Man- of capital upon which these subscription to support the resolution with much ger so much, except in so far as in rages are to provide a return. The Com- pleasure, particularly as the schedule of convenience may he caused when they mittee were unable to do so because of rates embodied therein is the principal find their poorer clients and social certain information which they could not recommendation of the joint Chambers friends have ceased to appear as usual Commerce Telephone Committee in the Telephone Directory, but it does get from the Company. There were two of methods under which this valuation could of which I had the honour to be affect the smaller trader, who has to depreciation on the actual capital, put in be arrived at. Mr. Cook was working on Chairman. I crave this Council's per.look at every dollar before spending by the shareholders and bonthalders in
very English-speaking country the what is known as present-day recon mission to refer to rather copious notes, struction cost, less depreciation," Mr. as the subject calls for frequent reference telephone has become a necessity in the Lowe's Committed was working upon to figures and facts of a technical nature. struggle for existence, and being, by necessity, either a Government depart actual money put into the business, less "It will be noted that the resolutionment or a licensed monopoly, the public lepreciation. The Government found defers possible increases of the rates a have a right to expect service at fair rone difficulty in deciding what view to year further than the Committee recom- but moderate rates in relation to cash take with regard to these methods of mended. This is reasonable as time is cost only, and not on presumably tempor
ary inflated values. valuation, but is decided that this is not passing and the Company has given no matter, which it desires-or is indeed indication of improving the service, con- competent to give a decision upon. I ditions. The reinedy is in their hands, Mr. Cook's mabod of the inflated value and I am sure they will always meet with given by present-day cost of reconstruc tion is correct, then there is no reason considerate treatment as 2000 A
the Company provements are effected, but not before, why the shareholders in ahould get the high rate of interest as they would apparently wish. namely, 12 per cent.-upon which Mr
Cook was working- For instance, the value of the land upon which the offices
Government does not feel called upon to
matter.
for
1921
BELLING » TO, THEM BPI, VES, -
the purchase of plant and buildings, It seems to me unfair to endeavour to make subscribers pay higher rates because, in the middle of a contract is assumed that greater expenditure would have been accessary if the Company had had to pay high 1921 prices for all its land, and plant instead of only a small portion purchased at high prices in recent years.
after
``À BUBJECT FOE-ARBITRATION,
According to an American expert the hing been questioned in some quaters, long and tedious process and the valuation of a telephone company's assets. the present company is a con- lengthy case and long judgment in the tinuing Company or not. Personally Government versus the National Tele contend that, as the present licence does phone Co., in 1081 and 1913, shows this agreement had to be made with the presets were fixed at a value of £12,000,000 not expire until 1930, the suggested, naw
In that award the Telephone Company's
DEFENCE OF THE SCHEDULE OF RATES. therefore, to buy and sell, so to speak was very fully set out and forms the
sent Company and, as they could and no local buyers at their own price, they had, 20,000,000, and the method of valuation the Company had claimed The 3 rate is higher than the net between themselves if they had floated a leading law on the subject. Whether the stand, or are to be built, has gone up rates for 1920, which were $45.30 and local concern. They thereby merely pro- Company's valuation of £19,000 appro enormously since the Company purchased
posed to change their whole interestimates to the smount of the claim or the $73.55. Under the present the present Company for a whole inter- and, from the subscribers' point of view, the service is just as eficient if that land licence with exchange ranging round 2/6 est in a local Company, which carried award only. Mr. W. W. Cook, and pre- is sold and the undertaking were to be up to date in 1922, it is hardly likely with it the right to subscribe all future stably Mr. Barker Ness, kaow, but the removed to a cheap site in a back street, that the present year will enable the necessary capital to the exclusion of was that it was based on this celebrated impression the Government were giveni There appears to be an valid ground for
others if their shareholders so desired. · I allowing shareholders to take a return Company to reach s rate as high as 88). think, therefore, there is no doubt that award which naturally gave great weight from subscribers in respect of the enhanced It is true that the flat rates for Victoria, under these circumstances the proposed tion shows that Mr. Cook could not have
to the Company's valuation. Investiga value of the land. Be that as it may, the Peak and Kowloon would have resulted licencees were merely continuous ones, employed the method adopted of arriving whatever they chose to call themselves, at reconstruction cast by using the decide as to what the exact amant of the in some immediate small loss in income and also, whether they were registered average cost for the previous 19 years capital should be, but it feels that, while to the Company through the cancellation with limited liability in England or applied to material and 8 years for it is prepared to pay liberally on the of excess mileage rates, but in view of Hongkong. The fact that it was proposed labour (in America it is baieved they money actually put into the business, tak the expansion of residential and business to chtain a majority of local directors ing Mr. Lowe's figures, it does not see areas it was felt the Company would see does not, in my opinion, alter the situs employ the straight line method of ti
5 years average) nor did he why it should allow as equally high re-recoup themselves by increased busines. tion as the real power would still be in preciation adopted by the Judges. The turn on the higher valuation of recon. In any case the probable general increase the hands of the shareholders e. the assumed life of the plans is a very in- struction cost. These rates of subscrip of four to five dollars in the flat rate is old shareholders holding the majority portant point, and how far the Judges tion cover both ways of looking at the expected to more than cover this proble of the shares.
