HUTCHISON UPDATES News

CORPORATE

HWL Annual Results Turnover 2001 PORTS Turnover 2000

EBIT 2001 2001 2000 % EBIT 2000 TELECOMS

Turnover 89,038m 84,825m +5 HK$ PROPERTY q & HOTELS Profit attributable to 12,088m 34,118m -65 shareholders RETAIL & MANUFACTURING

Earnings 2.84 8.00 -65 $ per share ENERGY & INFRASTRUCTURE $ ------0 5 10 15 20 25 30 $ Dividends 1.73 1.73 – $ HK$ BILLIONS

Hutchison Whampoa Limited’s consolidated net profit for the year Cheung Kong Infrastructure HWL stake – 84.6% Turnover Profit attributable Earnings Dividend ended December 31, 2001 was HK$12,088 million (approximately (HK$) to shareholders per share per share US$1,549 million). Earnings per share were HK$2.84 (2000 – HK$8.00) with a total 2001 3,838m 3,323m 1.47 0.63 2000 3,345m 3,228m 1.43 0.60 dividend per share of HK$1.73, unchanged from the previous year. Excluding profits on disposal of investments less provisions of Hongkong Electric Holdings HWL stake – 38.87% HK$3,124 million (2000 – HK$25,742 million), the Group’s profit Turnover Profit attributable Earnings Dividend increased 7% over the previous year. (HK$) to shareholders per share per share The results include profit of HK$30,000 million on disposal of the 2001 10,867m 6,507m 3.05 1.63 Group’s investment in VoiceStream, and profit of HK$4,393 million 2000 10,634m 5,535m 2.62 1.515 from the sale of approximately 695 million shares of Vodafone Hutchison Harbour Ring HWL stake – 50.5% Group and approximately 89 million shares of Deutsche Telekom Turnover Profit attributable Earnings Dividend pursuant to forward sales contracts for delivery in 2002. (HK$) to shareholders per share per share

Provisions for the year totalled HK$31,269 million, comprising 2001 70.4m 680.6m 12.16 cents 1.5 cents HK$1,500 million for certain property developments and HK$29,769 2000* 330.6m (1,037.2m) (24.42 cents) – million for diminution in value of its equity investments. Turnover for * Figures are for ICG Asia, which changed name to Hutchison Harbour Ring on Sept. 25, 2001. the Group’s core businesses totalled HK$89,038 million, a TOM.COM HWL stake – 29% 5% increase over 2000. EBIT for the Group totalled HK$21,846 Turnover EBITDA Earnings Dividend million, a 12% increase over 2000. The Group’s consolidated cash and (HK$) per share per share

marketable securities amounted to HK$145,336 million, 2001 626.6m (192.1m) (19.78 cents) – approximately equal to the consolidated borrowings of HK$146,992 2000 89.2m (462.4m) (43.82 cents) – million. For full results, see www.hutchison-whampoa.com/eng/investor2.htm Hutchison Telecommunications (Australia) HWL stake – 58%

Turnover EBITDA Net profit Dividend HUTCHISON WHAMPOA LIMITED (A$) after tax per share Hutchison Whampoa Limited (HWL) is the holding company 2001 418.6m (112.9m) (137m) – of the Hutchison Whampoa Group of companies. With origins 2000 404.7m (85.2m) (92.5m) – dating back to the 1800s, it is a Hong Kong-based multinational Partner Communications HWL stake – 35% (Now 42.7% – see story p.5) corporation with a diversified portfolio. It is also part of the Li Turnover EBITDA Operating Dividend Ka-shing group of companies, which together represent about 15% of (US$*) profit per share the total market capitalisation of the Hong Kong stock market. In 2001 736m 148.6m 23.3m – 2001, HWL’s consolidated turnover (including associates) was 2000 476.4m (13.3m) (122.3m) – HK$89,038 million (approximately US$11,415 million) and net profit *US$ figures converted from New Israeli Shekels at Dec. 31, 2001 exchange rate: US$1.00 equals NIS4.416 was HK$12,088 million. Husky Energy HWL stake – 35.1% With over 120,000 employees worldwide, the Group operates and Turnover EBITDA Basic earnings Dividend per invests in five core businesses in 36 countries: Ports & Related Services; (C$) per share common share Telecommunications; Property & Hotels; Retail & Manufacturing; and 2001* 6,627m 2,042m 1.63 (diluted) 0.36 Energy & Infrastructure. 2000 5,090m 1,499m 1.39 – * 2001 Figures reflect first full year of combined operations following Husky’s merger with Renaissance Energy

SPHERE 2 bites

CORPORATE ENERGY & INFRASTRUCTURE Research Centre Opens CKI to Tunnel ‘Down Under’ A state-of-the-art cancer research centre at A consortium led by Cheung Kong city’s west is expected to carry up to 95,000 Cambridge University, UK was officially Infrastructure Holdings (CKI) has been vehicles a day by 2006. opened on May 18 by Hutchison Chairman chosen as the preferred tenderer for a new Work is expected to commence before the Mr Li Ka-shing and Lord Sainsbury, Britain’s A$800 million (about US$4.5 million) road end of 2002. Minister for Science and Innovation. tunnel project to carry through-traffic Named the Hutchison/MRC Research beneath the central business district of Centre, the project is a collaboration Sydney, Australia. between the Medical Research Council CKI has a 50% interest in the consortium, (MRC), the University of Cambridge and Cross City Motorway (CCM) – which Cancer Research UK. Construction of the also includes DB Capital Partners (30%) new building was made possible by a £5.3 and construction contractor Baulderstone million donation from HWL, to match Hornibrook (20%). funding from the MRC. The project, a 2km cross-city tollway tunnel linking Sydney’s eastern suburbs with the Scholarship Scheme Expanded Thanks to a HK$23 million White Rose Given Green Light donation from Mr Li Ka- shing and the Hutchison Husky Oil Operations (72.5%) and co- approximately 100,000 barrels of oil per day. Group, the Chevening venturer Petro-Canada (27.5%) in March South Korea’s Samsung Heavy Industries Scholarship Scheme in April announced their decision to proceed with has been awarded the contract to build the was expanded to include an the development of the White Rose oil FPSO hull, Aker Maritime Kiewit extra 63 scholarships for Hong field, located off the east coast of Contractors will build topsides designed to Kong and Mainland Chinese postgraduate Newfoundland and Labrador, Canada. produce oil at a quality suitable for shipment students each year for the next four years, The White Rose development plan is by shuttle tankers to market, and US increasing the existing number of scholarships focused on a purpose-built Floating company SBM IMODCO will design and by one third. Chevening Scholarships are Production Storage and Offloading (FPSO) fabricate the turret and mooring system for offered annually by the British Government to vessel with a peak production rate of the FPSO. enable high achievers from around the world to undertake postgraduate study in the UK. PROPERTY & HOTELS applause Five-star Status The Harbour Plaza Chongqing has been awarded “five-star hotel HWL and its subsidiaries have continued to certification” in recognition of its high-quality facilities and services. attract attention with several media rankings This 390-room luxury hotel boasts a high-tech business centre and and titles. Hutchison featured in the top ten top-flight leisure facilities, including an indoor swimming pool, of CFO Asia’s “Best Annual Report in Asia tennis court, cinema complex, bowling alley, shopping mall and ice- (2000-2001)” [10], while Euromoney ranked skating rink. HWL top in the “Best Asian Companies – Conglomerate” category and placed it in the top five “Best Companies in HK” category Le Parc Phase II in Demand [5]. In April, Finance Asia named HWL “Best After greater-than-expected demand for Managed Company in HK” and “Best Phase I units of Le Parc in the southern Financial Management in HK”. HWL was Chinese city of Shenzhen, the development also in the top three for “Best Investor continued its success when Phase II apartments Relations in HK” [2], “Strongest came to market in February. Commitment to Enhancing Shareholder Demand was so high that prospective buyers Value in HK” [2] and “Companies Most lined up the day before the opening, and 280 Committed to Corporate Governance in units were snapped up in just three days. The HK” [3].The Asset Benchmark Survey, development boasts European-themed gardens meanwhile, judged Hutchison “Best in and consists of approximately 3,200 units as well Corporate Governance, Hong Kong.” as shopping facilities, schools and a clubhouse.

