Hutchison Whampoa has warned it may quit the fixed-line telephone business if the Government decides to open the local market to more competition and does not restrict the number of players allowed licences to own international call infrastructure. The company has poured more than $2 billion into building its local network around Hong Kong. However, Hutchison Telecom (Hong Kong) managing director Dennis Lui said there was a possibility shareholders would decide to write off the operations and sell the assets if a new business environment meant the investment just was not worth it. 'Sometimes it is better to cut off your arm, cut the loss, than go forward and get killed,' Mr Lui said. It is Hutchison's toughest warning yet about its future in the fixed-line business in the light of the regulatory changes proposed by the Government. It adds to the pressure from the new local players who are looking for some sort of deal that allows them to keep the market restricted to the four existing operators. Mr Lui said Hutchison had submitted a proposal to the Government that would involve a 'new performance bond'. This would amount to a corporate guarantee that could allow the Government to take legal action against the company if it failed to fulfil its new promises. 'More or less everyone has submitted something along these lines,' Mr Lui said. At the time of the issue of their original licences in 1995, the companies were required to surpass a performance bond dictating the sizes of their networks by certain pre-agreed dates. Hutchison has surpassed this many times over, fixed network director Peter Wong said. On January 1, competition begins in the international market through a process known as international simple resale (ISR). This allows operators to lease capacity from Hongkong Telecom and resell to consumers. The Government has already said ISR licences will be issued to anyone on demand. However, it has not decided whether licences to operate international undersea cables and international gateway landing facilities will also be opened up in the same way. Mr Wong said Hutchison saw this so-called international facilities licence as an integral part of the local business. This licence has value and would allow the company to 'negotiate with overseas players on a more equal bilateral basis', Mr Wong said. If the gateway market was totally opened, the local players would be sidelined as big international operators came in and dominated the market. They would get a free ride, while Hutchison and new rivals would have had to pay out millions on building a local network, Mr Wong said. Mr Lui said Hutchison was not against eventual competition but at a slower pace. It had proposed a moratorium on new local competition and gateway licences until 2003. 'It would give a few years for the local companies to survive and pose a serious challenge to Hongkong Telecom,' the managing director said. Supporting its view that Hong Kong is opening too quickly, Mr Wong pointed to the experience in other countries. The length of time between first liberalisation of the local market and subsequent freeing of the international market is more than six years in Australia, Canada, Britain and the United States. In Hong Kong, under the Government's proposal, opening the global market will occur in 3.5 years.