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EXHIBIT 1.1
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The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[CHINA MOBILE LOGO]
CHINA MOBILE (HONG KONG) LIMITED
(Incorporated in Hong Kong with limited liability under the Companies Ordinance)
ANNOUNCEMENT
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The Company was notified by the relevant regulatory authorities on
25 December 2000 that various telecommunications charges will be adjusted. The
adjustments that will affect the Group's business mainly consist of a reduction
in digital transmission lines leasing fees, a reduction in domestic long
distance calling charges, a reduction in international and Hong Kong, Macau and
Taiwan long distance calling charges, the cancellation of the mobile services
surcharge of Zhejiang Mobile, Jiangsu Mobile and Henan Mobile and the reduction
of the base usage charge of Guangdong Mobile from RMB0.50 per minute to RMB0.40
per minute as a result of the nation-wide policy of mobile services surcharge
cancellation. These adjustments will take effect from 1 January 2001 unless
postponed due to objective circumstances after obtaining approval from the
relevant regulatory authorities. However, except for China Telecommunications
Corporation which must implement the above-mentioned adjustments by 1 June 2001,
all other telecommunications operators must implement such adjustments by no
later than 1 March 2001.
Assuming that the settlement arrangements currently applicable to domestic
and international and Hong Kong, Macau and Taiwan long distance calling charges
remain unchanged and based on the types and numbers of digital transmission
lines actually leased, the number of subscribers and the actual usage volume
recorded by the Group in July, August and September 2000, the Board estimates
that the reduction in transmission lines leasing fees and long distance calling
charges, the cancellation of the mobile services surcharge of Zhejiang Mobile,
Jiangsu Mobile and Henan Mobile and the adjustment to the base usage charge of
Guangdong Mobile will lead to a decrease in the Group's profit before tax for a
half year period of approximately RMB942 million (equivalent to approximately
HK$887 million), representing a decrease of approximately 5.42 per cent. as
compared to the Group's pro forma combined profit before tax of RMB17,376
million for the six months ended 30 June 2000. The above calculation has not
taken into account the potential benefits to be derived from the possible
increases in the number of subscribers and usage which may result from such
adjustments, and the resulting revenue growth. The Board believes that such
adjustments may reduce the Group's operating expenses and contribute to the
Group's revenue growth and development over the longer term.
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The board of directors (the "Board") of China Mobile (Hong Kong) Limited
(the "Company", together with its subsidiaries, the "Group") announces that the
Company was notified by the relevant regulatory authorities on 25 December 2000
that various telecommunications charges will be adjusted. The adjustments that
will affect the Group's business mainly consist of a reduction in digital
transmission lines leasing fees, a reduction in domestic long distance calling
charges, a reduction in international and Hong Kong, Macau and Taiwan long
distance calling charges, the cancellation of the mobile services surcharge of
Zhejiang Mobile Communication Company Limited ("Zhejiang Mobile"), Jiangsu
Mobile Communication Company Limited ("Jiangsu Mobile") and Henan Mobile
Communication Company Limited ("Henan Mobile") and the reduction of the base
usage charge of Guangdong Mobile Communication Company Limited ("Guangdong
Mobile") from RMB0.50 per minute to RMB0.40 per minute as a result of the
nation-wide policy of mobile services surcharge cancellation. Zhejiang Mobile,
Jiangsu Mobile, Henan Mobile and Guangdong Mobile are all wholly-owned
subsidiaries of the Company. These adjustments will take effect from 1 January
2001 unless postponed due to objective circumstances after obtaining approval
from the relevant regulatory authorities (the "Effective Date"). However, except
for China Telecommunications Corporation, which must implement the
above-mentioned adjustments by 1 June 2001, all other telecommunications
operators must implement such adjustments by no later than 1 March 2001.
The estimated financial effects on the Group as set out below in this
announcement are only estimates of the Board and have not been audited.
Investors are cautioned not to unduly rely on such estimates.
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REDUCTION IN DIGITAL TRANSMISSION LINES LEASING FEES
The Group leases most of the digital transmission lines (almost all of
which are of the two megahertz type) that are currently used by the Group, with
an absolute majority of the intra-provincial and local digital transmission
lines being leased directly from the subsidiaries of China Telecommunications
Corporation, whilst almost all of the inter-provincial long distance
transmission lines are leased from the China Telecommunications Corporation
through China Mobile Communications Corporation, the parent company of the
Company. The Group leases certain transmission lines on the basis of fee
schedules laid down by the relevant tariff regulatory authorities. These same
fee schedules are also applicable to other telecommunications operators (the
"Standard Leasing Tariff"). The level of Standard Leasing Tariff varies
according to the types (including capacity and coverage) of transmission lines
concerned. In relation to the existing digital transmission lines leased
directly from China Telecommunications Corporation, or indirectly through China
Mobile Communications Corporation, the Group is allowed a large volume discount
of 20 per cent. of the Standard Leasing Tariff. However, according to the terms
of the digital transmission lines leasing agreements, if the relevant regulatory
authorities revise the Standard Leasing Tariff, the relevant parties will
hereafter renegotiate the discount rate.