SPHERE 3 HUTCHISON UPDATES Newsbites

TELECOMS Better Connections TOM Extends Outdoor Network Corporate customers The TOM Group leading HONG KONG GREATER CHINA of Hutchison acquired controlling manufacturer Telecommunications (Hong Kong) can stakes in five outdoor media companies in and distributor enjoy a comprehensive end-to-end China in the first quarter of 2002. The of music, film wireless enterprise solution companies are Liaoning New Star and TV that includes integrated Prosperity Advertising (agreement programmes. email, phone, SMS, WAP announced in February), Shenyang Sano In January, TOM and organiser features Jinxiang Advertising, Sichuan partnered with following the commercial Southwest International Advertising, CERNET Corp to launch in May of the Xiamen Bomei Advertising and Fujian establish two JV companies – CERNET BlackBerry wireless e-mail Seeout Outdoor Advertising (MOUs Information Technology Co and solution, developed by announced in March). Including the new CERNET Online. CERNET Corp is the Research In Motion acquisitions, the Group’s outdoor media commercial arm of China Education & (RIM) of Canada. network consists of 12 outdoor media Research Network (CERNET), China’s BlackBerry operates companies with over 170,000 sq. m. of largest educational Internet provider. The co- exclusively on advertising space in 22 cities. operation includes production, distribution Hutchison Telecom’s TOM has also entered China’s audio-visual and sales of CERNET dial-up ISP access GSM Dualband and and entertainment industry following an cards, branding and creating CERNET ISP GPRS network in Hong Kong and agreement in March to acquire 50% of services, and exploring telecom value-added Macau. Hutchison intends to further extend Guangzhou-based Hong Xiang, China’s service (VAS) opportunities. RIM’s technology to the Group’s 3G markets worldwide by working together to develop 3G applications. Hi3G Developments

SWEDEN Building on its selection Hi3G has signed agreements with Birka of 3G services and Energi and Vattenfall on placement of Software Vendors content offerings, Hi3G has reached an Hi3G’s antennas and other equipment at UK Hutchison 3G has agreement with SEB bank that will allow their power poles and transformer stations. recently signed deals 3G customers access to a selection of The deal is in line with the policy of with several software vendors to provide key financial services, news and tools. providing 3G infrastructure in a cost-effective components of the middleware infrastructure Hi3G has also secured exclusive rights to and environmentally friendly way by utilising of its 3G network. These include: send ice hockey content to 3G mobiles from current infrastructure. Earlier, Hi3G signed Elitserien. The agreement with Svenska frame agreements with PNB and Prenad TTI Telecom International Hockeyligan covers content rights as well as covering project management, design, Manager of Managers (MOM) solution sponsorship of Elitserien. construction and telecom pre-installations for Starbase Moving forward with its network rollout, base stations in the Malmö region. Starbase Collaboration Suite Autonomy Corp JV Stakes Acquired Creative Content Intelligent Data Operating Layer (IDOL) Hutchison Hutchison 3G’s Network365 HONG KONG UK Telecommunications in customers will mzone avatar April announced that it would acquire Asia soon have access to the UK’s Tertio Global Crossing’s (AGC) stake in their most potent mix of music- Provident respective joint-venture companies in Hong oriented brands following the Ncorp Kong, namely AGC’s 50% interest in signing in March of a two- year deal with media and ljen Hutchison Global Crossing (HGC), its 42.5% interest in ESD Services and its 50% entertainment company Emap. Ascential interest in Hutchison GlobalCenter, for a Under the agreement, the DataStage XE total consideration of US$120 million in cash. Emap performance network Volantis Systems Under the agreement, HGC and Hutchison will provide content from all its Volantis Mariner – Service Delivery Platform GlobalCenter will become wholly owned music titles – encompassing Q, Mixmag, Smash Hits and Schlumberger/Entrust subsidiaries of Hutchison, while Hutchison will have an indirect 85% stake in ESD Services. Kerrang! – as well as content Infrastructure and security services Hutchison and AGC have agreed to continue from lifestyle magazine brands such as FHM, Vendor Software Solution to use each other’s services. New Woman and Empire.

SPHERE 4 TELECOMS PORTS Network Providers Selected Agreements Signed Streamlined Logistics In the build-up to its AUSTRIA Nokia in April signed a ITALY Logistics Information Network contract to supply the Italian launch, H3G has Enterprise (LINE) and Yue Yuen core 3G network for Hutchison 3G signed a roaming agreement with Telecom in April formed a JV company, Austria for an undisclosed sum. Italia Group. SupplyLINE, to act as Lead Logistics Earlier, Siemens signed a deal worth around In separate agreements that will also apply in Provider (LLP) for the sports footwear C200 million (approximately US$186 other markets where Hutchison has a and electronics industries. SupplyLINE million) to supply Hutchison with 3G radio presence, Alcatel will supply its open services also welcomed Elitegroup Computer network technology, including base stations. platform to support H3G’s multi-media Systems and Global Brands Manufacture services; Ectel will provide NGN FraudView, Group as new shareholders in the venture. As One-Stop Shop a real-time fraud prevention and security part of the deal, SupplyLINE will co-ordinate management solution; and divine will supply and manage its customers' supply chain by Leading online office HONG KONG its divine Content Server Enterprise Edition providing logistics services that manage the supplies provider (dCSEE), a platform for managing and integration of the movement of goods and the bigboXX.com in April launched a distributing content. flow of information. corporate premium service. The bigboXX In February, LINE and Reebok announced the Premium Center provides over 150 products, rollout of a global supplier portal, the Order ranging from desktop items and paper A$600m Rights Issue Visibility Application (OVA), which will link all of products to printing and floral services, as Hutchison Reebok's footwear and apparel manufacturers well as customised services for client’s large- AUSTRALIA Telecommunications around the world, as well as logistics service scale promotional requirements. (Australia) in April announced a pro rata providers and other business partners. renounceable rights issue of convertible notes to raise approximately A$600 million (about Stake Raised in Partner US$323 million) to fund the development Largest Cruise Liner Calls Hutchison Whampoa ISRAEL and operation of 3G services. Freeport Harbour at Grand Limited has acquired The notes will have a five-year Bahama Island in May 13,778,668 Partner Communications term and will pay 5.5% interest welcomed the world’s largest shares from Matav Cable. Upon completion per annum. If the conversion cruise liner, Royal of the sale, Hutchison’s shareholding in right is exercised, each note Caribbean Cruises’ Partner increased to approximately 42.7% will entitle the holder to one Voyager of the Seas. The ship, and Matav Cable’s shareholding decreased ordinary share in Hutchison which has a capacity rating to approximately 7.5%. Telecommunications. of 3,840 people, arrived for its annual dry-docking overhaul, 3G Game Plan which was carried out at Grand Hutchison 3G has formed partnerships with nine companies to Bahama Shipyard. GLOBAL develop and supply over 40 games for the 3G format. The companies are: iFone, It’s Alive, Supedo, nGame, Codetoys, Simian Industries, Morpheme, Shuttle Service Launched Cheeky Wireless and Purple Software. Under the agreements, a range of new and classic Shantou International Container arcade-style games, as well as traditional board and card games, will be available to all Terminals in April welcomed the 126-TEU Hutchison 3G’s operations worldwide. vessel M.V. Tianma, marking the commencement of a regular shuttle service RETAIL & MANUFACTURING between Shantou and Xiamen operated by Priceline Launches in Asia China Ocean Shipping Agency Xiamen. Priceline (www.priceline.com.hk), the new the world on its Internet travel service operated by books. Travellers Cranes Lift XICT’s Capacity Hutchison-Priceline (Travel), opened for can bid for Two post-panamax quay cranes were delivered business in Hong Kong in April and in tickets and to Xiamen International Container Singapore in May. The service offers a rooms in the Terminals (XICT) in March. Along with five bilingual transactional website in Chinese and Asia-Pacific rubber-tyred gantry cranes delivered in English that allows travellers to name their region, the US, December, the cranes will lift handling own price for air tickets and hotel rooms. Canada, Europe, capability by 40%. In May, XICT became a port Priceline has 25 Asian and international air- Mexico, the Caribbean and Central America, of call in the new PSW-1/AES-1 pendulum line partners and about 8,000 hotels around with more destinations being added. express service of Kawasaki Kisen Kaisha.

SPHERE 5 COMMUNITY A HELPING HAND

“To be able to contribute to society and to help those in need to build a better life, that is the ultimate meaning in life. I would gladly consider this to be my life’s work.” – Li Ka-shing

By Mark Caldwell

hang Jing had been looking reach. Not only was she in physical pain, able to walk again but was also able to forward to the start of a new but she had also lost the opportunity to pursue her dream of receiving an educa- school semester in her home- lead a normal life. Instead of asking: tion at a local primary school. She stud- town of Lanzhou, in Gansu “What will I do next?” Zhang Jing was ied hard and made new friends. Zhang Province.Z forced to ask: “What will I do now?” Jing was smiling again. The little girl imagined herself walk- Her future was in ruins. The name Li Ka-shing may be well ing to school along the banks of the During the months of recuperation known to businessmen and journalists, Yellow River, breathing the crisp morn- that followed, Zhang Jing began to fear but Zhang Jing had not heard it before. ing air and laughing with her friends. that she might never attend school. In This changed, however, on February Lanzhou, at China’s geographic centre, is the mornings, she would hop on her 20, 2001 when Mr Li paid a visit to the a pleasant environment to grow up in, right leg to catch a glimpse of the stu- Gansu Disabled Persons Rehabilitation even though earthquakes frequently dents walking past. Sometimes, tears of Centre. On this occasion, in a gesture shake its stark, mountainous terrain. disillusionment rolled down her cheeks. that caught everyone’s attention, he gave A few days before the new school Then, in July 2000, her future began his business card not to government term began, Zhang Jing suffered a per- to look more promising. officials or business partners but to two sonal earthquake of her own; she was hit With help from the Gansu Disabled disabled girls. One of them was Zhang by a car. At that awful moment, her life Persons Rehabilitation Centre, which Jing. She was able to proudly present her changed course. is sponsored by the Li Ka Shing benefactor with a school report – she Zhang Jing was fortunate to survive, Foundation, Zhang Jing received an had scored marks of 97 and 100 respec- but she lost her left leg.When she woke artificial leg at minimal cost. tively in Chinese Language and up in hospital, everything she had once It wasn’t long before the little girl Arithmetic. To everyone’s surprise, she looked forward to now seemed out of regained her mobility. Not only was she even demonstrated the success of her

