Hong Kong Telecommunications Ltd.

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Hong Kong Telecommunications Ltd.

15th Floor
Three Exchange Square
Hong Kong Island
Hong Kong
(5) 848-8718
Fax: (5) 868-5187

Public Company
Incorporated: 1988
Employees: 15,450
Sales: HK$18.37 billion (US$2.42 billion)
Stock Exchanges: Hong Kong New York Pacific

Hong Kong Telecommunications Ltd. (also known as Hongkong Telecom) is the holding company of Hong Kong’s principal telecommunciations group. The group serves as the major provider of telecommunication facilities and services to business and residential customers in Hong Kong, including domestic and international telephone, telex, facsimile and date transmission, and computing services. Hongkong Telecom’s worth to the British colony is underlined by the fact that the island economy could not have become the strong worldwide financial and trading center—or the intermediary trade center for China—that it is today without the extensive and expanding telecommunications facilities provided by the company.

The origins of Hongkong Telecom date back to the beginnings of Hong Kong’s telecommunications history in the 1870s. Around that time, John Pender, a one-time Manchester cotton merchant, extended his worldwide telecommunications empire in all corners of the British empire by forming the China Submarine Telegraph Company. By 1871, the first telegraph cable was put in place in Hong Kong by Pender’s company, effectively connecting Singapore and Hong Kong, Britain’s main colonies in the Far East, by telegraph to London. Later, in 1873, Pender completed the merger of his Australian, Chinese, and British India companies into the Eastern Extension Australasia and China Telegraph Company to look after the telegraph cable. Several decades later, this company became part of the Cable & Wireless Group.

Domestic telecommunication facilities in Hong Kong became more advanced in 1925 when the Hong Kong Telephone Company took over the interests of China and Japan Telephone and Electric Company. The company’s mandate included providing all the British colonies with local telephone services. Over the next six decades, Hong Kong Telephone’s line capacity grew to more than 2.5 million, and the company was serving approximately 6 million people.

The holding company Hongkong Telecom was incorporated in 1988. Its two major subsidiaries, Hongkong Telecom International (formerly known as Cable & Wireless Hong Kong) and Hong Kong Telephone (bought by the Cable & Wireless Group in 1984) operate separately to provide telephone services to customers throughout Hong Kong. Hong Kong Telephone, one of the most modern networks worldwide, continues to furnish the area with domestic phone service.

Telecom House, the headquarters of Hong Kong Telephone, was built in 1972 on new land reclaimed from Hong Kong bay in the Wanchai district of the island. The Wanchai reclamation and stationing of the telephone headquarters was said to typify the colony’s transition from an economy based on manufacturing to one dependent on service industries, which created a demand for telecommunication services. Hong Kong Telephone’s franchise for domestic service in the colony was extended for an additional 20 years in 1975, to run out just ahead of Hong Kong reverting to China’s control in 1997.

In 1984 Hong Kong Telephone began developing an all-digital telephone system for the colony and surrounding regions. The aim was to give the colony state-of-the-art telecommunications facilities and performance. Superior service also meant offering specialty services. For example, on December 1, 1985, Hong Kong Telephone established Computasia Ltd., a subsidiary operating the company’s data processing center and also charged with selling specialty software to the telecommunications industry.

Hongkong Telecom International, formed in 1981 as Cable & Wireless Hong Kong, was set up to take control of Hong Kong’s international telecommunications facilities. Hongkong Telecom International connects Hong Kong to more than 200 countries in the world, including over 600 cities in China alone. Featuring submarine cable, satellite, and microwave networks, the company is regarded as Asia’s telecommunications center.

In December 1985, the eastern section of the Guangdong microwave project in southern China was opened, for which Hongkong Telecom International, then Cable & Wireless Hong Kong, provided technical assistance. A few months later, in March 1986, the western section opened, effectively linking telecommunications traffic between 25 cities in Guangdong province, which then emerged as an expanding hinterland manufacturing base next to Hong Kong.

In 1986, Hong Kong Telephone started up a public facsimile service from Hong Kong to Beijing, Shanghai, Guangzhou and Shenzhen, a newly-created special economic zone. Such facilities were instrumental in helping much of Hong Kong’s manufacturing base continue relocating to southern parts of China, then undergoing economic reforms and establishing closer manufacturing links with western markets. The Cable and Wireless Group had at the time two joint ventures in China. The first, Shenda Telephone Company, of which the group had a 49 percent stake, sold and installed an overhead fiber optics system that linked Shenzhen City, Shahe, and Nantou. And the second, the Huaying Nanhai Oil Telecommunication Service Company, began helping explore for oil deposits in the South China Sea.

Cable and Wireless also signed agreements in 1986 to provide some 1000 kilometers of digital trunk microwave and five long-distance toll exchanges in the Yangtze Delta region of China, linking 27 cities in the Jiangsu and Zhejiang provinces. Another agreement was signed that year with the Guangdong Posts and Telecommunications Bureau to develop a mobile radio telephone and paging service in the Pearl Delta region. The unified system was aimed at allowing local subscribers to use handheld telephones. To complete this contract, Hong Kong Telephone established a non-franchised operation, Communication Services Ltd. Its function was to introduce new mobile radio telephone and radio paging services, allowing the use of hand-held equipment anywhere in Hong Kong and the Pearl Delta region. By March 1987 Communication Services Ltd. had opened 18 retail outlets.

