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PUBLIC RECORD OFFICE, LONDON
26 November 1896.] The Marquess of TWEEDDALE, Mr. II. A, C. SAUNDERS,
and Mr. F. E. HESSE.
Mr. Murray -- continued. 2020. Is there more interruption on that 1872 cable, for instance, than on the later one Ol dear, yes.
A cable laid in good water is not liable to interruptions in deep water for some few years, perhaps, but that gradually comes on. and becomes more frequent. As a matter of fact, we have put 40 per cent, of new cable into our No. 1 Adén-Bombay.
2021. What is the age of that?-Twenty-five years, and the great proportion of that has all been done within the last year or two.
2022. Then, you do notice a distinct process of deterioration?-Oh, yes. It is not that you cannot go to the fault; the difficulty is that the cable will not lift. The last repair we spent 187 miles of cable, because we got into deep water with it, and we had to go along and along until we got hold of a good piece to lift it; but the tendency is for the faults gradually to come into deeper water, It is supposed that after a cable has been laid down 12 years it will remain there, but it is not the case.
Chairman.
2023. I thought you said just now that by new processes you had found a cable that had been lying in the water for 12 years absolutely intact as good as new?—Yes, in that part; but, then, we have had a good many breaks from irregular bottom-taping gets over the corrosion, but the chafing on the bottom, of course, will go on.
2024. But apart from chafing, I suppose you would expect a modern cable, manufactured with all your experience, would last a good deal longer I do not know than an old one?-Oh, dear, yes. what the life of a cable is, but certainly it quite doubles the life. The taping of the outer wires of the modern cable will preserve it to a very great extent almost indefinitely-because in the old form of deep-sea cable you depended a good deal for the strength of your cable on the hemp with which the iron wires were served. If you lost that hemp you had only your iron wires to depend upon, instead of the sum of the two breaking-strains the actual breaking strain wa greater than the sum of the two separately. But the modern cable, no doubt, would jast very much longer.
Mr. Murray,
2025. One question about those figures that you gave us about slack; that was, the amount of slack on the distance actually travelled by the ship-Yes, the difference between the distance, taking the distance travelled by the ship, of course. Yes.
2026. Not the point to point distance ?—In some cases, Fake Aden-Bombay: some of those cables-well, they are point to point dis- tances-tlicse and St. Vincent-Pernambuco (showing on map), it is a straight line.
2027. Which is it: because it makes a good deal of difference --It is the actual distance.
2028. The point to point distance, or the dis- tance that the ship went over?-We will take the
[Continued,
Mr. Murray-continued. Pernambuco cable; you will see that it is a line straight from one point to the other,
2029. I suppose it was not, as a matter of Well, as near as you fact, actually straight? can navigate a ship,
What
2030. That is what I was coming to. ught you to allow for deviation over and above the point to point distance?—Little or nothing: if in a straight line, you lay a line down a line on which a cable is to be laid it is decided between the contractors and the cable in such that you shall lay a company and such a position; and it is very rarely that it woull 'differ at all; it would be very ex- ceptional that you would get two or three miles off one side or the other; and it is plotted exactly, so that they know exactly the distance the ship has run every noon. They know exactly the amount of enble that has gone out every It noon and the distance the ship has travelled. is calculated in that way, not by the measurement, but by what the ship has actually done.
2031. Those figures that you gave us then were actual figures? - Actual figures. You may take it that in a mean depth of 2,356 fathoms, for a distance of 1,862 miles, 11-83 per cent. was paid out; and that. I think, is about the right amount per cent, for that depth. (Mr. Hesse.) I was going to venture to give this information -that the Eastern Extension Company has spent 1,500,0007. in repairs and renewals of its cables during the last 22 or 23 years.
2032. On a first cost of how much? On a first cost of 2,500,0007.
2033. Besides their reserve fund?-Besides their reserve fund; simply repairs and renewals, apart from the reserve fund.
Mr. Jones.
2034. You stated in reply to the Chairman that the capital stock of your company was
think? Roughly a yes. 3,000,0007.
:
2035. And on that you have paid only divi- dends of 5 per cent., with a bonus equal to about 7 per cent.?—No, not exactly; the divi- dends and the bonus have been upon the share capital. I mentioned that there was a rertain amount of 4 per cent, debenture stock in the three millions, and a certain amount of deben- It is on the two ture bonds paying 5 per cent. and a-half millions of share capital that we have paid the 7 per cent.
2036. You mentioned also that in the event of the Pacific cable being laid, and assigning to that, according to your estimate, a certain portion of the traffic, it would subject your company to a loss of about 118,000, a year?-- Yes. (Marquess of Tweeddale. On the present tariff.
2037. And if the rate was reduced to 38. per word. 197,000l. per year? (Mr. Hesse.) Yes.
Some
2038, I think you stated also that from the time the rates were reduced from Us. 4. to 4s. 97. there had been a gradual increase. years more; some years less?—Yes, one year a decrease of 5 per cent.
