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developments if it were in danger of being dispossessed
in a few years. The Hong Kong Company has a 50 year
term. The Telephone and General Trust asked for a
35 year term. The latter term might be susceptible
of slight reduction, but this would depend on the
other conditions in the agreement.
4. The shareholders would require a reasonable
return on capital with the prospects of higher
dividends if increased net profits were made. There
must be an incentive to earn higher profits through
greater efficiency and economy, and it therefore seems
clear that no maximum limit should be placed on
dividends. On the other hand, in view of the
monopoly rights granted to the company, it does not
seem necessary or desirable that the whole of any
increased net profits should be distributed to share-
holders. Apart from the need for building up
reserves there is a good case for devoting part at
least of any increased net profits for the benefit of
government and for telephone subscribers.
5. In the Hong Kong agreement shareholders were
guaranteed a minimum return of 8% per annum.
Presumably if shareholders are to be deprived of the
full benefit of higher profits they should be
compensated by a guarantee that telephone charges
will be maintained at a high enough level to give a
reasonable turn on capital invested.
It may,
however, be doubted whether shareholders need now
be guaranteed so high a dividend as 8 per annum.
6. The subscribers would want to be assured against
exploitation under monopolistic conditions. They
require the telephone service to be cheap as well as
efficient. It seems desirable that rates should be
fixed (and revised from time to time) by agreeman t
between representatives of the company, subscribers
/and