6
WEDNESDAY, FEBRUARY 5, 1975
HE ADDED THAT BY SUCH DIRECT PARTICIPATION IN THE COMPANY'S AFFAIRS, THE DIRECTOR WOULD BE ABLE TO BRING THE GOVERNMENT'S INFLUENCE TO BEAR ON THE POLICY AND MANAGEMENT OF THE COMPANY AND +1 +I HOPE WITH HIS FELLOW DIRECTORS, TO FOSTER THE EXPANSION AND GOOD HEALTH OF THE COMPANY TO THE BENEFIT OF THE COMPANY AND THE COMMUNITY ALIKE.+
EARLIER, THE SENIOR UNOFFICIAL MEMBER, DR. THE HON. CHUNG SZE-YUEN, SPEAKING ON THE MOTION BY THE FINANCIAL SECRETARY, SAID THE TWO QUALIFICATIONS WERE NECESSARY IN ORDER TO SAFEGUARD" THE INTERESTS OF TELEPHONE SUBSCRIBERS.
FOR A PUBLIC UTILITY, HE SAID, ONE MUST ADMIT THAT AN AVERAGE RATE OF RETURN OF 13.6 PER CENT WAS GOOD.
SINCE THE COMPANY WAS IN SUCH A PROFITABLE SITUATION IN 1973 AND HAD A 17-19 PER CENT INCREASE IN TELEPHONE RENTALS AS FROM FEBRUARY 1974, ANY LAYMAN WOULD QUESTION THE COMPANY'S PUBLIC STATEMENT IN AUGUST 1974 (WHICH WAS ONLY SIX MONTHS AFTER THE INCREASE) THAT. THE COMPANY WOULD NOT BE FINANCIALLY VIABLE UNLESS A FURTHER 70 PER CENT INCREASE IN TELEPHONE RENTAL WAS GRANTED.
DR. CHUNG NOTED THAT THE GOVERNMENT HAD PROPOSED A 30 PER CENT INCREASE BECAUSE +THE COMPANY IS FACING A CHRONIC CASH SHORTFALL DUE TO THE LARGE. CAPITAL EXPANSION PROGRAMME IT HAS EMBARKED UPON IN RECENT YEARS AND (MUCH INCREASED) INTEREST COSTS ON PAST BORROWINGS, TOGETHER WITH A CONSIDERABLE SLOWING DOWN IN 1974 IN THE DEMAND FOR NEW TELEPHONE LINES+.
HE REFERRED TO THE PUBLISHED ANNUAL REPORTS AND ACCOUNTS OF THE COMPANY WHICH, HE SAID, SHOWED THAT BETWEEN 1969 AND 1972 INTEREST COSTS ON" BORROWINGS AROUND $150 MILLION TO $250 MILLION WERE FLUCTUATING BETWEEN $2 MILLION AND $5 MILLION PER YEAR.
+SUDDENLY, IN THE YEAR 1973 THE INTEREST COSTS INCURRED BY THE COMPANY ROŠE TO $12 MILLION, AND BORROWINGS AS AT 1973 YEAR END INCREASED TO NEARLY $450 MILLION, HE SAID.
+WITH INTEREST RATES RISING RAPIDLY DURING 1974 TO 10 PER CENT TO 12 PER CENT PER ANNUM, THESE PAST BORROWINGS ALONE COST THE COMPANY A CASH DRAIN OF ABOUT $45 TO $55 MILLION AND THIS SUBSTANTIALLY REDUCED THE COMPANY'S PROFIT.+
AS A RESULT, DR. CHUNG SAID, IT WOULD CREATE DIFFICULTIES OF CASH FLOW AND IN TURN THE COMPANY WOULD REQUIRE MORE BORROWINGS WHICH AGAIN WOULD FURTHER AGGRAVATE BOTH THE PROFITABILITY AND CASH-FLOW SITUATION.
/HE POINTED OUT