CONFIDENTIAL COMMERCIAL-IN-CONFIDENCE
P1210 MDHIAN 781
THE DEAL, AND MAY CONTACT YOU TO BRIEF YOU ON THE LATEST STATE OF PLAY, PRIOR TO YOUR MEETING WITH DOMINIC WONG.
3 =
RT HAD BEEN CONSIDERING ACQUIRING A STAKE IN PACIFIC LINK, BUT NOW CONSIDER THIS COURSE TO BE UNLIKELY. THIS WOULD MEAN THAT THEY COULD APPLY FOR THE FOURTH CELLULAR LICENCE, IF THEY SO WISHED.
TELEPOINT
4.
BT WOULD LIKE YOU TO REASSURE THE HONG KONG AUTHORITIES THAT THEY REMAIN STRONGLY COMMITTED TO PERSONAL COMMUNICATIONS LTD CONE OF FOUR HONG KONG TELEPOINT LICENSEES), AND THAT THEY BELIEVE TELEPOINT SERVICES TO BE IDEALLY SUITED TO THE HONG KONG MARKET.
THE BT BRIEF IS AS FOLLOWS:
1
M
DISPROPORTIONATE RETURNS AND ACCOUNTING RATES
HKTI AND ITS PREDECESSOR ORGANISATIONS HAVE FOR SEVERAL YEARS MADE A PRACTICE OF SENDING A DISPROPORTIONATE AMOUNT OF UK- BOUND TRAFFIC TO MERCURY. THE NORMAL SYSTEM FOR THE DISTRIBUTION OF INTERNATIONAL TRAFFIC WHERE THERE ARE TWO OR MORE OPERATORS IN A COUNTRY IS FOR TRAFFIC TO BE RETURNED TO THOSE OPERATORS IN PROPORTION TO THE TRAFFIC WHICH THEY SEND (THIS IS KNOWN AS 'PROPORTIONATE RETURNS'). THIS ARRANGEMENT, WHICH IS ENCOURAGED BY THE UK'S CODE OF PRACTICE ON INTERNATIONAL ACCOUNTING, IS IN PLACE BETWEEN THE UK AND VIRTUALLY ALL COUNTRIES, OTHER THAN A NUMBER WHERE CABLE AND WIRELESS HAS AN INTEREST IN THE INTERNATIONAL OPERATOR.
IN THE CASE OF HONG KONG, BT ESTIMATES THAT MERCURY ORIGINATES ABOUT 24PERCENT OF UK HONG KONG TRAFFIC, BUT RECEIVES ABOUT 50
PERCENT OF HONG KONG DOLLARS 6M
G
UK TRAFFIC.
AS A CONSEQUENCE, BT RECEIVES ABOUT
PA LESS FROM HKTI THAN IT WOULD IF A SYSTEM OF PROPORTIONATE RETURNS WERE IN OPERATION. BT HAS COMPLAINED ON A NUMBER OF OCCASIONS BOTH TO OFTEL AND TO THE PMG IN HONG KONG ABOUT THE PRACTICE, WHICH IS CLEARLY AN ABUSE OF HKTI'S MONOPOLY POSITION IN HONG KONG, BUT TO NO EFFECT.
THE FINANCIAL BENEFITS OF THIS ARRANGEMENT TO THE CABLE AND
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CONFIDENTIAL COMMERCIAL-IN-CONFIDENCE
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