Beijing makes wrong call on concerns over sale of puny PCCW

BACK IN THE early 1980s, there was a company in Hong Kong to which our government had granted the sweetest of all possible sweetheart deals. Hong Kong Telephone at the time had a monopoly on all local telephone traffic until 1996 and on overseas calls until 2006. Don't ask me how it was given this pearl of a concession. The history of it is now lost in the mists of time. But the fact was that if you picked up the phone, you dealt with Hong Kong Telephone. You had no choice. Admittedly, telecommunications at that time was not what it is now. Telephone meant just that, telephone alone. You could hook up a bulky answering machine and you could organise conference calls but there was not much more you could do with a telephone. The first fax machines, monstrous boxes placed on the floor, were only just coming to the market. The internet was, of course, unknown. Nonetheless, telephone services were as crucial to the functioning of the Hong Kong economy then as they are now, even if much less sophisticated and this monopoly posed a distinct danger to the economy's workings. What if some foreign entity were to gain control of Hong Kong Telephone and, not caring much about whether Hong Kong thrived, were to take advantage of the monopoly to jack up the charges to exorbitant levels and walk away with the loot, tough luck for Hong Kong. It happened. Control of the company briefly passed to the Jardine Matheson camp, which proved to have bitten off much more than it could chew, and from there to the British-controlled Cable & Wireless. I cannot give you comparative figures on call charges at the time as evidence that C&W gouged us, but I can offer you one interesting statistic that certainly points to this conclusion. For a period of years, Hong Kong Telephone was the biggest stock on our market by market capitalisation, for some of that time twice as big as the next biggest, Hongkong Bank. And now things have changed. What was once the mighty Hong Kong Telephone, darling of the stock market, has now become the weakling PCCW, one of the most disappointing performers on the market in recent years. What happened was that we came to our senses. From having one of the most rigged telecommunications regimes in the world, we opened the market to create one of the most competitive telecommunications regimes in the world. We paid Hong Kong Telephone off for its monopoly and then abolished that monopoly. But, strange to say, we still seem to be concerned about who owns the rump of this former monopoly or, at least, are forced to make concessions to Beijing's concerns about who owns it. This is ironic. When we had good reason for that concern back in the 1980s, we did nothing about it. Now that there is no longer reason for any concern, we find that two foreign bidders for PCCW have been shunted aside, apparently on Beijing's wishes, in favour of a partial sale to a Hong Kong-dominated consortium that has apparently yet to be formed and that the stock market finds disappointing. I can guess at Beijing's reasoning. Telecommunications is a crucial industry and to let foreigners gain control of what is still the biggest player in Hong Kong is strategically unwise as it may result in foreign subversion of Beijing's sovereignty over Hong Kong. But how exactly this could come about is a mystery to me. Telecommunications companies in a competitive market are not in the business of sponsoring political causes. They are out to make money for their shareholders and promoting political ideologies at the same time would only be a good prescription for losing money. It makes no political difference whether PCCW is owned by an Australian, an American or a Hong Kong entity. They all have the same commercial objective and it is a political one only to the extent that they would all seek to influence public policy to make the most money for themselves. There was reason to worry about that when we had a monopoly in telecommunications but not now in the present competitive environment in which the industry operates. And, even if there were some reason to worry, we now have a strong regulatory agency, the Office of the Telecommunications Authority, to deal with such worries. Modern government practice is to exercise necessary control over an industry through regulation, not share ownership. Beijing's reasoning is the reasoning of a bygone era. It also introduces dangers of its own. To interfere in investment decisions on the basis of groundless political concerns is to deter investors from coming to Hong Kong. But fortunately, it does not matter that much any longer. PCCW is not what Hong Kong Telephone once was, far from it.