1922-08-23 — Page 3

THE HONGKONG DAILY

THE TELEPHONE QUESTION.

PRESS.

Part I., Claus 6. If Mr. Cole's tion is based on the replacement valinn supplied the Company, it must ba assumed that he approved of and made

THE COMPANY'S REPLY TO THE COMMITTEES these values his own. It is difficult to

REPORT.

Colonial Secretary, 1,1 have to thank you for your rtesy in furnishing me with a copy of Report of the joint Committer of the Chambers of Commerce, on the pre od agreement with the Telephone Co. an extenajop of its License. I have this document with earn which to mind disclos no good cause for the tinued pustement of the conclusion he new license. "

2

*

WEDNESDAY, AUGUST 238D,

The method which Alessrs Lowe, Bingham Matthews claim to be the right one in Mining" an ertakin would cost to construc

namely what

and establish

plans of equal capacity, less an appro priate deduction in respect of deprecia- tion, is the course pursued by Mr. Cook The cost price" or the money invested?' had rightly no place in arriving at the

present value. ***

Shareholders

situation,

(b) to relevance to the present (o)This is doubtful, (d)-The fall of prices, such a,it was

was allowed for by the appraisers up to March when the valnations were made..The London Com mittee recently reporting on the rates there saw no likelihood of any material fall during the next 3 years, (c)-Mr. Cook's valuation was based, as he says, " on a sound basis which I am prepared to defend in the witness box, based on legal deci- sion." His certificates indicate that it followed the course approv- ed by Messrs Lowe, Bingham & Matthews, amely reconstruction cost less depreciation,

understand the clause He (Mr. Cole) considers that £210,637 represents the The China and Japan Telephone Co.

present value of the undertaking sold by In the mequin the Colonial Secretary one owner to another, The Raporters do ward us the following letter which has had appointed a focal Committee, of not indicate where and when Mr. Cole addressed to the Government in which Mr. Marsh was bemember, to con said this and I venture to think that Mr. ly in the Report of the Committer of sider and advise the Government on the Cole has been misunderstood, for such n Company will retain an interest equi Part 11 Class 3 ()—The existing Chamber of Commerca, appointed to question of increased rates. hort on the terms required by the title, like Messrs. Lowe, Bingham and basis of valuation at all The class scribers whom the Company hope will be This Com statement means that he followed no legal Valent to what it brings in to the new company side by side with the local sub- mpany in connection with the exten. Matchowe, "found that they had been within brackets introduced by the Reready to co-operate as Directors and

of there license-

asked to undertake a task which required porters with presumably an extension 18th August, 1992. technical knowledge not obtainable in of ficense and powers to increase rates, n. Mr. AG, M. FITCHER, C.B.E., Colony, but notwithstanding this was indicating thereby sont part of Mr. Cole's gested a rate of $120 arrived at, ap-valuation of £210,837 is to be attributed to

rate of t parently, on no known basis, but as anything outside the actual land, build- midway figure between the old rats and kings and plant, is unsupported by any and that anked by the Company.

Neither of these reports were of such pany, and unless it appears as a definita thing within the knowledge of the Com nature as to guide the Government to object of valuation in his report the pre- satisfactory decision. They then resolved sumption has no warrant to seek the guidance of specialists in Telephone Construction, and arranged in error in understanding that the Com Part 1: Clause The, Reporters are with the Company to bring one specialist pany's valuation of £270,087 is their to the Colony, while the Government transferred fris, que owner to another as Sea of a fair value for the undertaking would bring another, who would coufern going concern with presumably au st me. belare calling attention in cgether and furnish their findings on the extension of license and powers to increase il to its terris, remind you shortly of amount of the rates and the value of the Jates). The valuation is as described in long drawn out negotiations to which undertaking. Mr. Cook, one of the best which include nothing for a going concern Mr. Cook's schedules and certificates, report, is the latest contribution. known authorities in Londền on telephone-nor, the extension of license. Mr. Cock wo and a half years ago, the Telephone matters and the assessor to the recent was never asked or expected to take these pany, suffering bile others both here House of Commons Committee appointed risewherd from the rise in prices to inquire into the subject of London equent on the War, applied to the rates, was invited by the Company, and ernment for a recnusideration of the Mr. Cole, the General Manager of the cription rates witch-fixed many Shanghai Telephone Company, was invit igo under different circumstances ed by the Government to visit the Colony out of date, and had become in for the above purpose. These grutlemen icable to the present time. Thein due time agreed on a basis for arriving rament acknowledged that our ap- tt i revised schedule of charges to replace ion deserved consideration, if it was the one which the war, conditions had lett by facts, and set afoot enquiries

