TNAG-2247-FCO40-3230-Business-interests-in-Hong-Kong-Cable-&-Wireless-1991 — Page 215

Secondly, and much more significantly for the future of British

telecommunication interests in Hong Kong, is the appointment by

the Hong Kong Government of Booz Allen Hamilton, an American firm

of consultants, to consider whether a second telecommunications

network should be built in Hong Kong and to assess the impact of

removing the exclusive franchise on local calls after the current

agreement expires in 1995. The report which is expected to be

completed this month could be damaging for British commercial

interests. The Hong Kong Government publicly stated in February

that there was no intention to terminate Hong Kong Telephone's

local calls monopoly, but admitted that if very compelling and

overriding factors in favour of the consumer existed they would

contemplate dissolving the international monopoly. As internal

telephone calls are free, revenue is made almost entirely on

international calls.

While any liberalisation programme would open the door for

British Telecom to enter the market, the likelihood is that there

would be pressure within Hong Kong to introduce non-British

companies into the telephone network rather than maintaining it

as a wholly British interest. Any change would be at the expense

of Cable and Wireless and UK interests would be likely to be net

losers.

ок

The key issue at stake is the resolution of any conflict between

the desirability of increased competition and any moves

prematurely to end Cable & Wireless' exclusive licences for

internal and external telecommunications prior to 1995 and 2006.