This state of affairs discounted the Company's estimate is & matical small loss of income. Generally would xist until the present share debatchle point which, also, applies to Then again, there is the question of speaking the reversion to a silver or holders had sold the majority of their Hongkong, where depreciation, owing to new capital. Mr. Parker Ness urged local currency rate (which is the Com- shares to local interests or had admitted the humid climate, is apt to be greater that 15 per cent, should be allowed, and pany's own desire) should be made at new shareholders in similar proportions than in England. "he was not willing to go below 12 per current rates and the suggested rate of in other words, sold, or parted with. In my opinion, generally speaking, it cent. The Government is impressed with 4 is considered lair to subscribers and
proportionate original interest. the fact that one of his own corpora the Company under present conditions. obtain the Government's sanction to
would appear that on the basis of the ious, the Bengal Telephone Corporation, What the future may bring forth no one higher valuation of its nasets than depre- the local Company's plant would prob National Telephone Company's award has very recently issued, in London, can tell, for during my residence of ciated values on original cont figures ably be worth less than half what they £350,000 first mortgage debertares at nearly 23 years I have seen the dollar would admit of, practically means the claim, and I am further of opinion that per cent. at 97, and the issue was closed fluctuate between is. 6d. and G. 2d, and Government would have lent itself to an owing to the technical nature of the within an hour of the opening of the to a Hongkong subscriber this means, arrangement which would have enabled work the only way to settle the point list. This appetrs to show that the rates under the present agreement, a 10 the old shareholders to sell the whole or is to make the matter the subject of for this kind of undertaking are consider telephone rate might Buctuate between
any part of their interests to themselves arbitration, with a Judge or Lawyer as ably cheaper than 13 per cent. The 13 and $32.
at a profit which, as between themselves, Government is most anxious to deal both The reduced claim of $10 and $145 Company lar does not allow them to do. fairly and liberally with the Company on would have meant an increase of about Only on sual a method and at the expense it dealt with the 100 per cent. on the 1021 rate, or £60,000 of the telephone subscriber, who is called Electric Company, the Dairy Farm and Ray $500,000) per annum extra proft on to pay higher rates, would the old other public nility concerns, and it is to the Company and a corresponding shareholder either be able to sell his shares as far as it can be antished that these loss to the Colony for reiterated promises at a considerable profit to a new share rates will give à liberal retura upon the of up-to-date service in the near future holder or a new shareholder subscribe for money invested in the business. Of Is it likely they would have been in any
dew shares carrying an equivalent course, the recommendation of the Com-hurry to perform them I
dividend mittee provides for a revision of these A more correct way of looking at this rates if, in practice, the return is found claimed increased rate is to regard the would result in the old shareholder get
This very plausible inflation of capital not to be suficient. Mr. Parker Ness Company asking for a reversion to its maintains that the terms are entirely old rate of $100, thereby saving itself a dividend equivalent to a rate unfair and he quotes the fact that higher at the expense of the subscribers with several times greater than he could have in Singapore, Calcutta and elsewhere. phone," say $100,000 or £12,000 odd per rates are being paid to other companies loss on exchange of $20/30 per telegot on the original cost of bis investment, We have replied to that that rates in 40/50 per cent, increase on the reinstitut Japan are low, and, particularly in per Shanghai The Mutual Telephone Com-ed old rate which may be estimated to phay of Shanghai, apparently entries on bring in some £10,00 to 250,000 per at a good profit on rates of Tis: 45 for annum to meet possible increased expenses, private telephones and Tls. 65 for an which I will endeavour later on to show ofice telephone, over a range of two and may not occur, and extra dividend on explanation. The apparent regularity of at being taken at his own valuation by old capital expenditure artificially raised increase shows them to be arbitrary, and people who live go for away from in the guise of high prices which were the note adjoining, means that the Com-London. never paid for on most of the materialpany must satisiy the Government, or its
the same lines
half miles.