From the Effective Date, the Standard Leasing Tariff in respect of two
megahertz digital transmission lines will be reduced by an average of 58 per
cent. to 81 per cent., depending on coverage. The existing large volume discount
of 20 per cent. granted by China Telecommunications Corporation will no longer
apply. For illustration purposes only, based on the types and numbers of digital
transmission lines actually leased by the Group in July, August and September
2000, the Board estimates that, as a result of the reduction in the Standard
Leasing Tariff (but after adjusting for the termination of the large volume
discount), the Group may be able to save approximately 52 per cent. in digital
transmission lines lease expenses and approximately RMB2,287 million (equivalent
to approximately HK$2,153 million) for a half year period.
REDUCTION IN INTERNATIONAL AND HONG KONG, MACAU AND TAIWAN LONG DISTANCE
CALLING CHARGES
From the Effective Date, the billing unit for international and Hong Kong,
Macau and Taiwan long distance calls will be shortened from one minute to six
seconds. International long distance calling charges will no longer be dependent
upon the call destination and will be uniformly adjusted to RMB0.80 for every
six seconds. Hong Kong, Macau and Taiwan long distance calling charges will no
longer be dependent upon whether the calls originate from the Guangdong province
or other provinces, and will be uniformly adjusted to RMB0.20 for every six-
second unit.
Under the existing arrangements, when a Group's subscriber makes an
international or a Hong Kong, Macau or Taiwan long distance call, the Group will
collect from the subscriber an international or a Hong Kong, Macau or Taiwan
long distance calling charge in additional to the base usage charge. The Group
will keep RMB0.20 per minute of the long distance calling charges and pay the
rest of the long distance calling charges to China Telecommunications
Corporation. If a Group's mobile subscriber receives an international or a Hong
Kong, Macau or Taiwan long distance call, the Group will generally not
participate in the revenue sharing and settlement of the long distance calling
charges, except in Beijing, Shanghai and Guangzhou where the international
gateways are located. Following the implementation of the various adjustments
set out in this announcement, these settlement arrangements will also be
correspondingly adjusted. The detailed adjustment standards and timetable will
be separately determined by the Ministry of Information Industry. Based on
existing applicable settlement arrangements for international and Hong Kong,
Macau and Taiwan long distance calling charges, the Group collects RMB0.20 per
minute from the international and Hong Kong, Macau and Taiwan long distance
calling charges. The reduction in international and Hong Kong, Macau and Taiwan
long distance calling charges is not expected to have a significant direct
impact on the Group's profit.
REDUCTION IN DOMESTIC LONG DISTANCE CALLING CHARGES
From the Effective Date, the billing unit for domestic long distance
calling charges will be shortened from one minute to six seconds. Domestic long
distance calling charges will be uniformly adjusted from the existing four
levels of charges at RMB0.50, RMB0.60, RMB0.80 and RMB1.00 per minute to RMB0.07
for every six-second unit.
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Where applicable, the Group collects domestic long distance calling charges
in addition to the base usage charges. The Group and China Telecommunications
Corporation have entered into interconnection agreements to provide for revenue
sharing and settlement of domestic long distance calling charges. Following the
implementation of the various adjustments set out in this announcement, these
settlement arrangements will also be correspondingly adjusted. The detailed
adjustment standards and timetable will be separately determined by the Ministry
of Information Industry. For illustration purposes only, based on the existing
settlement arrangements applicable to domestic long distance calling charges and
based upon the actual usage volume recorded by the Group in July, August and
September 2000, the Board estimates that the Group's profit before tax will be
reduced by approximately RMB926 million (equivalent to approximately HK$872
million) as a result of the reduction in domestic long distance calling charges
for a half year period. The above calculation has not taken into account the
potential benefits to be derived from the possible increases in usage and
revenue, which may result from the reduction in domestic long distance calling
charges. Although the Group's revenue will be reduced in the short term as a
result of the reduction in the domestic long distance calling charges, the Board
believes that the reduction in domestic long distance calling charges may
increase telecommunications usage, thereby contributing to the Group's revenue
growth over the longer term.
CANCELLATION OF MOBILE SERVICES SURCHARGES
Subscribers of the Group's mobile services pay standard base usage charges
of RMB0.40 per minute, and in addition, Zhejiang Mobile and Jiangsu Mobile
collect a surcharge of RMB0.10 per minute, whilst Henan Mobile collects a
surcharge of RMB0.08 per minute. Subscribers of the Group's mobile services also
pay a standard monthly fee of RMB50, in addition, Henan Mobile collects a
monthly surcharge of RMB10.
