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Cindy Sui

A Hong Kong telecommunications firm is being investigated by mainland police for allegedly colluding with a Beijing company to cheat Guangdong authorities.

 Guangzhou Security Bureau yesterday estimated at least $40 million had been reaped in the scam which involved routing all calls into the mainland through Guangdong to enjoy a discounted rate set up solely for the province.

 The special rate offered by the mainland Government is meant only for calls from Hong Kong to Guangdong.

 But by routing calls to other mainland cities through Guangdong first before transferring them to the other cities, the SAR company was able to take advantage of the discount illegally, Guangdong Public Security Bureau officials said yesterday.

 The scam comes as the local International Direct Dialling (IDD) market opens up today, paving the way for cut-throat competition for the mainland market.

 Mainland authorities declined to name the Hong Kong firm.

 The Office of the Telecommunications Authority said the company under investigation had not violated rules in Hong Kong and its operation licence would continue to be valid.

 Zhang Binzhao, a spokesman for the Public Security Bureau's Economic Protection Unit, said: 'We plan to contact the Hong Kong police for assistance.

 'Once we have gathered enough evidence, we will seek the arrest and prosecution of those people involved.'  Five mainlanders have already been arrested, including the chief executive of the Beijing firm.

 The scheme is believed to have started in October 1996 when the two companies allegedly set up five call-transmission centres in Guangzhou, Shenzhen and Dongguan to re-route from Guangdong about 11.6 million minutes of long-distance calls from Hong Kong to other mainland cities.

 The transmission centres enjoyed a turnover of 1.18 billion yuan (HK$1.09 billion) until the arrests in April, officials said.

 The companies under investigation made an estimated profit of $5.8 million in the illegal transmissions, public security officials said. Mainland police began investigating the case in April when they received a report of suspicious activity from the Guangdong Post & Telecom Bureau.

 A joint investigation among Guangzhou, Shenzhen and Dongguan police led to the arrests, as well as the confiscation of 300,000 yuan and 6,000,000 yuan worth of equipment from the call-transmission centres.

 A Hong Kong IDD operator said it was well-known there was a lot of illegal 'traffic' going into China.

 The operator said companies could rent capacity from Hongkong Telecom pretending it was to link offices in the SAR and the mainland.

 But they could then sell that on to other consumers which was against the law both in Hong Kong and the mainland.

 'Typically these operations are short-lived but can be very profitable because they undercut prices offered by the likes of the major providers like Hongkong Telecom,' he said.

 'Another method is to route traffic through the US. It is also well-known that there are many illegal methods to move traffic between the US and China.' 



Guangdong $40m phone scam probe for HK firm