Rs
There are various other points out standing. The Government proposes to make it a condition of any new agree ment that the Company is to transfer ts management to Hongkong. We find great difficulty in getting into touch with the Directors, and it is to more renson
is.
"COMPANY'S INCREASING BUSINESS AND
INCREASING PROFITS,
To
a good rate on his investment and the and guarantees the new cash shareholder telephone subscriber pays the piper. Why
should be!:
arbitratar and each side to employ a Telephonic Engineer and Accountant who would collaborate instead of, as up to now, working separately
for such enhanced values was based on a It would seem that the Company's claim definition by Sir Frederich Branwell, con Brmed by the House of Lords, on what is known as the then value terms as appler to Tramway Assets. These so- in solving the National Telephone valas called tramway terms were these adopted tion and I have shown how they wege applied in that case,
TAKEN AT HIS OWN VALUATION. elicited a reply that he could not gira Recent enquiries from Mr. Parker Ness me the reference to the case to which it referred. Personally, I don't blame Mr. Parker Ness who only did what he thought was the best for bis own and The suggested annual gradual increas bis Company's interests, and I am sure of rates up to 8120 in 1920 calls for some he must have had many a good laugh
THE LATES SCHEDULE EXPLAINED,
and buildings the Company had invested Committee, in allowing them, or so much until 1930 it is too soon to decide As the present licence does not expire extra as will recoup the Company for whether the Government should instal a additional expenditure incurred, to pro new system of its own, but it is not too vide better service and a reasonable.ro soon to institute enquiries from others Hozourable members will desire to tarn on additional capital expenditure than the Oriental Telephone Co., as to able that Hongkong telephones should be know whether the rates are suficient to only. The accounts required must be the best system suitable to the climate run frain London than that Directors cover.expenses of running the telephones. actual detailed working accounts showing and the varions, languages of the inhabit- in Hongkong should run telephones in Extracts from the Company's accounts how they fit in with the annual published ants of Hongkong. "Manchester. There is also the point that prepared by Messrs. Lowe, Bingham and balance sheets and estimated figures of subscribers are paying considerable sums Matthews, at the expense of the Hong expenses; income or depreciation shouldable members for so patiently listening to La conclusion, I have to thank honour- în inconfe tax excess profits duty and Long Government," show that between be disregarded, otherwise the Government my remarks, and on behalf of my Com corporation tax in the United Kingdom. 1914 and 1919 the ninaing expenses in and the subscribers can easily be fooled mitica, to express thanks to the Govern There are other difficulties, such as the cluding renewals but excluding depre. by the licences, though I hope the present ment for making available all papers question of the value of obsolescent plant, ciation, London Office and Birectors licencees will not dream of doing any and documents, and particularly to the and there is one other point, the fees and English taxation varied between such thing in the future. The idea of Honourable the Colonial Secretary for question of the automatic telephone. The 832 and 341 per $100 receipts or (in other these increased rates is no effort to pro his valuable assistance and advice on the "Government is not satisfied with the worda) per telephone. There is, there-vide for increased interest or dividend on many points in the case, which he has finding that an automatic telephone should fore, a wide margin to meet dividends some £250,000, which the Company claim fought se persistently, with a Parker not be installed, and it wishes to go and the excluded expenses between these they wish to spend to rebuild their ex Nessian pistol at his head for some three further into the matters -
figures and the $84 rate-Between 1914 change and renew and extend their plant years, and lastly it has been a pleasure
THE COMPANY'S CO-OPERATION LACKING.
Sif. I-beg to support the resolution.
HIS EXCELLENCY The resolution' which Ppears on the Orders of the Day has been moved and seconded. Those in favour of it say Aye; on the contrary The motion was carried without a dis sentient voice,
MENT BILL.
