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choice of handsets from over 20 manufacturers. In addition, Hong Kong is likely to be one of the first countries in Asia to introduce telepoint, a lower-cost form of mobile
telephony.
2. Telco offers a broad product choice and very high quality service by world standards, all at very low prices. Based on a comparison of countries with the most advanced telecommunications services, such as the U.S., U.K., and Japan, Hong Kong consumers appear to enjoy comparable product choices. For example, Telco provides 14 local telephone services, while its counterparts in Japan, the U.K., and Singapore offer 16, 16, and 14 services, respectively (see Exhibit 3). The U.S. provides the widest choice, with 17 local services in total. Although Hong Kong has fewer product
offerings in local telephony than the U.K., because of the territory's advanced stage in network digitalization, each product that is offered in Hong Kong is generally more widely available to consumers than is the case in the U.K. (see Exhibit 4). Network digitalization
has also enabled Hong Kong to significantly improve its network quality. Furthermore, according to an international survey of large business users, Hong Kong`ranks second only to Singapore, another monopoly, in terms of customer satisfaction with telecommunication infrastructure, significantly above the U.K., and higher than the U.S. and Japan (see
Exhibit 5).
It is generally agreed that Telco is one of the most efficient telecommunications
companies in the world. While no single measure can accurately reflect all the differences that exist among telephone companies in different countries, in terms of average size of assets needed to support a local network, Telco is one of the most efficient, requiring US$4.6 million to support 10,000 lines. In terms of number of employees per 10,000
lines, Telco ranks higher than its counterparts in much larger countries, which presumably enjoy greater economies of scale. It has often been pointed out that Telco's efficiency is aided by Hong Kong's high population density. While this is undoubtedly true, Telco is
more efficient, by the same two measures, than Singapore - a country with limited space and fairly dense urban development (see Exhibit 6).
Partly because of its efficiency, and partly because of revenue sharing from
international traffic to the local service, Telco has been able to offer the lowest local tariffs
among the developed nations, and among Hong Kong's neighboring countries (see Exhibit 7). Indeed, Telco's historically low local tariffs have enabled Hong Kong to achieve the third highest telephone penetrations in the world – with 1,570 phones for every 1,000
McKinsey & Company, Inc.
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