HK Telecom gives up its monopoly

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The Independent Online
Hong Kong Telecommunications (HKTel), which is 54 per cent owned by Cable & Wireless, the UK telecoms giant, has abandoned its long-distance monopoly eight years ahead of schedule in exchange for a one-off compensation package worth HK$6.7bn (pounds 531m) and a package of measures which should boost its revenue from other sources.

The deal concluded with the Hong Kong government marks the end of an era for Cable & Wireless, which used to be the monopoly telecommunications supplier for the British Empire. Hong Kong was its last remaining monopoly in any country where open markets and laissez-faire economics prevail. The former British colony's telephone network monopoly, due to expire in 2006, will give way to competition in the provision of international network services as early as 1 January 1999.

Stephen Ip, Secretary for Economic Services, said: "Before this agreement, our external telecommunications sector was out of line with the best current international practice, and this has had adverse implications for our regional competitiveness in telecommunications .

HKTel is the largest contributor to Cable & Wireless's balance sheet. In the company's latest returns, for the half year to September 30 1997, Hong Kong accounted for over one-third of global turnover and two-thirds of the operating profit.

HKTel has already lost its domestic telephone monopoly. Three new fixed- line companies now compete in this sector. Meanwhile, a host of companies has launched cut- rate overseas phone services, which pass through the Hong Kong Telecom gateway, in return for a fee but are eating away at the frayed monopoly supplier's business.

As well as the cash payment, which will be made in two parts, HKTel will cease making royalty payments to the government, which last year totalled about pounds 42m.