CABLE & Wireless will use its $9.17 billion sale to China of a stake in Hongkong Telecom to revive plans for a mobile phone network in Beijing. Agreed in principle in 1994, the deal struck with the Beijing Telecommunications Administration has failed to materialise. Insiders say the company's new link with China Telecom, which it won in exchange for a 5.5 per cent stake in its prized asset, will give it leverage in getting the deal off the ground. It should also give Cable & Wireless access to a range of other potentially lucrative mainland opportunities. Apart from the mobile phone network, the 1994 agreement with the Ministry of Posts and Telecommunications also included the building of a Hong Kong-Beijing fibre-optic link for US$300 million (HK$2.32 billion). Cable & Wireless confirmed yesterday that work on the link had begun, but talks on the mobile phone network are continuing. It is believed the deal has been held up because China is intent on barring foreign equity investment in mainland telecom operations. This attitude is based on security rather than commercial reasons, but Cable & Wireless is equally insistent it will not invest in China without the prospect of return in shareholder value. The deal with China Telecom appears to have swept aside these concerns. Direct links between Hongkong Telecom and the Beijing Telecommunications Administration have also improved after a deal struck last month making it the first local company to offer frame relay services between the territory and the mainland capital. This will allow simultaneous communication between multiple users at either end on a single access line, and provide packet-switching technology for high-speed data applications between the two cities. Future deals that could result from Cable & Wireless' dilution of its stake in Hongkong Telecom could also involve further equity sales, but the company's deputy chief executive, Rod Olsen, stressed that this would be subject to regulatory approval. In particular, share transactions which would see its stake in Hongkong Telecom fall below 50 per cent can only take place with the prior agreement of the Government, under a 10-year-old pact struck in 1987 when Cable & Wireless began building its now 54.5 per cent stake in the local firm. Mr Olsen said such a move would only be sought if it meant a boost for Cable & Wireless shareholders. He stressed that this also meant share sales would not take place if China became less attractive. 'So long as the opportunities of a growing presence in China and Asia make share sales an attractive undertaking, it is right for us to look at every opportunity,' he said. While welcoming the deal, the Government said any further share transfers taking Cable & Wireless' Hongkong Telecom stake below 50 per cent would be subject to scrutiny, since it would contravene Telecom's monopoly.