TNAG-0845-FCO40-1055-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1979 — Page 124

CONFIDENTIAL

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5. Both banks identify the preferred course as an early (prob-

ably summer 1980) sale of shares in a new subsidiary to set up

and run Cable and Wireless's Hong Kong operation, to be followed

by the later consideration of a sale of shares in the main

company. Both banks estimate the capitalisation of the Hong

Kong operation at over £400 million, but it is thought unlikely

that a flotation on the Hong Kong market would raise more than

£50 million. However, it is possible that the Hong Kong Govern-

ment, local institutions or overseas investors might be interested

in taking up shares.

6. The Governor of Hong Kong, who was consulted informally,

attaches importance to the British Government retaining a 51%

share interest in Cable and Wireless in order to guarantee the

colony's future external communications services.

7. The current position is that Barings have now been commissioned

by the Department of Industry to carry out a detailed study of

the financial benefits to be gained by a sale as compared with the

status quo.

The study is expected soon. If Ministers subsequently

decide to proceed with the idea of a sale of shares, it will be

necessary to conduct formal negotiations with the Hong Kong

Government and to consult a number of other overseas governments.

September 1979

CONFIDENTIAL