CONFIDENTIAL
MDHIA
15725
14
TELECOMMUNCIATIONS HAS HAD CONSIDERABLE SUPPORT FROM THE US GOVERNMENT, BECAUSE OF THE INVOLVEMENT OF US WEST, INCLUDING TELEPHONE LOBBYING OF THE GOVERNOR FROM THE US SECRETARY OF STATE FOR TRADE AND COMMERCE. THE HUTCHISON GROUP HAVE ALWAYS BEEN VERY CONFIDENT, AND HAVE TAKEN THE VIEW THAT ANY OVERT INTERVENTION BY ME OR HMG COULD BE COUNTER PRODUCTIVE (MY TELNO INDUS 32).
4. THE LATEST DEVELOPMENT IS VERY DISAPPOINTING. THIS IS A VERY LARGE CONTRACT INDEED. BRITISH TELECOM HAD EXPECTED THEIR GROUP TO SPEND SOME HKD 6 BILLION OVER 15 YEARS, AND EXPECTED A 9 YEAR PAY BACK PERIOD BEFORE THERE WERE ANY SIGNIFICANT PROFITS. IT WOULD GIVE BRITISH TELECOM A LONG TERM STAKE IN HONG KONG GOING WELL BEYOND 1997. IF THEY LOSE HOWEVER, THEY HAVE LITTLE PROSPECT OF ANY FUTURE BUSINESS HERE AND MIGHT MOVE THEIR REGIONAL HEADQUARTERS FROM HONG KONG (SEE MY TUR).
5. I HAVE TOLD BRITISH TELECOM THAT CLEARLY WE ARE CLOSE TO THE END OF THE ROAD. IF THEIR RIVALS ALSO SAY THEY CANNOT MEET THE NEW TERMS THEN EVERYTHING IS STILL UP FOR GRABS. BUT IF THEIR FEARS ARE RIGHT, AND THEIR RIVALS DO AGREE TO ACCEPT THEM, THEN THERE IS NOT MUCH MORE WE CAN DO. I TOLD THEM THAT IF THEY THOUGHT IT WOULD HELP I WOULD BE READY TO SPEAK TO SENIOR MEMBERS OF THE HONG KONG GOVERNMENT E.G. CHIEF SECRETARY OR THE GOVERNOR, ALTHOUGH COULD PROBABLY ONLY MAKE THE RATHER OBVIOUS POINTS THAT THERE WOULD BE ADVANTAGES IN HAVING BRITISH TELECOM WELL ESTABLISHED IN HONG KONG AND THAT IF THEY AND THEIR GROUP OF STRONG AND SOUND COMPANIES CAN SEE NO PROSPECTS OF A PROFIT IF THEY ACCEPT THE NEW TERMS, THEN THERE MUST BE A POSSIBILITY THAT IF THEIR RIVALS ACCEPT THEM THEN IN THE EVENT WOULD NOT BE ABLE TO DELIVER. BRITISH TELECOM SAID THEY WOULD WISH TO PONDER ON THIS OVERNIGHT AND LET ME KNOW ON 28 JULY WHETHER THEY WOULD WELCOME SUCH SUPPORT.
6. AS A LAST RESORT WE COULD POSSIBLY ALSO ENVISAGE A CONFIDENTIAL MINISTERIAL MESSAGE TO THE GOVERNOR URGING THAT THE BRITISH TELECOM GROUP'S VIEWS AND INTERESTS BE GIVEN SERIOUS CONSIDERATION, BUT I RATHER DOUBT WHETHER THAT WOULD DO MUCH GOOD AND IT WOULD DOUBTLESS INVITE THE RESPONSE THAT A FAIR SELECTION PROCESS HAS BEEN FOLLOWED AFTER EXAMINATION OF THE BEST TERMS AVAILABLE FOR THE HONG KONG GOVERNMENT.
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