SPHERE 7 COMMUNITY

new leg by kicking a feather shuttle- supporting his family. to make a difference to the lives of less cock, a popular game among Chinese Showing extraordinary aptitude, he fortunate people. The scale of that suc- children. became a general manager at 19, and the cess is reflected in the thousands of indi- “One day when we enjoy more rest, as they say, is history. He rose to viduals whose lives have been enhanced advanced technology, you may even be become one of the region’s most suc- as a result of his targeted donations. able to run,” a delighted Mr Li told her. cessful businessmen. In July 2000, six months after Zhang High school student Tian Nan, who Amidst all his accomplishments, Jing received her sponsorship, Mr Li and was born with a hearing and speech however, Li Ka-shing has never forgot- the China Disabled Persons Federation handicap, also met Mr Li.With sponsor- stepped up their efforts to help the phys- ship and help from the Rehabilitation ically challenged with the launch of the Centre, she had learned to talk and was Cheung Kong New Milestone Plan. able to enjoy a normal school life. ...almost 15 million With a five-year implementation pro- “Put the past behind you.The future gramme, its mission is to help disabled will be much better,” Mr Li encouraged people will benefit people to hold active roles in society by her. supporting education and health care, He urged the girls to contact him if from the promoting working ties between the they were in need. It was a meeting all disabled and the public, and encouraging three would cherish. On his return to establishment of disabled people to develop self-confi- Hong Kong the next day Li Ka-shing fol- dence and self-reliance. lowed up with letters of encouragement. service centres Objectives include the establishment Mr Li faced his own challenges of 200 attachment stations for artificial growing up in provincial China. He was for the disabled... limbs, employing 400 trained specialists. born in Chaozhou in 1928. His father, Li The goal is to provide 15,000 artificial Yunjing, was the head of a primary limbs each year and to benefit 60,000 school and he infused his young son with disabled people within six years. The a love of learning and high aspirations. ten his roots. As his business blossomed, long-term vision is to provide artificial In 1940, Japanese troops invaded he began to make significant contribu- limbs for all 230,000 disabled people in the country and the Li family fled to tions to education and medical care pro- China by 2015. Since the programme’s Hong Kong. Shortly after their arrival jects in Hong Kong and Mainland implementation, 2,200 disabled people the young Li, aged 12, began his career China and subsequently to other parts of have received artificial limbs at one- as an apprentice. At 15, after the death the world.After more than half a centu- tenth of their normal cost. of his father, he took his first job in ry of hard work, he believes the greatest Another goal is to train 500 teachers a watch strap company and began advantage of his success lies in being able for deaf students within six years, and to

SPHERE 8 PRICELESS DIVIDEND

HAT COULD YOU DO Mr Li himself never had the opportu- with HK$4.5 billion? Few nity to receive a formal education. Being W individuals have that sort of a voracious reader, he is largely self- spending power, but that’s the sum Li taught. He considers education to be Ka-shing has invested over the past 22 the single most vital resource of society years in helping other people. and he has spared no effort to make Better known for his gift of turning a education more accessible. profit, this is how Mr Li chooses to The website offers fascinating spend much of it. footage of an award-winning documen- The money has funded education, tary film that Mr Li helped finance, enti- medicine, culture and welfare.The ben- tled Knowledge Changes Fate, made by efits have been so widespread and so renowned Mainland director Gu profound they’re more difficult to calcu- Chang-wei. Featuring some 40 individ- late than the cash itself.It’s impossible to uals whose lives improved as a result of quantify the impact on thousands of the education they received, the film received an overwhelming response, inspiring people throughout Hong Kong and the Mainland to embrace life- long learning. Browsers can learn more about scores of other interesting and useful

STOCK IMAGES (2) IMAGES STOCK projects funded by the Foundation, which has some remarkable success stories of its own. One of the largest Everyone needs a helping hand at some point and most successful education projects, in their lives and the Li Ka Shing Foundation goes to great lengths to reach out to less fortunate for example, has been Shantou members of the community. University, which has received some HK$2 billion from the Foundation and individuals who have benefited from a which has already produced some better education, improved health and 20,000 graduates. cultural upliftment. The Li Ka Shing Foundation is the set up a listening and language recovery In March this year, the Foundation only “business interest” of Mr Li’s that technical school. launched a website, in Chinese and consistently fails to produce a financial Twelve provinces in the mid-west English, to keep the public abreast of its return. But there’s a pervading sense regions of China will benefit from activities and to increase society’s that of all Mr Li’s investments this is the schools for the blind. Three thousand awareness of the importance of helping one he values most. teachers will be trained to educate blind others. children with the aim of raising their There is much of interest on this school enrolment rate to 80% from the easy-to-navigate site. Visitors can learn current 40%. More than 25,000 children more about the Foundation – its mis- will be offered financial aid and 35,000 sion and objectives, the details of its blind people will be trained as masseurs. many projects, and pictures relating to In total, almost 15 million people the projects. will benefit from the establishment of The website also gives a glimpse of service centres for the disabled in 664 the man behind the tycoon, offering underdeveloped prefectures. insights into the forces that shaped a Individual stories of hope can easily philosophy underpinned by high regard be submerged in statistics, given the scale for learning and a relentless drive to of the Li Ka Shing Foundation’s influ- help others. Mr Li is shown in casual ence. There are many more like Tian attitude. Interviews, articles and video For details of the many projects sup- Nan, who has learned to talk, and Zhang clips of a 1998 RTHK documentary tell ported by the Li Ka Shing Foundation, as Jing, who can walk again. For Mr Li, the his life story, beginning with his difficult well as a personal look at the names and greatest satisfaction comes from know- formative years in rural China faces behind the numbers, log on to ing that behind each figure on the and charting the progress of his www.lksf.org. Readers are also invited to Foundation’s spreadsheet is a tale of a life extraordinary career. write to the Foundation via the website. changed for the better. – With reporting by Tao Siu Tip

SPHERE 9 TECHNOLOGY 3G READY... ONE, TWO, 3G

The curtain is about to rise on a new world of 3G multimedia communications and one company is pulling out all the stops to make showtime an unforgettable experience.

By Justin Quillinan

picture is worth a thousand TRAILBLAZING words.That’s one of the cru- The rollout will begin in a few short cial differences between 3G months, with Hutchison 3G companies (third generation) mobile launching the new services under a new Amultimedia communications and 2G. global brand. Starting in the UK and Soon, when we communicate via our Italy, followed by Hong Kong, Sweden mobile handsets we will be able to not Australia, Denmark, Israel and Austria, only talk to each other as we do with these companies will blaze a trail into a 2G but also to show each other what new world of mobile multimedia that we mean. promises to be as different from existing With the launch planned for the offerings as TV was when it overshad- UK in autumn this year, and with Italy, owed radio. Hong Kong and Sweden on track to Analysts differ over the timing, but follow soon after, 3G is set to make a they generally agree 3G will be a key

real difference to people’s lives, and YIU (4) MIRANDA driver into the next technology era. Hutchison will be in the vanguard of “In the short term we are being that change. pragmatic about 3G’s business prospects,” In the past two years, telecoms oper- and services in Europe, Hutchison has says Declan Lonergan, Research ators have spent billions buying 3G been building out infrastructure and Director, Wireless at Yankee Group licences in the hope that they could do striking high-profile content deals Research in the UK, “but in the long something spectacular with them. to ensure that spectacular things will term we fundamentally believe 3G will However, when the buying frenzy abat- happen. be a success. Hutchison is coming into ed some analysts concluded that prices Says Matthew Mo of J.P. Morgan: an exciting market with some interest- paid were too high for what amounted “In contrast to many European telecom ing ideas.” to little more than pieces of paper analysts, [Hutchison] believes that a 2G The ink has already dried on con- entitling them to a slice of the wireless operation is a burden as 2G operators do tracts to offer richer content than ever spectrum. not have the right organisation to man- before. But not everyone is writing off the age, monitor, and generate products for Voice will still be there, of course, value of these licences. “The UMTS 3G users. We should bear in mind that but 3G will go far beyond 2G’s low data spectrum is like real estate,” says Jeremy the negative sentiment surrounding 3G rates to harness the power of multime- Green, a research director at Ovum in is created by 2G operators, which have dia. It will create a wireless environment the UK. “It’s a limited commodity that good reason to be bearish as their 3G offering complex colour graphics, quality will not go out of fashion – and rollout might eat into the profitability of audio and video, and high-speed file Hutchison knows a thing or two about their current 2G operation.” transfer for business use. New services real estate.” Group Managing Director Canning will include entertainment, news, current The Group has so far secured eight Fok is unequivocally upbeat about 3G: affairs, sport, and multimedia messaging licences, each within strict budget lim- “The more I get involved, the more I in a way never seen before. its, and walked away from others that feel confident,” he says. “The building Those companies that do make a didn’t make sound economic sense. blocks are 99% complete and we are success of 3G stand to reap rich Unfettered by 2G legacy networks now in execution mode.” rewards, though opinions differ on

