CLP Holdings generates and distributes electricity to Kowloon and the New Territories. Salomon Smith Barney recently put a neutral recommendation on the stock after the company formed a subsidiary to apply for a fixed-line telephone licence from the Office of the Telecommunications Authority (Ofta). CLP Telecom will compete in cross-border telecoms traffic by running a fibre-optic cable from the mainland over existing power lines to compete against other carriers. The new telecoms company will target Internet protocol traffic, but Salomon Smith Barney said it was still unclear whether there was enough demand for bandwidth in southern China to boost the company's earnings. CLP will concentrate on providing infrastructure to other companies and will not become an active entrant into the cross-border telecoms market. Even if the market proves to be profitable, it will be open to other competitors to come in, as Ofta has not set any limit on the number of new external licences. The value of the partnership will also depend upon Hong Kong's ability to become the telecoms hub in Asia and the importance of the connection to the mainland in a global perspective, according to Salomon. Despite the uncertainty about the profitability of the venture, Salomon supports the effort to derive more value from existing power lines.
