CONFIDENTIAL
consultants Booz Allen for the HKG. Hong Kong Telecom (a Cable & Wireless subsidiary) were shown a copy of the Booz Allen report. Their recommendation was full immediate liberalisation of Hong Kong's telecommunications policies.
Hence Lord Young's concern that the Hong Kong Government
might abrogate their two franchises (for domestic
telephones, ending in 1995, and for international telecommunications in 2006) or impose confiscatory tariff
reductions.
In fact, ExCo decided on 10 September to reject this option. Instead they have gone for Booz Allen's fall-back
option including a more measured course: no wish to terminate the existing franchise; gradual moves to introduce more competition, but on terms equitable to Hong Kong Telecom; negotiation with Hong Kong Telecom to reduce tariffs, particularly for international calls, in line with
reducing costs. ExCo agreed a negotiating brief for the
Hong Kong Government to use with Hong Kong Telecom on these lines. The Governor has privately assured Lord Young that HKG do not intend unilaterally to terminate franchises before their expiry date.
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We have ensured that the Governor is fully aware of Lord Young's approach. When Lord Young came in to see Sir J Coles before his current visit to China, he mentioned Cable & Wireless's interest in Hong Kong in general terms and referred to the Governor's assurances about the franchises, but did not indicate any particular concern on the subject. He took a similar line when he saw the Prime Minister.
4.
Given that ExCo's decisions take full account of Hong Kong Telecom's interests, I do not therefore believe that there is a case for the Secretary of State to write to the
Governor. Hong Kong have long had autonomy in the field of telecommunications and it would set an awkward precedent for the future if we were to put pressure on the Hong Kong Government in this area. In any case, it would be difficult
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