SPHERE 11 TECHNOLOGY

how much revenue will be involved. months it grew from a handful of staff to The UMTS Forum, the indepen- 1,500 full-timers and 600 contractors. dent body that promotes the uptake of Employee numbers will rise to around 3G, recently published a study that con- 3,000 over the next couple of years. cludes annual 3G service revenues will Managing Director Colin Tucker reach US$322 billion in 2010. confirms that the building blocks of 3G Forum Chairman Dr Bernd Eylert are largely already in place in the UK, says the opportunities ahead aren’t just namely the 3G devices, the network and for “techies” and early adopters, but for the middleware. everyone. He advises operators to “reach Hutchison has no intention of fol- out to their customers” and learn from lowing the example of some GPRS the current 2G boom in text messaging operators who had nothing to sell when (SMS) where children usually end up they launched. Customised 3G devices, teaching their parents what to do. SMS’s manufactured by Motorola and NEC, multi-media alter ego (MMS) should be will be available from Day One. These simple and enjoyable to use, he said. handsets will support multimedia Such ideas have been on capabilities and allow seamless transition Hutchison’s agenda from the word go. between 2G, 2.5G and 3G systems. The technical nuts and bolts behind the Equally important will be the core scenes will be crucial, but equally network infrastructure that will make important to 3G’s success will be the the devices work. greatly enhanced customer experience, “We can look at the infrastructure which Canning Fok describes as “The building behind the handset in two layers,” says “adding eyes to the ears” that everyone Tucker. “There’s the radio network is accustomed to in 2G. blocks are 99% which provides the connectivity out to Film clips and video postcards will complete and we the handset, and then there’s the appli- soon become commonplace. Parents cations platform which ensures that will be able to eyeball their children are now in content can be deciphered.” from their offices and not only wish The radio network is the connec- them a good day at school but also tell execution mode.” tivity bit – switches, transmitters, fibre- them to comb their hair before they go! optics etc. Several vendors have been Business partners will video conference chosen to help build the networks, and exchange complex data without ever including Nokia, Siemans-NEC, 186k, meeting up. In medical emergencies, Nortel Networks, Ericsson and patients’ vital signs will routinely reach Such capabilities have long been Motorola. hospital staff before the patient arrives, the stuff of science fiction, now they “On top of the network is the appli- saving many lives. will soon be accessible to the general cations platform,” Tucker explains (see Curiously, football – a European public. 3G has the speed to deliver con- sidebar, p.13). “As we needed to move obsession – could hold the key to open tent and applications in a way that 2G fast, we decided to take ready-made a treasure chest of opportunities for 3G. and even 2.5G – General Packet Radio large blocks of software – a billing sys- Whilst Hong Kong fans might favour Service (GPRS) – couldn’t hope to tem, the ISP to deliver the content and horse racing and Australians cricket, match. so on.We modified these, and then tied some of the biggest content deals struck “Some mobile operators claim that them all together with the EAI so far have involved football action – 3G gives the same services as GPRS, (Enterprise Application Integration) 20-second clips of championship match only faster. This is absolutely untrue,” level.The EAI acts as a highway between highlights, allowing fans to keep close to insists Bob Fuller, joint CEO of all of these pieces. All the communica- the action wherever they are. H3G Italy. tions are done across this layer.” Illustrating the power of football to “3G is an entirely new market that In the past, most of the 2G architec- get people talking, mobile phone com- has nothing to do with previous tech- tures were effectively one piece of soft- panies had to put up temporary base nologies.The network is broadband and ware and therefore much harder to stations near the stadium to cope with 10 times faster than GPRS. As regards upgrade. However Hutchison’s approach some 50,000 extra calls made during services, only 3G can guarantee true allows it to quickly build complex func- the Scottish Cup Final played in multimedia and interactivity in real tionality by taking significant pieces of Glasgow in May this year. time, where the quality of the customer’s ready-made software and plugging them Such deals don’t stop on the pitch experience feels ‘real’.” together through this standard interface. either. 3G’s ability to personalise services With the launch a few months away, “If we decide to deploy a more to suit customers’ interests includes observers will be watching closely to see sophisticated system, we can remove one location-based offerings. If you follow a what has been achieved so far and what piece and replace it with another with- particular team, you might want to exciting opportunities lie just ahead. out replacing all the pieces,”says Tucker. know that its star player is doing a book- Care has also been taken with the signing event a few miles from where BUILDING BLOCKS location of base station sites using exist- you happen to be.Your 3G device will Hutchison 3G UK won Licence-A – ing sites where possible to speed things not only alert you to the information, the highest bandwidth of five – in the up and reduce environmental impact. but also show you how to get there! British auction in May 2000. In just 18 Services will embrace content from

SPHERE 12 3G

many sources and the technical “transla- marketing by amassing information on plus everyday exploration.” tion” work to enable content to be people’s interests, spending patterns and Gernon points out that the deals broadcast to 3G devices has been out- physical whereabouts. Lisa Gernon, with the UK Football Premiership will sourced to the BBC. Hutchison 3G UK Marketing & be the tip of the content iceberg. “This “We can save a significant amount Strategy Director, describes 3G as a isn’t just for blokes.A lot of women fol- when buying equipment and software “category shift” in the mobile industry. low football anyway, but there will be because we’re buying in bulk,” Tucker “We’re not a traditional mobile much more, such as music, games, enter- adds. “The same goes for content – we company. 3G is about bringing tainment and dining information – the get a good deal because we will bring broadcasting, media and the Internet list is endless.” large audiences.” into one experience,” says Gernon. It is hard to predict which applica- “Our services will empower all the tions will take off, but crucial to success RINGING THE CHANGES senses to give customers a personalised will be a sophisticated customer rela- In contrast with the current mobile experience that will reflect their lives. tionship management system (CRM), market, which is all about a limited People are on the move or at work all which will provide a marketing edge. number of packages usually based on day, so it’s about extending their inter- The platform to be used globally is tariffs, 3G will enable person-to-person est throughout the day – everyday stuff called E-piphany and is similar to the

ARCHITECTURAL Customer Experience EDGE

O PROVIDE THE BEST possible customer ex- CMG ADC Network 365 perience, Hutchison 3G Unified data and Convergent billing T Autonomy voice messaging solution that allows Secure payment has designed an IT infrastruc- A search engine platform customers to manage platform and ture that allows complex and that delivers location- account finances electronic wallet specific information to services diverse data to be integrated customers and processed through a com- mon platform that is scalable and flexible. This platform is comprised of Customer various software programmes Relationship that “decipher” information Management from different sources and are (CRM) plugged in to an Enterprise Application Integration level (EAI) which acts as a highway E.piphany Analytical CRM enables business analysis based on customer behaviour for all communications. Ascential The result is that various Provides a concise view of customer needs and behaviours processes and components are Chordiant Software able to communicate with CRM solutions that handle service requests from subscribers underlying applications to deliv- er smooth functionality of the entire system to the user. Enterprise Application Integration Tibco Middleware interaction software provides the Starbase Business process execution that integrates IT Collaboration Objects suite manages soft- Business ware requirements, Intelligence configuration, change analytical tool management, defect tracking, and testing TTI Telecom Embarcadero Provides Manager Unified modelling of Managers (MOM) Tertio Intec language tool integrated software Real-time service Intercarrier mediation solutions activation that and billing products automates provision ensure accurate of convergent and smooth billing services processes All information was accurate at time of going to press.

SPHERE 13 TECHNOLOGY

system used by Amazon, the online using wireless phones. Mobile expendi- della Sera, and Tiscali, the leading retailer. ture accounts for 2% of the GDP.” European Internet service provider. “We don’t intend our devices to be Ericsson and Siemens-NEC are 3G services will be available in 50 a mini-TV” says Gernon. “It’s all about building the network for H3G Italy and major Italian cities from the last quarter ‘snacking’ on the information that you the company has a roaming agreement of this year. Expected coverage will be as an individual are interested in. In five with the main Italian mobile operator – 45% by the end of 2002 and 80% by years time I believe people won’t know Telecom Italia Mobile (TIM) – for 2004. In the meantime, roaming agree- how they managed without 3G. It’s the interconnection and site sharing. H3G ments will fill in the gaps. natural next step in the evolution of has also signed content agreements with “Our clear objective is to succeed communications.” 11 soccer teams, which include the win- with an ‘explosive’ development of the H3G Italy’s Bob Fuller predicts that ners of the last 10 Italian championships. market,” says Fuller.“We have more fre- 3G will open up thousands of new H3G Italy is also in the process of quencies, the best technologies, the best opportunities. “Italians love TV,fashion, closing agreements with some of its content and the best human resources to soccer, and mobile communications,”he shareholders, who are major players in satisfy our customers’ needs.” observes, “in fact, Italy is the second publishing, Internet and new media. Sweden and Denmark will follow biggest mobile-phone market in Europe These include CIR, which controls La after the UK and Italy.This, says Hi3G with 87% of its 58 million population Repubblica, HDP,which holds Il Corriere Access Managing Director Chris

3G-WHIZ!

