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Worldwide turnover
Hong Kong turnover
Total worldwide profits
Hong Kong profits
NOTE: All figures in £millions
1992
3,176.2
1,345.0
1991
2,592.9
1,117.0
726.9
482.9
572.1
372.9
4. The Company has told us in the past that they recognise the fragility of their investment in Hong Kong, and are doing their best to diversify, both in Europe, which now represents around one third of their turnover, but only one sixth of profits, and the US, which they are trying to enter with some energy, although it still accounts for a small part of their overall profits.
Their existing portfolio of other franchises, principally in the Caribbean and a number of Pacific, Indian Ocean and African ex-UK territories, make up a very small percentage of their turnover, and an even smaller part of their profits. Many of these franchises are only just profitable, and often politically unstable. You can gain an overall view from the attached extract from Cable and Wireless's 1992 Annual Report.
Conclusion
5. Overall, therefore, it is very clear that the loss of Hong Kong would make a a major dent in Cable and Wireless's viability, and would remove a large part of the resources available at present for investment in the US and, more particularly, the UK. The effect on C & W's share price of any strong indication of the removal of their franchises, would, therefore, be fairly disastrous.
6. Against this, C & W have spent some time cultivating the Chinese authorities, and have shown themselves a reliable supplier, particularly of the new economic zones and the South China Sea oil franchises. This, combined with the existing shareholding of 20% of Hong Kong Telecom by the Chinese government holding company CITIC may make the company's position slightly more secure.
Neil stilla
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NEIL MCMILLAN
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