fu informaation on the subject. In thrown out of perspective, and presented r instance, they appointed Messrs. their new schedale to the Government as

Bingham and Matthews to acquire furnish information on the raho of jointly agreed on and recommended for Company's undertaking and the adoption. The Government thereupon of the rates that would return fair adopted it, and introduced the schedule reasonable compensation for the see. These gentlemen pursued their iries over a period of moir than a and, although their conclusions led settlement of the above questions, Report' made some important, adinis which bear closely on the situation answering a question put by you the value of the existing under g Mestra Lowe, Bingham hews stated:

in"the draft agreement, which was mainly drawn up by Mr. Cole, and you, after consultation with H.E. The Governor, nuthorised the publication of these new rates. It is true that, although no one seriously contemplated the postpoftement of the Agreement, it was mentioned that that has since taken place in the signature should anything befall its due completion and the antification would not in the mean at long last been arrived at by experta line take effect. The scale of charges had who knew their business and was accepted by the Government and the Company. The rates question was regarded on both may he remarked that the newly authoris aidens & closed-book.

dates are materially less than those Eu pesant, it

authorised in India and elsewhere.

The work involve in this kind of uation calls for the services of mical Tekphone Expert, moreover who specialises in Telephone Com retion."

plant, as the fext of his schedules anil certificates proves. into consideration in his valuation of the |

There is he amount of depreciation estimated as necessary for the new vides for depreciation and reserves of a percunthgenot exceeding 8 per cent.", company. The Draft Agreement pro

the words in the Draft Agreement are not

I know of no difference between the basis of valuation in case of the National Telephone Company. and that 'adopted by Mr. Cook in. the present instance. The aystem known as the Tramyay Terms. i.c., property and plant at valuation, plus 40 per cut for compulsory sale, and plus goodwill, was the une applied to the present case without any addition for goodwill, going concern or compulsory sale, It is not yet known what the de- preciation will be in the future,

The S per post, depreciation, is anita situation is necessary for the busines

xcept that by the Agreement it | must net exceed 3 per cent..

average figure which would not apply to being situated in or very near to the Part 1, Claver --The property from

the case, for instance, of Steel Poles, the erecting the new building to add two every item of the plant individually. In Telephone Centur. depreciation, is slow and the residual floors for public offices which would be leti It is proporad, in value high (40 per cent after 25 years until the time arrives when the whole of is) in the ease of another item of the the building might be necessary for the the depreciation is rapid (about 14 per revenue to the Company plant-Storage Batteries, for example business. This should be a source of cent) and the residual value nil.

mounting to," but "not exceeding." thing... A per tant, depreciation, quite a different

non-experts. may fall when dealing with consideration and of agreement by the Part II. Clause d--The new subscrip.

mutters of a technical character,

This exemplifies the error into which tion rates have been the subject of careful Part 1, Clause The Company con- this connection, The Committee, seems to two Experts, both of them specialists in much overdue, and that as no interruption schedule of rates they propose in substitu tend that the increased rates are already have made no calculation, to Justify, the is to take plave in the service during the tion of that of Messrs. Cole and Cook. period of transition from one system to her simply allege that the subscription increased during this period, there in un put forward the figure of $54.00 instead another, and the working costs will be rates are too high," and the Committee reason for postpaning the increase which of the existing £10 thus Jessening instead it is contended should have been granted, of increasing the average rate which the to them two years ago, It inust be made clear from the

Company of the proposed new rules, sug produced from 8113.00-850,00 per annum set that it is not the value of the

gested that they should only come into for service within one mile of the subsequently to the publication by the the years 1905-1917 the £10 subscription If Mr. Cole, 10 has until lately, produced.. During nt according to the books that we, dealing with, and we have taken words value of the existing under-