ERSONALISED MULTIMEDIA communications are about to London art student Emily Jones finds her P become an everyday reality. Your 3G useful for almost everything. 3G device will give you the power to It’s the perfect tool for staying in touch process massive amounts of data in the with family and friends. She has great fun blink of an eye – without cables. swopping “postcards” and cartoons with Just think: here is a “phone” that will them and can even show off her latest provide video and audio streaming such “masterpieces”. reached her budget limit for the week. as live news and sports broadcasts, music- Emily can’t resist the fashion, beauty Besides all the fun aspects, her 3G is on-demand, multimedia messaging, instant and horoscope sections which she’s also a powerful research assistant, giving access to area-specific information, bookmarked along with the listings sec- Emily access to a vast inventory of infor- mobile e-commerce, interactive games tion of London’s dance club scene. She mation on the Web to help with her art and even remote surveillance. loves the fact that her 3G lets her watch history research. 3G will add an invaluable dimension to her favourite music video clips whenever “I get the material I want quickly and modern life. It will open up a world of (and wherever) she wants to – on the with the minimum of effort,” she says. services tailored to suit you, as well as bus, in the park, at her studio.The device Emily’s only gripe about her 3G device help you explore the world. It will enable actually tells her when her favourite stars is that her boyfriend, Ron, keeps borrow- new, more flexible working practices with will be performing in the city, allows her ing it to watch football clips and to play users enjoying access to vital data to buy tickets and alerts her when she’s interactive games! whether they are in the office or not, and it will greatly improve distribution sys- tems for goods and services. As 3G is put to work it will unleash a Gotland-based taxi company GotCab understands the bene- tidal wave of possibilities. Imaginative new fits of offering excellent, speedy service. To streamline its applications will no doubt emerge, further operation, the company has provided each of its drivers with enhancing both business and leisure, a 3G device. Using the “always on” Global Positioning System adding variety and colour to our experi- (GPS) function, the central control office is able to keep tabs ences and making life simpler and more on the location of each taxi in real time. In turn, the drivers enjoyable. enjoy superb navigation assistance, with instant access to Here’s a glimpse of possible things to street maps, traffic reports and weather information.When a come. customer calls the control centre, the nearest available taxi can be deployed immediately. Furthermore, customers calling via a 3G device can be directly linked to the nearest cab and Note: Names and activities depicted are fictitious, located easily, again through the GPS. Customers can also pay serving only to illustrate possible 3G applications. using their 3G electronic wallets.

SPHERE 14 3G

Bannister, will give the company a a keen marketing edge to our services “This is going to happen whatever chance to learn from the pioneers. and delivering real benefit rather than the cynics say,” Tucker enthuses. “3G Like its sister companies, Hi3G will gimmicks.” will improve people’s lives – it offer top-tier sports content, including Hi3G and two of its competitors really will.” football and ice hockey. have created a JV company, 3G Reacting to a presentation by H3G “But the Scandinavian mobile mar- Infrastructure Services, to build a com- in May,John Godfray,head of conglom- ket has always been highly sophisticated, mon UMTS infrastructure outside erates research at ABN AMRO Asia, and Hi3G will initially target business Sweden’s major urban areas. This will said: “This is a seriously exciting story, professionals who are not impressed significantly cut costs while leaving the and I can now understand why Canning with hype. In Europe, Scandinavia leads operators free to compete where it Fok told me two years ago this was the in PC penetration, Web usage, Internet counts – providing content and services. most exciting project he’d ever worked banking – they are a very technological- The full menu of content and appli- on. We (the analysts) were gobsmacked ly savvy people,” says Bannister. cations has yet to be revealed, but with a by the whole thing.” “There are more m-commerce trials global footprint covering some 170 mil- The building blocks are in place, the going on in this region than in the rest lion people, the eyes of the world will be customers are out there and it’s almost of Europe.There’s a hunger for technol- firmly focused on Hutchison’s 3G time for the show to begin. ogy which we aim to satisfy by bringing launch this year. – With reporting by Mark Caldwell

Romeo Galanti, a Milan-based banker, is in Rome on business. Although his day is filled with meetings, Romeo makes time to call florist Maria Rossetti for a special bouquet for his wife Juliet, on the occasion of their fifth wedding anniversary. Using the camera on her 3G handset, Rossetti shows Romeo her selection of floral arrangements. Romeo chooses a bouquet, adds a special email card and also forwards Juliet’s address with instructions on when the flowers should reach her.Finally, Romeo pays for the service by keying in his secure payment pin number.All this in a span of six minutes. Later,Rossetti hops on her delivery bike and uses her 3G device to find the quickest route to Juliet’s office. Naturally, Juliet is delighted to receive her bunch of red roses and sends a thank-you MMS with kisses and roses to her husband.

Lucky Wong knows the importance of a nice profit. good timing and values his time. Like many The windfall will justify his splashing out Hong Kong residents, he thrives on busi- on the Ming Dynasty vase he’s been eye- ness, follows the markets, appreciates qual- ing.Wasting no time, he bids for the piece ity, and loves the horses. It’s Wednesday on Sotheby’s auction site. Since fortune evening and Wong, who is returning by seems to be smiling on him,Wong logs on ferry from his manufacturing plant in to his UK stock trading account and adds Guangzhou, doesn’t want to miss the some shares to his portfolio. Happy Valley races, which are in full swing. As the ferry approaches its mooring, an From the form-guide obtained through icon of a limo appears on Wong’s 3G his 3G handset, Wong thinks “Speedy screen.With one click he is in contact with Money” has a very good chance. With a his driver who is waiting outside to take few clicks he places a bet which is auto- him to the racetrack – in good time to matically charged to his Hong Kong enjoy a light supper and watch the last two Jockey Club account.Then he watches the races. Approaching Happy Valley, an MMS race on the small but high-resolution appears on his 3G screen: he has won the screen.To his delight, the horse wins by a bid for the vase. Ah, timing is everything! neck.With odds of 6 to 1,Wong has made – MC

SPHERE 15 COVER STORY POWER TO THE PEOPLE

For more than a century, Hongkong Electric has provided the vital energy that has powered Hong Kong’s development.

By Arun Sudhaman

magine Hong Kong waking up without power. Apartment lights don’t work; neither do electric kettles, cookers or water geysers. Stumbling out into the morn- ing, unwashed and hungry,the workforce is immobilised. NeitherI the trams nor the Mass Transit Railway is running. Escalators and elevators don’t move,TV and radio channels are silent, industrial machinery has ground to a halt, and even the stock exchange has ceased to function. By nightfall, instead of being illuminated by its famous neon lights, “the city that never sleeps” would be shrouded in darkness. Thanks to Hongkong Electric Company, this scenario is unlikely to occur, except perhaps in the imaginations of its 536,000 customers. For 112 years, the company has energised the city’s live-wire Central District and maintained a steady flow of power to the people. Hong Kong’s emergence as an economic dynamo would not have been possible without its continuous supply of elec- tricity, delivered with unobtrusive efficiency. The company’s enviable record stands as testimony to solid management and a commitment to deploying the best technology. “We are in the elite group as far as reliability is concerned,” says K.S.Tso, Group Managing Director of Hongkong Electric Holdings (HEH), Hongkong Electric’s parent company.“Last year marked the sixth year in a row that the company achieved supply reliability of 99.999%, a record that only a handful of

) cities in the world can hope to match.” 1 HONGKONG ELECTRIC HONGKONG ( COVER STORY

Hongkong Electric supplies all the power that illuminates and energises Hong Kong Island. From left: The stock exchange; city tram; The Peak Tower.

