XN000022-1987-10-19 — Page 2

MONDAY, OCTOBER 19, 1987

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GOVT SUPPORTS C&W/TELCO MERGER

AND

THE HONG KONG GOVERNMENT, AS MINORITY SHAREHOLDER OF CABLE WIRELESS HONG KONG) LTD. (C&W (HK)}, HAS AGREED WITH CABLE AND WIRELESS PLC, (C&W PLC) TO SUPPORT A MERGER OF C&W (HK) AND THE HONG KONG TELEPHONE COMPANY LIMITED (TELCO) ON THE TERMS SET OUT IN THE PRESS ANNOUNCEMENT BY THE BOARDS OF C&W PLC. AND TELCO TODAY (MONDAY).

A GOVERNMENT SPOKESMAN EXPLAINED THAT IN RESPONSE TO THE PROPOSALS OF C&W PLC TO RE-ORGANISE ITS INTERESTS IN HONG KONG THROUGH A MERGER OF C&W(HK) AND TELCO, THE GOVERNMENT, WHICH HOLDS A 20 PER CENT SHAREHOLDING IN C&W(HK) AS AN EXCHANGE FUND INVESTMENT, HAS APPOINTED BARING BROTHERS ASIA LIMITED (BARINGS) TO ADVISE ON THE IMPLICATIONS OF THE PROPOSALS ON ITS SHAREHOLDING IN C&W(HK).

IN ACCORDANCE WITH BARINGS ADVICE AND GOVERNMENT HAS AGREED TO SUPPORT THE MERGER.

RECOMMENDATIONS,

THE

IN SUPPORTING THE PROPOSED MERGER, THE GOVERNMENT RECOGNISES THAT IT REPRESENTS AN OPPORTUNITY FOR IT TO EXCHANGE ITS INVESTMENT IN A PRIVATE COMPANY, C&W (HK), FOR A MARKETABLE INVESTMENT IN A LISTED COMPANY.

THE SPOKESMAN SAID,

"IT

IS

INTENDED ᎢᎻᎪᎢ . FOLLOWING

IMPLEMENTATION OF THE MERGER AND SUBJECT TO MARKET CONDITIONS, THE GOVERNMENT WILL TOGETHER WITH A SUBSIDIARY OF C&W PLC OFFER FOR SALE TO THE PUBLIC APPROXIMATELY 11 PER CENT OF THE ISSUED SHARE CAPITAL OF THE NEW COMPANY EARLY NEXT YEAR, WITH EACH PARTY SELLING AN EQUAL NUMBER OF SHARES.

++

THE GOVERNMENT INTENDS TO APPOINT BARINGS IN CONNECTION WITH THE OFFER FOR SALE. AS A RESULT, THE GOVERNMENT WILL CONTINUE TO HOLD APPROXIMATELY 5.5 PER CENT OF THE NEW COMPANY WHICH IT INTENDS ΤΟ RETAIN FOR AT LEAST 12 MONTHS THEREAFTER.

"THE INTENTION TO DISPOSE OF SHARES IN THE NEW COMPANY IS IN LINE WITH GOVERNMENT POLICY IN RESPECT OF THE EQUITY INVESTMENTS OF THE EXCHANGE FUND AS STATED BY THE THEN FINANCIAL SECRETARY IN 1986 IN CONCLUDING THE DEBATE ON THE SECOND READING OF THE APPROPRIATION BILL,"

THE SPOKESMAN SAID.

THE EXISTING CONTROLS EXERCISED BY THE HONG KONG OVER THE OPERATION OF TELCO AND CWHK WILL NOT BE AFFECTED THE PROPOSED RE-ORGANISATION OR THE DISPOSAL

SHAREHOLDING IN CWHK.

BY

GOVERNMENT EITHER

OF GOVERNMENT'S

"THE SEPARATION FROM TELCO OF ITS SUBSIDIARIES AND ASSOCIATED COMPANY WILL FACILITATE THE GOVERNMENT'S MONITORING OF THOSE EXCLUSIVE SERVICES OF TELCO SUBJECT TO THE SCHEME OF CONTROL, THE SPOKESMAN SAID.

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THE HONG KONG GOVERNMENT WILL CONTINUE ΤΟ APPOINT TWO DIRECTORS TO THE BOARDS OF CWHK AND TELCO RESPECTIVELY.

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