Exhibit 8: Pricing of Hong Kong International Calls
COST OF CALL BASKET (HK$, 1981
PRICES) (1)
9.00
REAL PRICE OF INTERNATIONAL CALLS
RCAGR (81-90)
8.00
7.00
6.00
5.00
4.00
3.00
-7%
COST OF A 3 MINUTE CALL
20
2.00
10
1.00
0.00
0
1981
1983
1985
1987
1989
1990
YEAR
Source: Fintech, BAH Analysis
(1) Basket is based on the average calling pattems from Hong Kong 1981-90 (2) based on 3 minute standard rate call
30
40
(HK$)
50
HK to USA
USA to HK
INTERNATIONAL STANDARD RATE CALL TARIFF COMPARISONS
HK to Japan
Japan to HK
HK to UK
UK to HK
4.7 Like BT's, HKTI's operating margin (net of outpayments) was nearly 60%. This has resulted in extremely high profits - HKTI's ROFA was in excess of 90% (see note 1 and Exhibit 9). By contrast, the allowable ROFA of US carriers, prior to price capping, was around 12.5%. Hence, while HKTI's rates are comparable with other administrations it is apparent that its tariffs can be reduced much further without jeopardising its profitability.
Exhibit 9: Financial Indicators of H.K. Telecom and Subsidiaries
KEY FINANCIAL INDICATORS
SERVICES
CATEGORY
HKT
HKTI
HK TELECOM
UNDER SOC
Return On Sales
(1)
31%
36%
45%
52%
Return On Fixed
N/A
17%
44%
90%
Assets
(2)
Return On
13%
18%
44%
254%
Shareholders Funds
Notes: (1) Sales defined as net of disbursements
(2) Includes all HK Telecom subsidiaries except HKT
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