In conclusion, I would like to express and 1910 the subscribers nearly doubled with more modern material. How much to have associated with Hon. Mr. Chow the great obligation of the Government in number. Wages more than doubled, extra revenue will be required each year Shou Son, Messrs. F. B. Marsh nd to the various gentlemen who have but profits doubled, showing that over afis as problematical as the extra capital Chow Taun Nin, the members of the advised it, and mere particularly, Mr period of six years the ratio of expense expenditure necessary, but it is obvious Committee, who have worked so hard Lowe, who has spent a very great deal was roughly the same, and double the the whole amount cannot be expended at and harmoniously in formulating the re- of time and trouble in this matter; also business done meant double profits. It occe and rates must therefore only be port on which this resolution is based, to express the Government's indebted is the Company's own fault if their proportionately extended. ness to Mr. Bennett, the Local Manager counts for 1920 and 1021 show different of the Company, for his very ready results, for they refused to produce them, assistance wherever he has been asked for but, as their published balance sheets for
From conversations I have had with information.. I beg to move the resolu- these later years show the average Hong. honourable members and others from time Hon. Mr. A. O. Laxo Sir, I beg to those, for 1918, it would seem that any surprise that the Committee did not fix kong profits to be slightly in excess of to time, I have gathered ther is some second the resolution which the Hon. increased expenses incurred had been more the capital value of the Company's assete Colonial Secretary has proposed. The than covered by increased income, so the and recommend that they should only be telephone service during the past for claim they make for increasel rates is allowed to pay a maximum rate of inter- THE STAMP URDINANCE AMEND- yeurs might not have been altogether satis not justified on this ground alone. Pesty or dividend thereon with similar ffactory, but it has to be remembered that From what I have said I trust it will allowances for further necessary capital
the management has many difficulties to be gathered that the now rates offered issues. It must be apparent how impos-The ATTORNEY-UENERAL Moved the second contend with and the utmost care and are not lower than those collectable nader sible it was to evolve such a scheme without reading of the Bill intituled; An Ordio attention has bien tecessary to cope with a the agreement expiring in 1930, and that the co-operation of the Company. Their ance to amend the Stamp Ordinance 19:11 growing demand. I am confident, Biz, that increased expenses only follow increased Vice-Chairman, Mr. Parker News, abso-The COLONIAL SEC¤erant seconded, and there is no desire ou the part of any mem-business in a similar, if not lower, per lately refused to give any information the motion was agreed to ber of the community that the China and contage so that the Company have no which would enable the Committee to On the motion of the ATTORNEY-GENERAL Japan Telephone Company, should ceas reasonable ground of complaint as a criticise the figure of £279,000 odd at the Bill was referred to the Committee for lis operations in this Colony, sad under continuing Company. Evidence in the which their own commiting engineer and consideration clause by clause. The Bill the circumstances I sincerely trust that National Telephone Case in 1819 showed valuer placed it. I venture to guess that passed through Committee without amend- the directors will accept the terms out that the ratio of running expenses to in- this attitude will be maintained until the ment, and du Council resuming. --- lined in the resolution for the extension as was, for all practicable purposes; larger fish now on the book, in ladin and The ATTORNEY-GENERAL moved that the of their licence.." "As the ben memberi reaxed figure, and the Chinn and Japan (elæwhere, - have been landed by the Bill be read third time presenting the Fustices of the Pence had Telephone Co.'s accounts bear this out. Uriental Telephone Co., Ltd, who are The COLONIAL SECRETARY seconded, and much to do with drawing up the report In 1906, with about 800 telephones, the Paramount owners of the Chine & Japan the motion was agreed to of the Committee to which reference has Hongkong profite were £3,500 at a 3100 Téléphone Co. Ltd.
His EXCELLENCY: The Bill is passed been made, and will, no doubt, desire to mte, and in 1921 with about 0,100 tele: The wide, difference between the Come
LA VIE ADJOURNMENT.” address, the Council on the resolution, I phones the Hongkong profits were £23,000 ny's estimated, depreciated valno at. 1921 will content myself with saying that it at a rate of $73.35. The intermediate high prices of £279,000 with that of my
H18: EXCELLEver inquired if hon, men- must be a soure of great, antinfaction to years in spite of exchange fuctuations, own (on the admittedly inadequate figures bers would be prepared to take the second -the individual members of that Committee bowed a gradual and almost continous dvailable) based on the meamed balance reading of the Supply Bill a fortnight
that the Government has nocepted the increase each year, except in 1920, when sheet figures (after estimated deprecia bance, and on hon. members signify rates outlined by them as a basis for with a rate of 345, the proft was only tion) of £125,000, means about twice as agreement, His Excellency adjourned the negotiating with the Company,
much an annual charge for interest and Council till October 26th,
(Cantinted en page 72
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