In June 1986, Cable & Wireless also announced plans for an underwater optical fiber cable connecting Hong Kong with Japan and South Korea, to become operational in 1990. As a measure of the group’s regional clout, the London-based organization became the first British company to be listed on the Tokyo Stock Exchange. This event underlined the telecommunication group’s expanding role in the emerging Pacific Basin region.

The 1988 establishment of Hongkong Telecommunications Ltd. to serve as a holding company for Hongkong Telecom and Hong Kong Telephone effectively consolidated the twin international and domestic telecommunication facilities under one umbrella. The first chairman of Hong Kong Telephone was Sir Eric Sharp. A native Briton, Sharp had also been chairman of Cable & Wireless PLC since 1981. Serving as deputy chairman was Brian Pemberton, the London-based joint managing director of the Cable & Wireless Group, with responsibility for the group’s activities in the Far East. Day-to-day management of Hong Kong Telephone was put in the hands of Michael Gale, who served as chief executive officer. Gale first joined Cable & Wireless in 1959, and had earlier served as chief executive officer of Hong Kong Telephone.

As of January 1988, Hongkong Telecom had 16,300 employees and was one of the largest employers in the colony. Expansion of specialty services, including non-voice communication services, was considered a top priority for the new company. For example, Faxline, a support service for Hong Kong’s facsimile terminal users, had 26,000 accounts in 1988, and was growing at the time at a rate of 2,000 new users a month. And Datapak, Hong Kong’s public data network for communications and networking, was expanding services between host computers and its own central data base terminal. One large Hongkong Telecom customer, global computer maker International Business Machines Corporation (IBM), required the establishment in 1988 of a subsidiary data sales service, IBS. Its role was to represent ROLM, a subsidiary of IBM in Hong Kong, providing it with voice and data digital information systems, on top of servicing and consultation services.

Beginning in 1987, satellite communication facilities were provided to Hongkong Telecom through five satellite dishes located at Stanley Earth Station and geosynchronous satellites situated over the Indian and Pacific oceans. With eight permanent and one portable antenna, the earth station proved to be one of the largest commercial satellite facilities in the world. International facsimile transmissions utilizing Hong Kong Telephone’s international telephone circuits grew considerably throughout the 1980s. And the creation of the Hongkong Telecom CSL subsidiary in 1990 allowed for the development of sophisticated paging and mobile radio telephone equipment and services.

By the end of the 1980s, telephone traffic between Hong Kong and China was becoming increasingly important to Hongkong Telecom. This reflected both the increase in business between the colony and emerging economic centers in southern China, and the expanding telecommunication facilities linking the two regions. For example, in 1989, China traffic accounted for around 20 percent of international traffic revenues for Hongkong Telecom and some 38 percent of traffic volume overall. This compared with 18 percent and 34 percent respectively for both revenue producers a year earlier.

In October of 1990 Rt. Hon. Lord Young of Graffham, chairman of Hongkong Telecom, met with Premier Li Peng and Yang Tai-fang, then China’s Minister of Post and Telecommunications, and announced China was to spend some US$6 billion by 1995 to expand that country’s telecommunications base. By virtue of the new and expanding China business, Young was quoted in the company’s 1991 annual report as saying that the “continued development of the Pacific Rim countries, and China in particular, should ensure that the region continues to enjoy strong economic growth.... Telecommunications infrastructures throughout the region are being expanded and modernized to support this growth. Hongkong Telecom is well positioned to benefit from these developments.”

In 1991, Hongkong Telecom added Citinet to its portfolio. The service, offering a private switchboard service to subscribers and operated from a central telephone exchange, was taken up by 21,200 account holders in its first year of operation. Hongkong Telecom also introduced radio paging that year, allowing subscribers to carry a credit-card sized pager around with them, complete with Chinese characters, for instant access to calls and messages. By 1992, China traffic continued to underpin growth in sales at Hongkong Telecom. Company chairman Young told shareholders in the company’s 1992 annual report: “China’s continuing economic development and the integration with the Pearl River Delta area encompassing Macao and Guangdong are also benefitting the Hong Kong economy. We have seen this translated into strong demand for our services, with international calls between Hong Kong and China growing 35 percent.”

Before the company’s board at this time was the renewal of the domestic telephone franchise for Hong Kong in 1995. Chairman Young expressed confidence that Hongkong Telecom’s sheer size and quality of facilities and service—at the time the colony enjoyed almost 93 percent digital service—would win it the franchise. Hongkong Telecom’s efforts to complete a digital “highway” through the colony and the region, including China, was part of a global effort on the part of Cable & Wireless. The aim was to connect through fiber optic cables British customers of Cable & Wireless with its U.S. partner, U.S. Sprint, via Ireland, the European continent, and Bermuda. But there was always the possibility that deregulation, then sweeping the global telecommunications trade, could install new operators to compete in Hong Kong alongside Hongkong Telecom. Here the actions of the Chinese government beyond 1997, when the colony reverts to the control of Beijing, is paramount. Still, companies throughout the world consider the high quality of Hong Kong’s telecommunications network as an important factor in their decision to locate regional offices there. As chairman Young wrote in the company’s 1992 annual report, “Hong Kong already has one of the most competitive telecommunications environments in the world, and we are not complacent about the challenges that further competition will create.... The completion of network digitalization next year, together with the reorganization of our sales channels, positions us to meet the challenges and take advantage of these opportunities.”