XN000022-1978-06-21 — Page 3

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WEDNESDAY, JUNE 21, 1978

LEGCO APPROVES PROPOSAL TO ADJUST TELEPHONE TARIFFS

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THE LEGISLATIVE COUNCIL TODAY APPROVED THE PROPOSAL TO ADJUST THE TELEPHONE TARIFFS FROM JULY 1 THIS YEAR.

MOVING THE MOTION TO AMEND THE TELEPHONE ORDINANCE TO GIVE LEGISLATIVE EFFECT TO THE PROPOSED ADJUSTMENTS, THE SECRETARY FOR ECONOMIC SERVICES, THE HON. DAVID JEAFFRE SON OUTLINED FOUR MAIN POINTS CONCERNING THE REVISION AS FOLLOWS:

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THE OVERALL INCREASE OF ABOUT SEVEN PER CENT IS LESS THAN HALF THE INCREASE THE COMMISSION OF INQUIRY INTO THE AFFAIRS OF TELEPHONE COMPANY THOUGHT WOULD HAVE BEEN NECESSARY 18 MONTHS AGO=

THE LAST INCREASE WAS ALMOST THREE AND A HALF YEARS AGO =

THE INCREASES ARE MODEST IN DOLLAR TERMS $2 A MONTH FOR SUBSCRIBERS OF RESIDENTIAL LINES WHICH ACCOUNT FOR 77 PER CENT OF THE TELEPHONE NETWORK AND $4 A MONTH FOR SUBSCRIBERS OF COMMERCIAL LINES AND-

NO FURTHER INCREASES ARE EXPECTED BEFORE 1981.

MR. JEAFFRESON ALSO GAVE A RUN DOWN OF THE VARIOUS DEVELOPMENTS OF THE TELEPHONE COMPANY LEADING TO THE PRESENT ADJUSTMENTS.

HE SAID THE COMPANY, BY VIRTUE OF AN ANNUAL GROWTH OF ABOUT NINE PER CENT IN BOTH 1976 AND 1977 IN THE NUMBER OF EXCHANGE LINES CONNECTED, HAS REDUCED CONSIDERABLY THE SPARE CAPACITY THAT HAD ACCUMULATED DURING THE RECESSION.

+IN ADDITION, THE COMPANY HAS IMPROVED PRODUCTIVITY PER EMPLOYEE. THESE DEVELOPMENTS HAVE SO FAR RENDERED IT UNNECESSARY TO IMPLEMENT THE TARIFF INCREASE RECOMMENDED BY THE COMMISSION IN 1975, INSPITE OF THE COMPANY'S EXPENDITURE ON IMPROVING THE QUALITY OF ITS SERVICE AND ON EXPANDING IT INTO RURAL AREAS.

+BUT, RISING COSTS MEAN THAT AN ADJUSTMENT IN TARRIFS IS NOW NECESSARY. THE COMPANY CALCULATED THAT AN INCREASE OF AT LEAST 10 PER CENT WITH EFFECT FROM JULY 1, 1978 WOULD BE REQUIRED, AND ACCORDINGLY SUBMITTED AN APPLICATION TO THE GOVERNMENT, HE SAID.

MR. JEAFFRESON POINTED OUT THAT THE GOVERNMENT IN THE PROCESS OF EXAMINING THIS APPLICATION, ACCEPTED THE COMPANY'S FORECAST OF OF AN ANNUAL INCREASE AT AROUND SEVEN TO EIGHT PER CENT IN THE NUMBER OF EXCHANGE LINES, UP TO AND INCLUDING 1981.

HE SAID USING THIS FORECAST AS A BASIS FOR A PROJECTION OF THE COMPANY'S FINANCES UP TO 1981 SHOWED CLEARLY THAT THE COMPANY WOULD BE UNABLE TO ACHIEVE IN 1978 AND THEREAFTER THE 16 PER CENT RETURN ON SHAREHOLDERS' FUNDS PERMITTED UNDER THE PROFIT CONTROL SCHEME.

/HE SAID THE