2039. So that, as a matter of fact, you had not been compelled to call upon the Colonial
26 November 1896.] The Marquess of TWEEDDALE, Mr. II. A. C'. SAUNDERS, [Continuerl
and Mr. F. E. HESSE.
Mr. Jones-continuel.
Governments to make up the amount of their guarantee, which was intended to cover any loss you might suffer-That increase was not in money; the increase was in number of words ; and at the lower tariff, of course, the increased number of words did not make up the former income; and therefore we had to call upon the Colonies to pay a very large sum for three
years.
2040. But at the present time?—At the pre- sent time we are not suffering from the reduc- tion.
2041. You are not suffering?-Owing to this West Australian traffic, this abnormal traffe. (Marquess of Tweediale.) The gold traffic? (Mr. Hesse.) This special gold traffic.
2042. Which you think is doubtful it may continue? We hope it will continue, but we do not know.
2043. There is room to doubt. Does the three millions of capital which you speak of represent actually paid-up capital?-Actual paid-up capital. 2044. Because I sce it stated here, in the "Economist," that something like 1,300,0007, of that was shares assigned to original stock- holders in, what is usually called on our side of the water I do not know what you call it here -watered stock?-There was a little watered capital, some 300,0007, due to the amalgamation of the several smaller companies; and the vary- ing interests had to be arranged in that manner; but we have taken from revenue far more than that 300,000 for the benefit of capital. So that you may consider the watered capital is more than wiped out. (Marquess of Tweeddale.) There were three companies originally. (Mr. Hesse.) There were three merged into the Extension Company, and four into the Eastern Company.
2047. That was quite usual in amalgama- ting But it was a very small percentage of watering, which has been more than wiped out? Marquess of Tweeddale.) It was merely to induce the shareholders to come into one combi- nation. (Mr. Hesse.) One of the company's shares were at a much higher premium than another. In the ** Economist "here, the autho- rity for the statement, it says: It is worth "while examining into the claims which the
various cable companies put forth to adequate remuneration their invested capital. Six-and-a-half and seven per cent., though very fair rates as times go, are nothing "extraordinary in themselves upon investiments "of twenty years' standing. But it must be "remembered that these are the rates payable "on a watered capital, and that they represent "considerably higher returns upon the money Thus the "actually put into the cables.
+1
LE
on
an
Eastern capital was watered to the amount of "819,500, and the Eastern Extension to the "amount of 472,500, and a dividend of 65 per "cent. on the Eastern capital should read as s
+6
per cent. on the original capital, while 7 per cent "on the Easteru Extension capital means over "9 per cent. on the capital prior to its being "watered. Beyond this, these companies have "worked themselves into a strong position by not dividing to the full extent profits
14
感言
Mr. Jones-continued.
was
legitimately carned. The dividends have "been no guide to the profits made, and if requi- "site the tariffs would be much reduced without affecting the payments to the shareholders "? - Marquess of Tweeddale.) I know something the chairman of about that, because I was the first company to the East from Malta to Algiers, and when we were amalgamated with the companies from London to Malta the Anglo-Mediterranean
paying 17 per cent., so, of course, they had to provide capital to get the shareholders to come into the new combination. That was the cause of that watering. In both cases, cast or west, the watered capital was due to the necessity of giving shareholders who had been enjoying a higher rate of interest an inducement to come into the combination. (Mr. Hesse.) But, of course, it has been wiped out. (Marquess of Twerddale.) In both companies?- (Mr. Hesse.) In both companies, by taking from revenue for capital purposes large sums of money far in ex- cess of the watering."
2046. The reason why I asked that question was because, in view of the statement you have made here, taken in connection with the views
expressed by the company, which was not un- natural, I think, that Government tariff should not interfere with private enterprise, whether in the event of the cable being completed, and these reductions being made, your earnings under such circumstances would not be ample to pay a sufficiently good dividend on your existing stock?
That watering need not be considered." 2047. No. I put that out of the question. I 1 mean mean on your capital of three millions. whether with all these reductions, supposing they were to take place, the Pacific Cable Being constructed, the reduction to 3s, per word, and your losing 197,000 per year?—(Marquess of Tiereddule) Whether if that were guaranteed us. Whether we would be able (Mr. Hesse.) No. to pay a dividend.
2048. Whether then you would be able to pay a very large dividend ?—I do not think we should be able to pay any dividend on that portion of the capital invested in the Australian system. We should be earning, of course, some money on the China, Japan, and other traffice, but I believe we should earn nothing at all on the Australa- sian capital.
2049. It is all one company, is it not?--It is one company, but it would be unfair to make the telegraphing public of Java, China, &c., &c., pay higher rates than necessary for the benefit of Australasia.
2050. The average of your earnings then would be so reduce?—They might be reduced by 4 per cent.. perhaps, or more,
Sir Donald Smith.
2051. I think you have mentioned that the insects or worms that are injurious to cables are to be found at depths of 200 fathoms only? (Mr. Saunders.) No. They are found in depths up to 800 to 900 fathoms, but not often.
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