TRACK RECORD neering graduates – enter an atmosphere where it is easy to The company started operations at the 100kW Wan Chai learn from their more experienced seniors. We train our power station on December 1, 1890 when electric streetlights employees thoroughly and make sure they can benefit from were turned on in Central for the first time. on-going professional education. Simulators are used to con- As the city developed, demand for electricity grew, and in tinuously hone their skills and many are sent abroad for further 1919 a new 3MW power station opened at North Point. In training.” 1968, a state-of-the-art power station was commissioned, this By Hong Kong’s standards, staff turnover is insignificant at time at Ap Lei Chau.This facility had an installed capacity of barely 3% to 5% per year, mainly from retirements.There are 1,061MW when it was fully developed, meeting the require- even instances of three generations of one family working for ments of a city that was now entering the glob- the company at the same time. al limelight. “It is very important to have mutual under- The Lamma Power Station project was standing with the people who work for you,” commissioned in 1982.To hedge against volatile ...over the past Mr Tso adds. “We share a common vision: oil prices it was designed to generate power pri- every staff member is dedicated to contributing marily through coal firing instead of oil, with 10 years, to the smooth running of the operation.” gas turbines on hand as back-up in emergencies. This unwavering focus on increasing effi- Today, Lamma Power Station is the sole gener- units sold ciency and productivity has produced extraor- ator of power for Hong Kong and Lamma dinary results: over the past 10 years, units sold islands with a capacity of 3,305MW, including per employee per employee have soared 83%. eight coal-fired and seven gas-turbine units. By global standards, the 50-hectare site at have soared CENTRAL CONTROL Lamma is compact, but the machinery it hous- Once generated, the electricity flows through es is among the most advanced. Consequently, 83%... submarine cables from the power station to the plant is immaculately run with none of the Hong Kong Island. It is at the System Control clutter and debris one might expect to find in Centre at Ap Lei Chau that the company’s such a set-up, and people are conspicuous, in technological edge is most apparent. A gleam- large part, by their absence. ing haven of silent efficiency, the System “We use computer technology to control most of the Control Centre deploys some of the most advanced equipment plant’s work,”says Technical Services Engineer Kam Wing Fai. ever seen in the business, enabling remote control of the power “But the human element is of course still crucial to oversee all generation process, transmission, and each of the 3,444 distri- operations.” bution substations. Engineers monitor wall-sized screens that show the entire distribution network, allowing them to pin- HUMAN DYNAMOS point and remedy problems accurately and effectively within Mr Tso stresses the vital contribution of the employees.“While minutes. the technology is pivotal in providing superior service deliv- “Power distribution systems worldwide rely on a similar ery, the company owes much of its considerable success to a system of distribution substations, but very few are remotely workforce that is highly motivated and experienced,” he says. controlled from a single centre, and fewer still can boast the “At Lamma Power Station, new recruits – mainly engi- sort of technology employed at the System Control Centre in

SPHERE 1812 POWERFUL SERVICE HONG KONG TOURISM BOARD (3) BOARD TOURISM HONG KONG

T MIDNIGHT ON JUNE 30 1997, MILLIONS OF All 18 pledges were comfortably met and exceeded last people across the world watched the Handover cere- year, as they are every year. A mony at the Hong Kong Convention and Exhibition Mr H.K. Lung, one of the most experienced members of Centre, which was attended by thousands of guests, including the Emergency Services Unit, believes that the number of China’s President Jiang Zemin and Britain’s Prince Charles. commendations the company receives each year provides While the world’s attention was focused on the historic ample proof of its dedication to customer service. event in Wanchai, a special Hongkong Electric task force, head- In 2000 and 2001, the company received 1,730 commenda- ed by the Group Managing Director K.S. Tso himself, was tions from satisfied customers. working behind the scenes to ensure there would not be the Mr Lung personally receives 30-40 thank-you letters from slightest disturbance or flickering in the supply network. happy customers each year, and has been the recipient of sev- For six months, the task force had been implementing a eral company service awards. meticulous plan to meet the unique challenges posed by the “The intention to help is the most important element in Handover. In all, the task force worked 1,500 man-days, and customer service,” says Mr Lung. “People should feel it really more than 130 staff were on standby on the big night. comes from the heart.” Unsurprisingly, the company’s efforts went virtually unno- Hongkong Electric was first to introduce concessionary ticed, which translates to a high level of customer satisfaction. tariffs, in January 1994. Today such tariffs apply to various “We aim to give whatever we can for the convenience of our underprivileged groups, including the elderly, the disabled, customers,” says Mr Tso. “Our staff take it as a personal chal- single parent families and the unemployed who are on or ) lenge to meet the customer service standards.We use a char- have qualified for public assistance. 1 ter of 18 service standards to ensure that all customer services The company was also among the first of its kind to imple- are first-rate. Standards in 2001, for example, set the average ment a Braille billing service, which came into operation in time for supply restoration after interruption at within two June 1993. hours; the average waiting time for counter services at the For the majority, these personalised services go unnoticed, Customer Centre at less than three-and-a-half minutes; and the but they make a huge difference to those affected. It is pre- average waiting time for telephone calls to the Customer cisely this kind of approach that has led to such a high degree Emergency Services Centre at less than 10 seconds.” of satisfaction among Hongkong Electric’s customers. HONGKONG ELECTRIC HONGKONG (2). MARK CALDWELL (

SPHERE 1219 COVER STORY

BRINGING IT HOME 1 2

3

4 5

6

9a 7

9b

10 8

9b

12

11

9c 9c 9c

1. Ocean-going vessels deliver energy to mechanical energy control and monitoring coal to the Power Station’s for driving the generator. facilities. In the major load dockside. It is conveyed to 5. The generators produce centres, large-capacity the junction tower then on electricity at 12.5kV to 22kV. transformers step down the to the coal storage areas or voltage to 11kV before distri- fed to the boiler bunkers via 6. Transformers step up these bution. Electricity is then dis- a duplicate conveyor system. voltages to 275kV. tributed to 3,444 customer 2. Coal is stored in one 7. All the electrical power pass- substations (9c), and further storage yard with a total es through the Lamma 275kV stepped down to 380/220V capacity to meet six weeks’ Switching Station. for final distribution. consumption. 8. Electricity is transmitted to 10. The transmission and dis- 3. Each generating unit stores Hong Kong Island via two tribution network is remotely coal in five coalbunkers.The separate 275kV submarine monitored and controlled at coal is fed to the boilers, cable routes across the East the System Control Centre. which produce steam at tem- Lamma Channel. 11. Rigorous tests are carried peratures between 541°C and 9.The power arrives at 20 out on all meters before being

569°C. installed in customer premises. ) switching stations (9a) and 25 1 4. Steam passes through the zone substations (9b), which 12. Power is available to all at turbine, which converts the are equipped with remote the flick of a switch. HEIDI MA (

SPHERE 2012 An aerial view of the Lamma Power Station. left, and the coal storage area, above. HONGKONG ELECTRIC HONGKONG (6)

Ap Lei Chau,” says Paul Cheng, Chief System Control Kong Infrastructure (CKI), acquired under a 200-year lease the Engineer. “The engineers comfortably anticipate most cus- Electricity Trust of South Australia (ETSA), the major elec- tomer emergency calls. It is very rare for an emergency call to tricity distribution company serving the state of South catch our team unawares.” Australia. In August 2000, HEI/CKI also acquired Powercor So, while the logistical complexity of achieving 99.999% Australia Limited (Powercor), the largest of the five distribu- supply reliability might be enough to short-circuit the human tion/retail companies in the state of Victoria. brain, the System Control Centre ensures this figure is met, With these two deals, which had a combined worth of and often surpassed, every minute of the day. A$5.565 billion (about US$3.1 billion), HEI/CKI became the largest electricity distributor in Australia, serving over 1.4 mil- GROWING THE BUSINESS lion customers. In the past few years, HEH has embarked on a strategy of Both companies have provided solid returns, and last year extending its operations. the sale of Powercor Australia’s retail division resulted in a one- Robust returns from Hongkong Electric, boosted by a off gain of HK$344 million (US$44 million) for HEI. “sovereign” credit rating from Standard & Poor’s have enabled “The company’s philosophy is to invest in companies with Hongkong Electric to secure competitive financing for busi- predictable returns and relatively low risks,”Mr Tso says.“This ness expansion. is the thinking behind our Australian acquisitions; it is a regu- “We had a wonderful year in Australia last year,” Mr Tso lated business with returns that are fixed by a formula.” recalls,“it was very hot.” He notes that HEI has timed its acquisitions well. “Share But if glorious days on a beach “Down Under” spring to prices of utility companies reached historic highs in the mid- mind, think again. Mr Tso is referring to the company’s 90s, but came down to more realistic levels following global Australian utilities investments in Victoria and South Australia. market turmoil in 1997. Prior to this, we viewed power util- In January 2000, Hongkong Electric International (HEI), a ities as overpriced. Now we are looking to consolidate our wholly owned subsidiary of HEH, together with Cheung Australian successes and add to our portfolio.”

