XN000022-1982-12-21 — Page 2

TUESDAY, DECEMBER 21, 1982

NO CHANGE FOR TELCO'S PERMITTED RETURN

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THE GOVERNMENT HAS NOT ACCEPTED A REQUEST BY THE HONG KONG TELEPHONE COMPANY LIMITED THAT THE BASE FOR DETERMINING THE PERMITTED RETURN UNDER ITS SCHEME OF CONTROL SHOULD BE CHANGED FROM THE VALUE OF SHAREHOLDERS' FUNDS TO THE VALUE OF AVERAGE NET FIXED ASSETS.

THE COMPANY ALSO REQUESTED AN INCREASE IN THE PERMITTED RETURN, BUT THIS WAS ALSO NOT ACCEPTED BY THE GOVERNOR-IN-COUNCIL.

+AFTER CAREFUL CONSIDERATION OF TELCO'S PROPOSALS, IT WAS CONCLUDED THAT THE REASONS ADVANCED DID NOT JUSTIFY CHANGING EITHER THE BASE OR RATE OF PERMITTED RETURN, A GOVERNMENT SPOKESMAN SAID. HE ADDED THAT EACH SCHEME OF CONTROL WAS TAILORED TO MEET THE INDIVIDUAL CIRCUMSTANCES OF THE COMPANY TO WHICH IT APPLIED.

IN VIEW OF THE RAPID EXPANSION OF TELECOMMUNICATIONS GENERALLY IN HONG KONG SINCE TELCO'S SCHEME OF CONTROL CAME INTO OPERATION IN 1976, THE SCOPE OF SERVICES PROVIDED BY THE COMPANY WAS EXAMINED TO DETERMINE WHETHER THE SCHEME SHOULD CONTINUE TO APPLY TO THE WHOLE COMPANY IN TODAY'S CIRCUMSTANCES.

THE SPOKESMAN SAID THAT AS IT WAS THE GOVERNMENT'S POLICY TO LIMIT FRANCHISES AND SCHEMES OF CONTROL AS FAR AS POSSIBLE TO MONOPOLY UTILITY SERVICES, ONLY THE BASIC TELEPHONE SERVICE SHOULD CONTINUE TO BE SUBJECT TO THE SCHEME OF CONTROL.

THE GOVERNMENT HAS THEREFORE AGREED THAT

SERVICES AND EQUIPMENT WHICH ARE NOT AN ESSENTIAL PART OF THE PUBLIC TELEPHONE SERVICE OR WHICH ARE NOT PROVIDED EXCLUSIVELY BY TELCO SHOULD CEASE TO BE INCLUDED IN THE COMPANY'S SCHEME OF CONTROL. THESE ARE 1-

(1)

(1)

(111)

(IV)

(V)

APPROVED EQUIPMENT CONNECTED TO THE TELEPHONE NETWORK WHICH IS AVAILABLE TO THE PUBLIC ON A COMPETITIVE BASIS FROM OTHER COMPANIES;

TROPICAL CYCLONE WARNING SERVICES;

THUNDERSTORM AND HEAVY RAIN WARNING SERVICES;

PAGING SERVICES;

INTERNATIONAL SERVICES OTHER THAN VOICE TELEPHONES;

(VI) DIRECTORY ADVERTISING;

(VIE) VIEWDATA SERVICES;

/(VIII) DAT EL