On the valuation of the undertaking the

force 2 or 3 years, hence the suggestion exchanges. ing to mean the present value, appraisers differed, Mr. Cook certifying and intred such a suggestion would be although showing a great desire to escape wis not communiented to the Company It is to be observed that the Committee, in to say what it would cost to the reconstruction cost at £326,286 and the inconsistent with his actions and with the from Mr. Cook'a valuation of the property struct and ablish plant of equal present day value Le. after allowing for terms of the Draft Agreement in the pre-and plant, avoid committing themselves icity less an appropriate deduction depreciation at £279,687. Mr. Cole on the oration of which he was the chief mover, to any other valuation. respect of depreciation."!

other hand vahied it at £230,857. The Telephone Company based their thereupon sent for, the appraisers and Mr. Cook and he agreed upon the scale.

Your No such suggestion was ever made when Part III The Committee's recom- man cost, plus an addition of 190 naked for an explanation of their differ-

mendation that the Government should cent. representing the increased enee. Mr. Cook represented that the able with present rates to earn a Iniring order by 1930, at once gives rise to Port 1., Clause The Company is not install a system of its own to be in work- of material and labour as compared valuation which had been prepared under return on the Capital necessarily employed the question, why, if Government, owner- pre-war cost Enquiries of the his supervision and carefully checked by in rendering the service, and it is, of ship and administration are desirable. ghai Mutual Telephone Company, lim had been conducted on a sound basis course upon this Capital that the rate and if it is an assured thing that in their ugh our Shanghai office, have con- which he was prepared to defend in the should be based, indeed for rate making hands the rates could be brought below ed this increase and other matters witness box, whereas the basis of purposes, an additional sum for the those agread on by the Experts, and if the eeted with Telephone Costs. Fur Cole's valuation was open to attack as going concern" is generally admitted. Committee believe that the Company is artmental Committee on Telephone on legal decisions.

Recording to the Report of the departing from standard, practice based The profit referred to in 1991 was £15,028 earning large profits, and that these pro- presented to Parliament in 1920, stood to have said that his figure of thing under 9 per cent on £280,000.

Mr. Cole is under- in London which was equivalent to some fits in the hands of the Government would following statement shows the per- £10,837 19ns a sum on which he thought

result in lessening the rates and giving a ges by which the present coat of that negotiations between a willing bayer able to the Company since its commence does the Committee not recommend the main items of the telephone plant and a willing seller might bn based! You ment in 1883 are as follows:--

Part 1, Clause 10-The dividends pay-fair return on the Capital employed, why eds the pre-war average cost,' g an average increase. of 204 per as being in your judgment the right que,

eventually approved of Mr. 'Cook's figures 1993-1003 and this you announced to the Chamber

0:1907-1914

over pre-war costs.

nother place in the same Report

r adds on the subject of Depre-

of Commerce when you recently, met them

·

1915-1921

Nil.

5% on £14,76). .....10 on £30,781.

purchase now of this profitable concern f Is it because an immediate consideration of such a transaction would press home taking, on, which rates have to be based the fact of the real value of the under-

Your obedient servant,

G PARKER NESS

to explain the agreement which contained now £260,000, and the number of subscribed 1-I have the honour to be, air,

The true Capital has risen until it is and a fair and reasonable return obtain- The difficulty confronting us is the ment were ready to conclude with the dred to 8740. It is apparent also that the Mr. Cook's figures and which the Governers stations has grown from a few hun ant of such allowance, and we are Company. At the termination of the value of the service to each subscriber has

a position to state what it should ne we have not the necessary meeting the Chamber of Commerce pro thus increased immensely since the £10 ical knowledge to form a scientific sed the appointment of the present rate was first introduced.

ils before stated, the joint committes to consider and report on Suck divisible profits as were earned present value is the cost of con- which you acquiesced. This Committee the business. Had the Capital been in the Draft Agreement, a proposition in over the above dividends were put into tion less depreciation."