SPHERE 1221 COVER STORY

In recent months the company has planned to invest (through a 26% stake in Union Power Development) in build- ing a HK$9.8 billion (US$1.26 billion) power plant in Thailand that will consist of two 700MW coal-burning plants. CLEAN, GREEN AND UNSEEN Again, returns are highly predictable as the power station has a power purchase agreement with the Electricity Generating Authority of Thailand,which is state owned.The project is at the final stage of securing approval from the Thai CENTURY AGO, “ENVIRONMENTAL PROTEC- government. tion” was almost unheard of, but that did not stop With an investment philosophy that bears obvious rewards, A Hongkong Electric from taking steps to improve the it is little wonder that shareholder confidence is high. In 2001, burgeoning city’s environmental safety. In 1902, smoke from net profit rose 18% to HK$6,507 million. the company’s Wan Chai power station posed an environ- “Many of our 16,300 shareholders invest in our company mental risk to Hong Kong’s Central Business District. To because of its stable earning power,” Mr Tso observes. remedy the problem the company immediately purchased smoke-consuming apparatus from England.At the next general BRIGHT FUTURE meeting, Hongkong Electric’s chairman pledged that the Because electricity is such a vital commodity, it is not uncom- company would no longer produce such emissions, eliciting a mon globally for governments to exercise some form of regu- round of applause from the gathered shareholders. latory control. One hundred years later, Hongkong Electric continues to Hongkong Electric is party to the Scheme of Control take its role as a responsible corporate citizen very seriously. Agreement with the SAR Government, under which utility Working closely with the Government’s Environmental companies are seen to balance the benefits for both customers Protection Department, the company has successfully imple- and shareholders. mented a HK$4.9 billion (about US$628 million) programme The scheme safeguards consumers by ensuring them of to raise environmental standards to levels much higher than reasonable tariffs and those required under existing legislation. reliable services. In “We make every possible effort to turn, shareholders ensure our operations are environ- receive a specified mentally sound. We maintain stringent “permitted return” controls to prevent air, noise and water provision for their pollution, we recycle waste, and we long-term invest- actively protect and enhance the nat- ments. ural landscape,” says Group Managing The Agreement Director K.S. Tso. “State-of-the-art is set to expire in technologies are adopted whenever 2008 and Mr Tso is practical and commercially available to confident that a new ensure the environmental impact of our arrangement will operation is kept to a minimum.” prove agreeable to all To maintain air purity, a flue gas parties. desulphurisation system removes at Taking the long least 90% of sulphur dioxide emissions. view, Hongkong Low nitrogen oxide burners are Electric has begun deployed in coal-fired boilers to reduce work on the fourth by two-thirds concentration of NOx in stage of the Lamma the flue gas. Electrostatic precipitators Power Station to clean furnace gases further before dis- cope with electricity charge from the 215m-high chim- demand that contin- The Admin Building at Lamma Power Station. neystacks, dispersing emissions away ues to grow at from populated areas. Meanwhile, mon- between 3% and 5% per year. itoring stations on Hong Kong and Lamma islands keep check Some observers believe a fully liberalised electricity on ambient air quality. market would better serve consumers. Others argue that The company also employs comprehensive waste-recy- liberalisation is impractical, especially in a territory defined cling strategies.“There is very little waste that is not recycled by its critical shortage of suitable sites and a relatively small from the Lamma Power Station,” notes Technical Services market. Engineer Kam Wing Fai, who is charged with honing the plant’s It is unlikely that significant market liberalisation would efficiency.“For example, coal ash and gypsum by-products are reduce costs to consumers or improve on the already near- sold to be used for construction materials.” perfect reliability.True, Hongkong Electric is the sole utility With an idyllic location overlooking the West Lamma provider in its domain, but it nevertheless is a highly compet- Channel, the company pays equally close attention to the sur- itive operation, constantly balancing the interests of its cus- rounding waters. Local anglers testify that fish are plentiful, tomers, the environment and shareholders while achieving attracted perhaps by the flow of warm water which, having ever-greater efficiency. cooled the plant, is pumped back into the sea. Furthermore, As the record shows, the company has been well plugged the company has co-sponsored a research study on the use of in to its environment for almost 112 years. It is also impecca- coal ash as artificial reefs for marine conservation. bly equipped to illuminate the future.

SPHERE 22 The plant’s location has presented the company with an Efficiency Centre at the Hong Kong Science Museum, and pro- added environmental challenge. Power reaches Hong Kong vides energy-efficient teaching kits for primary schools. Island on its south side but most of it is consumed on the Furthermore, the company conducts and sponsors corpo- north side, with a chain of picturesque hills in between. The rate afforestation schemes in Hong Kong and China. On traditional solution would be to use overhead transmission Lamma, for example, over 50% of all trees were planted by lines, but despite their relatively low cost, installation of these Hongkong Electric. would be disruptive and would require excavation in some of In June 2000, the Hong Kong Government approved a com- Hong Kong’s country parks. pany proposal to extend the Lamma Power Station. The gov- “So the company took a more difficult, but environmen- ernment noted that when the six new 300MW gas-fired units tally sensitive approach – tunnelling through the mountains,” are completed, total annual gas emissions are set to drop by as says Chief Engineer (Transmission & Distribution) S.S. Yuen. much as 60% while electricity generated will increase 43%. “Two tunnels were built, keeping the cables out of sight and “Contrary to the general perception,” the Government conserving Hong Kong Island’s natural beauty.” noted in a report,“the Lamma Extension Project would in fact At the other end of the supply chain, Hongkong Electric bring considerable environmental benefits in reducing the has made every effort to ensure that its network of 20 switch- overall emissions.” ing stations, 25 zone substations and 3,444 distribution sub- Not only is Hongkong Electric fully prepared to meet elec- stations blend in. “The substations are designed to achieve a tricity needs well into the new century but it is also fully com- perfectly harmonious relationship with the environment,” Mr mitted to maintaining a clean and safe environment for future Yuen explains. “Each location is unique, so each substation is generations. specially designed to fit its surroundings.” Hongkong Electric also supports research on renewable energy and alternative fuel sources. It has sponsored a research project into wind power on Hong Kong’s Po Toi and Lamma islands, solar energy research at the University of Hong Kong, and has invested in electric vehicles for its own use. Of equal value have been the company’s efforts to pro- mote the efficient use of energy. It co-sponsors an Energy HONGKONG ELECTRIC HONGKONG (2)

SPHERE 23 RETAIL ISLAND SHOPPING

When the Philippines opened its doors to foreign retailers last year, Watsons didn’t hesitate to make its move.

By Tim Metcalfe

ocialising, entertainment, fast- Thailand. These branded stores have food dining and shopping all roll proved adept at catering to the unique into one in the Philippines. characteristics of each market while They call it “malling”. In the retaining Watsons’ distinct “discovery” Sworld’s second-youngest country, where themed shopping formula which incor- half the population is under 20 and the porates tremendous product diversity streets are too hot to be hip, megamalls under the simple concepts:“Look Good. that stretch as far as 1.5 km over several Feel Great. Have Fun.” It’s a compelling floors are modern-day community cen- mix that attracts two million customers tres for youthful crowds who congregate per week. in their thousands. The Philippines represents Watsons’ The air-conditioning is one attrac- biggest-ever expansion programme.This tion – but there’s much, much more. Pop year, more than 60 ShoeMart stores will

stars perform mini-concerts, outside-TV LUCERO (9) PATRICK be re-branded with the Watson’s identity, broadcasts feature the country’s most 15 new stores will open and at least 150 popular entertainers, and glamorous Liberalisation Act was passed in the new outlets are planned over the next models strut the catwalks. Philippines last year the door was five years. The ceremonial grand open- Cinemas screen the latest block- thrown open. ing of its first two flagships was on April busters, giant fast-food courts feed the Some foreign companies remain 26 in two of the biggest and most pres- multitudes, cavernous arcades howl and wary of national statistics indicating an tigious malls in Metro Manila. explode to the sound of video games, average pay packet of just US$6 a day – “We’re registered as number 0001 in Internet cafés attract long queues and misleading because financial contribu- the Department of Trade and Industry’s music, the lifeblood of this most musical tions from an army of eight million file of international retail investors regis- nation, plays constantly. overseas workers substantially bolster tered under the new law,” says Dennis Then there’s the shopping. Filipinos most household incomes. Casey, Managing Director of Watsons famously love to look good, and they But for Hong Kong-based Watsons, Personal Care Stores in the Philippines. cheerfully spend as much as 20% of their Asia’s leading chain of health, drug and “We see enormous potential.” income on fashion, beauty and groom- beauty stores owned by Hutchison ing products. Girls are adept at their Whampoa Limited, the Philippines rep- PERFECT PARTNER own make-up at an early age, boys resents a golden opportunity. Watsons The campaign is through a joint venture habitually splash on deodorant after has moved rapidly to become the first partnership with the ShoeMart (SM) basketball practice and men don’t “household name” to enter the newly Group, the leading and largest owner, blink at the thought of manicures liberalised market – and it is doing so in developer and operator of shopping or pedicures. a big way. malls in the Philippines. It owns and With a 174-year history, the A.S. operates 11 super-malls – seven in OPPORTUNITY KNOCKS Watson Group is among the best-known Metro Manila, with others in Cavite, Tough trade restrictions have until trading names in Asia with over 630 Cebu, Iloilo, Pampanga and Davao. recently kept international retailers sit- branches of Watsons Your Personal Store One of the country’s largest con- ting on the sidelines of this emerging spanning Hong Kong, Mainland China, glomerates with interests also extending market. However, when the Retail Macau,Taiwan, Singapore, Malaysia and to banking, real estate development,

