With the 12-year licence being considered a kind of franchise by the Hongkong Government, it is understood local officials do not intend awarding it to lone bidder Wharf Cable until the move is endorsed by China.

It is understood that during Tuesday's Exco meeting, members decided to drop the idea of granting a provisional licence to allow the service to start up early. Instead, they considered that granting a permanent licence right away would be more appropriate.

However, with the Legislative Council still deliberating on the Television (Amendment) Bill, which will give the legislative framework for awarding a licence, Exco has reserved the right to reconsider granting a temporary licence if the Legco debate drags on into the autumn, when pay-TV is due to be launched.

It is understood the Government has been providing information on the service to China for about a year. But details of the licensing conditions, which are subject to negotiation between the Government and the bidder, have yet to be forwarded to Chinese JLG members.

Mr Ronald Chiu Ying-chun, assistant news controller of Wharf Cable, said yesterday that senior Wharf representatives had raised the pay-TV issue with China on several informal occasions.

Another Wharf Cable spokesman said they had no news on the Exco decision, but conceded that the company had completed negotiations with the Government on the licence conditions.

She had no idea whether the licence to be granted would be permanent or temporary, but said its validity would in any case last 12 years.

But she understood the Government would make public the licensing conditions later this week.

Declining to say if Wharf would directly seek China's endorsement on its multi-million-dollar project, she said, as far as she understood, the Government had been discussing the subject with the mainland.

But she denied a report in a Chinese newspaper yesterday which said Wharf had refused to sign the pay-TV contract with the Government before the latter consulted China on the issue.

Sidestepping the question of whether Wharf had ever urged the Government to consult China on the project, she said the company was passive in this area and consultation with China was a step for the Government.

The Deputy Secretary for Recreation and Culture, Mrs Rachel Cartland, also denied the story and refused to say if Exco had taken a decision.

When asked if Wharf had requested the Government seek China's blessing on the project, Mrs Cartland said: ''The position is that we recognise the need to consult China on the conditions of the licence. We've been keeping China briefed on the developments.'' Mr Chen Keqiang, Economic Affairs Department director at the Hongkong branch of the New China News Agency, stressed that the Hongkong Government should not unilaterally issue the licence before China formally endorsed the franchise at the JLG meeting.

Mr Chen said his department was currently studying the Government's proposal and its results would be submitted to the JLG later this month.

''The right to operate the cable TV is a franchise straddling 1997, hence its licensing will not be valid until it is scrutinised and approved by the Chinese authorities in the JLG,'' he said.

Without disclosing details about contact between Wharf and China, Mr Chen appreciated Wharf Cable's efforts to consult China on the licensing issue.

''We hope other consortiums interested in applying for franchises straddling 1997 will take the initiative to urge the Hongkong Government to consult the Chinese Government through the JLG,'' he said.