their report and with some of its details has, after a lapse of two months, sent in crossed by now issues from time to time,

propos to deal serialim,

on,

The Company, the Government ill recognise, is entitled to a fair sation for their services, and the at marked B shows how the

Part I., Clause 3.-The Hongkong and ay will fare on the basis of $100 Kowloon Exchange. Plants and the Sub- num. Referring to this 8100 scribers: Station Plaat were especially hey addIt must be noted that designed for use in this humid climate, ve essentially rough estimate in The plant in of standard design and called upon to periodically bring its He was afro Works Superintendent to the on 10,000 subscribers (the actual exactly the same type as at present manu- | issued share capital into accord with its Kwong Nam Dock Co, in Canton and was: to-day is under 0,000) (factured by Messra L.M. Ericsson for true Capital. If a new telephone com- intercepted. while crossing the river and hort, the Report announced that installation in conjunction with new pany were formed to set up business in detained on board Sun Yat Sen's ship, Lowe, Bingham and Matthews systems elsewhere. Within the last two Hongkong, it would cost them, according the Wing Fung. This happened, about nable, for want of expert know-years the Hongkong Exchange plant had to Mr. W. W. Cook, £328,296 for the re- two weeks before Dr.. Sun's departure and to ascertain the value of the been added to the extent of one third construction of the present establishment, it is a well-known fact that his relatives employed and on which alone the of its present capacity. After the installa-1 and upon this £326,280 reconstruction made every effort to secure his relets. hich would give a fair end cpason tion of the new system now necessary to price's turn would have to be made to He was accused of being implicated in ofit could be arrived at 74

the deports cars ánto the Gov. Archangs plants would be used for smøller describe it as "graaping" when the Como foiting-mine which exploded near the provide greater capacity, the present the shareholders; yet the Committee the attempt to blow up the Wing Fung by portion, you had gone to herb gini ascertained that there development. Many of the present ascertained value of the present under-mont he was removed to thredao Xu where orchanges in ontling area during pany expects a dividend on £280,000 the U.8.S. Tracy. After many days confine- general rise in telephone magneto instruments are of the con- taking. Whether part of the Capital; be is said to have confessed to Chen Chak s came to the conclusion that gertible type and are suitable for us on ases, nagit does here, Aron appreciation his abare in the attempt The present ase for the Hongkongzata bebe Central Battery Sten the Magosto value of buildings necessary to the report states that he was taken on board, de@150 per absorber was reaso Tophat she return to the operating

which are not, of the con- Company's business or from a rise in the a launch and put to death. His body was would be used in the develop. wathe of a portion of ita plant, is an cut into four pieces and thrown into the ring arona. The cables and irmlegant as it would be for the Company river. His relatives have issueil a reward plant are of the best design to obiect to have its rates fxed on for the recovery.or his remains d construction and are entirely suitable depreciated Capital. It must be allowed Mr. Chiu who was only 3 years of age, With the Central Battery System. thing had the plant decreased in value, was educated locally at EL Stephan's the statement that the system say to half of its cost, the Company would College and was regarded Re a good man smat extent coegleta is erronéõus not be justified in valuing its property in his profesion. He leaves

auce for depreciation, has been for reto-making purpose, at spect of the plant in Mi

original brothers who are mostly.

HONGKONG · BUSINESS-MAN'S

a less dividend even than the above would

AWFUL DEATH CARVED INTO PIECES AND

Company is, and always has been, According to the vernacular Press, Mr. have been paid on the larger capital. The

THROWN INTO RIVER, private one owned by the Oriental Tele-Chui Chik, manager of the Kwong Tuck phone and Electric Co., Ltd., and seeing Cheong Deck at To-Kwa Wan, has been it had no outside shareholders, it was not put to death in a most inhuman manner.

per

dojilate 19 per cent, ars exóbas beyond this percentage agi oqually between the 6 and the Company: All this to Sir Now) Stable wid Destor, Bloopy of which you be: Chamber of Commerce bort resently met, then-dă explai kalenin the foveramente was DT

cinde with the Company. Cook Valuation. “

W post. The “ame principle of course Hongkong and wife and family

applies (tite property His appreciated, moura hisdoekje

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