SPHERE 25 RETAIL

cement manufacturing, tourism and agement control. In the event, we now is unusual in the Philippines. entertainment, the SM Group is headed have a 60:40 majority holding in the “The retailing business is dynamic,” by Henry Sy Sr., one of the country’s joint venture.” she says. “You have to constantly reno- most highly regarded business tycoons. The deal was in fact brokered by SM vate, innovate and change to keep up “We’ve been talking to ShoeMart Group President Teresita Sy-Coson, with consumer tastes and be ahead of for many years and have always been Henry Sy’s daughter, who is leading the competition.” interested in taking the Watsons concept ShoeMart into its latest cycle of expan- to the Philippines,” says Philip Ingham, sion. She took charge of the chain in LOCAL STRATEGY CEO of A.S.Watson Group Retail Non- 1990 and has continued its evolution The partnership with Watsons,under the Food Division. “But before the change from a simple shoe store to an aggressive name Watsons Personal Care Stores of law we could only have taken a soft-goods retailer and shopping mall (Philippines) Ltd., is destined to ensure minority stake, and we’re only interested operator, leading the company to adopt ShoeMart remains in the retail driving in business where we at least have man- new technologies like bar coding, which seat. But it is not simply a case of trans-

BACK TO BASICS

HEN DR T.R. panies Glaxo Smith Kline and Bayer Diagnostics, and health Colledge founded care professionals to enhance community health awareness W his first Watson’s and provide the Hong Kong public with greater access than the Chemist dispensary in ever before to simple, relevant health information and advice. Canton in 1828, pharmacists Initially being implemented in Watsons stores, with the aim were at the front-line of health of eventually extending to all pharmacies, the programme is care. Customers related the providing Health Fact Sheets, Risk Factor Tick Tests and sim- symptoms of their ailments, ple Risk Detection Kits alongside advice and guidance from and pharmacists dispensed pills Watsons-trained teams of pharmacists and health & fitness or potions to treat them. advisors. This was the role of “old- First, the programme is focusing on diabetes, one of the style” pharmacists. Seriously ill most serious and fastest-growing chronic illnesses in Hong patients were, of course, directed to the nearest doctor; but a Kong, affecting an estimated 600,000 people – half of whom pharmacist was sufficiently knowledgeable of medicine and are not aware of it. experienced to recommend common cures. Advice is also being offered on 11 other “everyday” ailments Over the years, the key role of a pharmacy in public health such as headaches, coughs and colds, together with informa- care in Hong Kong has substantially diminished. No longer are tion about the correct use of vitamins. pharmacists regarded as community health-care professionals. “This is a much-needed programme that we’re enthusiasti- If we are very sick, we go to a doctor. If we are feeling off- cally supporting,” says Dr Vivian Lee of the CUHK School of colour, we look for cures ourselves in a chemist. Often, we Pharmacy. “Hong Kong needs pharmacists to play a more rely on advertising for advice. active role.” Meanwhile, public health has changed dramatically. Society is The initiative is modelled on a programme developed by the no longer ravaged by typhoid, cholera and such; but other Pharmaceutical Society of Australia, which has run successfully chronic diseases have taken their place. Today, living longer there for 15 years. with more stressful modern lifestyles, we are much more “We want to change the way the public thinks about phar- threatened by heart disease, cancer or diabetes. macists and uses them,” says Andrew Brent, regional Marketing Most of these “modern” diseases need not be fatal, so long Director of Watsons. “It’s a genuine example of Watsons try- as they are diagnosed early. But the unfortunate irony is that ing to address a growing problem and do something for the old-fashioned pharmacists are no longer on hand to spot the public good. It’s what we’re all about. It’s also taking Watsons alarm signals in customers who are feeling unwell. Instead, back to its Canton roots as a community pharmacy.” chronic conditions build up over the years, to the point where they become much harder to treat. In a major initiative to counter the problem,Watsons is now taking a leaf out of its original founder’s book and is leading a groundbreaking coalition of public and private sector organi- sations to restore the primary health care role of pharmacies. The collaborative programme called “Pharmacy Self Care” is linking the resources of Watsons, the Chinese University of Hong Kong’s School of Pharmacy, leading pharmaceutical com-

SPHERE 26 Filipinos love to look good and they cheerfully spend as much as 20% of their income on fashion, beauty and grooming products. porting Watsons from Hong Kong to the giving Watsons a Philippines touch,” affordability. People buy what they Philippines. For one, the operation has says Casey, who has overseen can at the time.” three arms. Health and beauty stores will the launch. “Here it’s mostly the most closely resemble Hong Kong oper- merchandising, especially the sizing ADDED VALUE ations, with a familiar mix of toiletry, of products. Since disposable income is Although the new Retail Liberalisation grooming and health products. lower, customers prefer smaller sizes of Act stipulates that 30% of pro- Watsons is also revamping 60% of products. ducts must be sourced from the SM’s Family Drug pharmacies with a Philippines, this restriction is not an modern facelift, focused entirely on issue, since Watsons buys products dispensing prescriptions and entering from multinationals like Procter & into open competition with traditional Gamble, Colgate and Gillette who drug-stores. Uniquely, explains Ingham, ...The Philippines have well-established production doctors rarely dispense medicine in the facilities in the country. Philippines; they only prescribe, so 80% represents More pertinently, the expansion of prescriptions are dispensed by represents a significant employment pharmacies. Watsons’ boom. Since each store will have a “In the Philippines, pharmacies are staff of around 20, Casey says the primary health care providers,” he says. biggest-ever potential new workforce should “People go to them not only for pre- number at least 5,000. scriptions, but also for advice.” expansion Philippines Trade and Industry Finally, Watsons is taking over Secretary Manuel A. Roxas II also the running of beauty and cosmet- programme... expects the entry of Hutchison ics counters in 16 ShoeMart Whampoa to inject fresh blood and department stores. modern ideas. “The entry of Each new Hutchison into the Philippines retail expansion pre- “In Hong Kong, shaving cream trade sector will undoubtedly give sents its own comes in 75 grams; here it’s 25 grams. Filipino consumers greater value for challenges – as The same goes for lotions, which come their money and provide impetus for Watsons has in 50-ml containers, rather than greater efficiencies in retail services learned from 250-ml. On the pharmacy side, while a and supply chain operations,” he says. extending into Hong Kong customer is likely to buy an “This is a testament to the strength six countries entire prescription at once, in the of our domestic economy and will be over the last Philippines customers like to buy a day’s a boon to our local manufacturers.We 15 years. supply at a time. They buy five tablets, are particularly happy that the outlets “We are for example, rather than 25. It’s about for pharmaceutical products will offer

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Most Watsons’ counter staff are science or nursing graduates. Customers go not only for prescriptions, but also for advice.

medicines at affordable prices.” In turn, Roxas is confident that Philippines’ products will gain access to TAIWAN TIE-UP the Watsons worldwide network of retail stores. Imported products are usually priced HOPPERS IN TAIWAN HAVE range.The tie-up thus not only creates a at a premium in the Philippines, but been enjoying even greater variety compelling offer for consumers but also Watsons has perfected the art of keeping S since the introduction of British- real value for each partner. prices down by sourcing directly from brand Boots products in Watsons stores. The implants will occupy approximately manufacturers and by-passing middle- Both companies have been delighted 10% of Watsons floor space and offer men, notes Casey. “People always like with the results of a trial that started in between 800 and 1,200 beauty and per- the idea of imported products at afford- July 2001 and received an overwhelming- sonal care products featuring Boots able prices.” ly positive response from consumers. brands. Watsons will benefit by the cre- Staffing the outlets is not a problem “The addition of unique products sold ation of a differential in their offer against either. “Unemployment is high at by Boots has enhanced the feeling of the competition, leading to increased around 11-12%, yet educational levels ‘discovery shopping’ in Watsons where footfall and sales. are also high and people prefer working customers are highly appreciative of the Watsons first opened in Taiwan in for companies with a good name. You extra choice and convenience,” says 1987 and now operates 223 stores have to be a graduate in science or nurs- Philip Ingham, CEO of A.S.Watson Group island-wide while Boots has been oper- ing to work in a pharmacy here, and Retail Non-Food Division. “The partner- ating in Taiwan for about 18 months. we’re having graduates lining up for ship with Boots is a breakthrough in the Consideration is being given to expand- interviews.” industry which we see will benefit con- ing the partnership into other Asian Watsons plans to “penetrate major cities first”, says Casey. But the aim is to sumers.We want them to look good, feel markets where Watsons has stores. expand wherever possible. “We’re talk- great and have fun.” ing to the other major megamall owners The rollout plan commenced in March in the Philippines, including Ayala and this year and will be completed by early Robinson’s, and looking anywhere else 2003 with around 100 Watsons stores we can – from airports and hospitals to on the programme. Boots’ net invest- university campuses.” ment will be some £2 million (about “Overall,” adds Ingham, “there are US$2.9 million). some really exciting prospects. It’s going Watsons has an island-wide chain of well so far and if this continues, our excellent retail stores in Taiwan while expansion target for the next five years Boots has a strong established brand that might increase significantly.There could compliments Watsons’ extensive product well be 300 new stores, not 150.”

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