From the Effective Date, the above-mentioned surcharges collected by
Zhejiang Mobile, Jiangsu Mobile and Henan Mobile will be cancelled. As a result
of the nation-wide policy of mobile services surcharge cancellation, the base
usage charge of Guangdong Mobile will be adjusted from RMB0.50 per minute to
RMB0.40 per minute, while the intra-provincial roaming usage charge will remain
at RMB0.50 per minute. For illustration purposes only, according to the actual
usage volume recorded by and the number of subscribers of Guangdong Mobile,
Zhejiang Mobile, Jiangsu Mobile and Henan Mobile in July, August and September
2000, the Board estimates that such adjustments will lead to a reduction in the
Group's revenue of approximately RMB2,303 million (equivalent to approximately
HK$2,169 million) for a half year period. The above calculation has not taken
into account the potential benefits to be derived from the possible increases in
the number of subscribers and usage which may result from such adjustments, and
the resulting revenue growth. Although the adjustments will reduce the Group's
revenue in the short term, the Board believes that they may strengthen the
Group's market competitiveness in terms of pricing, consolidate the Group's
existing contract subscriber base while at the same time significantly enhance
new subscriber growth, leading to a further expansion of the Group's subscriber
base and increase in the telecommunications usage volume. In addition, this
could lead to a further widening of the price differential between the contract
service business and the pre-paid service business of the Group, enhancing
market segmentation, product differentiation and business design, and resulting
in greater effectiveness in business management. This may thereby contribute to
the Group's revenue growth and development over the longer term.
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NOTICE RELATING TO OTHER CHARGES
According to the notice of the relevant regulatory authorities, the Group
may, as market conditions warrant, independently determine certain charges for
those telecommunications services where sufficient competition has already
developed. These include charges for IP phone service charges, and charges for
value-added telecommunications services such as subscriber transfer, call
forwarding, caller number display and short messaging service.
EFFECT OF REDUCTION IN TRANSMISSION LINES LEASING FEES, ADJUSTMENTS OF LONG
DISTANCE CALLING CHARGES AND CANCELLATION OF MOBILE SERVICES SURCHARGE ON THE
GROUP
Assuming that the settlement arrangements currently applicable to domestic
and international and Hong Kong, Macau and Taiwan long distance calling charges
remain unchanged and based on the types and numbers of digital transmission
lines actually leased, the number of subscribers and the actual usage volume
recorded by the Group in July, August and September 2000, the Board estimates
that the reduction in transmission lines leasing fees and long distance calling
charges, the cancellation of the mobile services surcharge of Zhejiang Mobile,
Jiangsu Mobile and Henan Mobile and the adjustment to the base usage charge of
Guangdong Mobile will lead to a decrease in the Group's profit before tax for a
half year period of approximately RMB942 million (equivalent to approximately
HK$887 million). This represents a decrease of approximately 5.42 per cent. as
compared to the pro forma combined profit before tax (combining the results of
the Company together with its existing 13 operating subsidiaries) of RMB17,376
million for the six months ended 30 June 2000 as set out in the Company's
prospectus dated 1 November 2000. The above calculation has not taken into
account the potential benefits to be derived from the possible increases in the
number of subscribers and usage which may result from such adjustments, and the
resulting revenue growth.
The Board believes that the reduction in transmission lines leasing fees
may reduce the Group's operating expenses, and that the reduction in
long-distance calling charges, the cancellation of the mobile services surcharge
and the adjustment to the base usage charge of Guangdong Mobile may strengthen
the Group's market competitiveness in terms of pricing, consolidate the Group's
existing contract subscriber base while at the same time significantly enhance
new subscriber growth, thereby leading to a further expansion of the Group's
subscriber base and increase in telecommunications usage volume. In addition,
this could lead to a further widening of the price differential between the
contract service business and the pre-paid service business of the Group,
enhancing market segmentation, product differentiation and business design, and
resulting in greater effectiveness in business management. This may thereby
contribute to the Group's revenue growth and development over the longer term.
The policy that allows for the Group to independently determine charges for IP
phone and certain value-added services is an indication that the regulation of
the information industry market of the PRC is becoming more market-oriented. As
a result of such policy, the Company can formulate different business
development strategies to address the different needs of the markets. This will
enhance the flexibility and effectiveness of the business management and is
beneficial to the development of the Company. In general, the Board also
believes that the reduction in transmission lines leasing fees, long-distance
calling charges, the cancellation of the mobile services surcharge and the
adjustment to the base usage charge of Guangdong Mobile may promote the growth
of the PRC mobile communications market and be beneficial to the long-term
development of the Group and the PRC information industry.
IN THE MEANTIME, INVESTORS ARE ADVISED TO EXERCISE CAUTION IN DEALING IN
THE SECURITIES OF THE COMPANY.
By order of the Board
CHINA MOBILE (HONG KONG) LIMITED
WANG XIAOCHU
Chairman
Hong Kong, 27 December 2000
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