Announcing a 13% rise in net profit yesterday, Hong Kong Telecommunications Ltd chief executive Michael Gale said that Cable & Wireless Plc had no plans to cuts its 58.5% stake in the company further, and is committed to staying after the territory returns to China in 1997. After the meeting, Gale also told Reuter that his company’s exclusive franchise, which is valid until 2006, is secure despite the Chinese threat to tear up agreements it has not approved – but the new non-exclusive domestic licence, due to come into force in 1995, will need Peking’s endorsement after it is negotiated with the present government. On the figures, the company says that it should achieve double digit profit growth in the year to March 1994 but will fall short of the 13.3% figure achieved in 1992-93, because of cuts in international tariffs agreed with the government last year and expected to be implemented on July 1 this year. The company has agreed to keep the average rise in domestic telephone charges to four percentage points below inflation, and to lower international rates by 12% over the next three years, starting with an 8% cut in the first year. During the year, traffic with China grew more than 30% against an average 26% for all international traffic, and now accounts for 44% of all international traffic; it should pass 50% in the next two or three years, the company says. The company retains major ambitions in China and says it wants to help the country create by the end of the century a network that would be over twice as big as the one operated by British Telecommunications Plc China plans to raise the number of telephone lines to 100m nationwide by the year 2000 from just 25m now. Despite the scale of the task – creating the equivalent of two and a half British Telecoms from scratch in seven years, China has ruled out foreign equity investment in telecommunications projects. But Gale expects that to change.A key benefit for Hong Kong Telecom is that it already has a major Chinese investor in the shape of the Peking-owned China International Trust & Investment Corp, which bought a 20% stake in 1990.
