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H U T C H I S O N U P D A T E S

HWL Annual Results

C O R P O R A T E

News 2001

89,038m

12,088m

2.84

1.73

2000

84,825m

34,118m

8.00

1.73

%

+5

-65

-65

–

Profitattributable to shareholders

q

$ Earnings per share

$

$ $ Dividends

--------------------

0 5 10 15 20 25 30

PORTS

ENERGY &

INFRASTRUCTURE

HK$ BILLIONS

TELECOMS

PROPERTY

& HOTELS

Turnover 2001Turnover 2000

EBIT 2001EBIT 2000

RETAIL &

MANUFACTURING

Turnover (HK$)

Profit attributableto shareholders

Earnings per share

Dividend per share

3,838m3,345m

2001 2000

0.630.60

3,323m3,228m

1.471.43

Turnover (HK$)

Turnover (HK$)

Turnover (HK$)

EBITDA Earnings per share

Dividend per share

626.6m89.2m

2001 2000

––

(192.1m)(462.4m)

(19.78 cents)(43.82 cents)

Turnover(A$)

418.6m404.7m

2001 2000

––

(137m)(92.5m)

Turnover(US$*)

EBITDA Operating profit

Dividend per share

736m476.4m

2001 2000

––

148.6m(13.3m)

23.3m(122.3m)

Turnover (C$)

EBITDA Basic earnings per share

Dividend percommon share

6,627m5,090m

2001* 2000

0.36–

2,042m1,499m

1.63 (diluted)

1.39

Husky Energy HWL stake – 35.1%

Hutchison Telecommunications (Australia) HWL stake – 58%

TOM.COM HWL stake – 29%

Cheung Kong Infrastructure HWL stake – 84.6%

* 2001 Figures reflect first full year of combined operations following Husky’s merger with Renaissance Energy

Partner Communications HWL stake – 35% (Now 42.7% – see story p.5)

Net profit after tax

Dividend per share

Hutchison Whampoa Limited’s consolidated net profit for the yearended December 31, 2001 was HK$12,088 million (approximatelyUS$1,549 million).Earnings per share were HK$2.84 (2000 – HK$8.00) with a total dividend per share of HK$1.73, unchanged from the previous year. Excluding profits on disposal of investments less provisions ofHK$3,124 million (2000 – HK$25,742 million), the Group’s profitincreased 7% over the previous year.The results include profit of HK$30,000 million on disposal of theGroup’s investment in VoiceStream, and profit of HK$4,393 millionfrom the sale of approximately 695 million shares of VodafoneGroup and approximately 89 million shares of Deutsche Telekompursuant to forward sales contracts for delivery in 2002.Provisions for the year totalled HK$31,269 million, comprisingHK$1,500 million for certain property developments and HK$29,769million for diminution in value of its equity investments. Turnover forthe Group’s core businesses totalled HK$89,038 million, a 5% increase over 2000. EBIT for the Group totalled HK$21,846 million, a 12% increase over 2000. The Group’s consolidated cash andmarketable securities amounted to HK$145,336 million, approximately equal to the consolidated borrowings of HK$146,992million. For full results, see www.hutchison-whampoa.com/eng/investor2.htm

HUTCHISON WHAMPOA LIMITED

Hutchison Whampoa Limited (HWL) is the holding companyof the Hutchison Whampoa Group of companies. With origins

dating back to the 1800s, it is a Hong Kong-based multinational corporation with a diversified portfolio. It is also part of the Li Ka-shing group of companies, which together represent about 15% ofthe total market capitalisation of the Hong Kong stock market. In2001, HWL’s consolidated turnover (including associates) wasHK$89,038 million (approximately US$11,415 million) and net profitwas HK$12,088 million.With over 120,000 employees worldwide, the Group operates andinvests in five core businesses in 36 countries: Ports & Related Services;Telecommunications; Property & Hotels; Retail & Manufacturing; andEnergy & Infrastructure.

TurnoverHK$

*US$ figures converted from New Israeli Shekels at Dec. 31, 2001 exchange rate: US$1.00 equals NIS4.416

EBITDA

(112.9m)(85.2m)

* Figures are for ICG Asia, which changed name to Hutchison Harbour Ring on Sept. 25, 2001.

Profit attributableto shareholders

Earnings per share

Dividend per share

1.631.515

6,507m5,535m

Profit attributableto shareholders

Earnings per share

Dividend per share

1.5 cents

–680.6m

(1,037.2m)12.16 cents

(24.42 cents)

Hongkong Electric Holdings HWL stake – 38.87%

3.052.62

10,867m10,634m

2001 2000

Hutchison Harbour Ring HWL stake – 50.5%

70.4m330.6m

2001 2000*

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E N E R G Y & I N F R A S T R U C T U R E

CKI to Tunnel ‘Down Under’

bitesC O R P O R A T E

Research Centre Opens A state-of-the-art cancer research centre atCambridge University, UK was officiallyopened on May 18 by Hutchison ChairmanMr Li Ka-shing and Lord Sainsbury, Britain’sMinister for Science and Innovation.Named the Hutchison/MRC ResearchCentre, the project is a collaborationbetween the Medical Research Council(MRC), the University of Cambridge andCancer Research UK. Construction of thenew building was made possible by a £5.3million donation from HWL, to match funding from the MRC.

Scholarship Scheme ExpandedThanks to a HK$23 milliondonation from Mr Li Ka-

shing and the HutchisonGroup, the CheveningScholarship Scheme in Aprilwas expanded to include an

extra 63 scholarships for HongKong and Mainland Chinese postgraduate students each year for the next four years,increasing the existing number of scholarshipsby one third. Chevening Scholarships areoffered annually by the British Government toenable high achievers from around the world to undertake postgraduate study in the UK.

Husky Oil Operations (72.5%) and co-venturer Petro-Canada (27.5%) in Marchannounced their decision to proceed withthe development of the White Rose oil field, located off the east coast ofNewfoundland and Labrador, Canada.The White Rose development plan isfocused on a purpose-built FloatingProduction Storage and Offloading (FPSO)vessel with a peak production rate of

approximately 100,000 barrels of oil per day.South Korea’s Samsung Heavy Industrieshas been awarded the contract to build theFPSO hull, Aker Maritime KiewitContractors will build topsides designed toproduce oil at a quality suitable for shipmentby shuttle tankers to market, and US company SBM IMODCO will design andfabricate the turret and mooring system forthe FPSO.

A consortium led by Cheung KongInfrastructure Holdings (CKI) has beenchosen as the preferred tenderer for a newA$800 million (about US$4.5 million) roadtunnel project to carry through-trafficbeneath the central business district ofSydney, Australia. CKI has a 50% interest in the consortium,Cross City Motorway (CCM) – whichalso includes DB Capital Partners (30%)and construction contractor BaulderstoneHornibrook (20%). The project, a 2km cross-city tollway tunnellinking Sydney’s eastern suburbs with the

city’s west is expected to carry up to 95,000vehicles a day by 2006. Work is expected to commence before theend of 2002.

HWL and its subsidiaries have continued toattract attention with several media rankingsand titles. Hutchison featured in the top tenof CFO Asia’s “Best Annual Report in Asia(2000-2001)” [10], while Euromoney rankedHWL top in the “Best Asian Companies –Conglomerate” category and placed it in thetop five “Best Companies in HK” category[5]. In April, Finance Asia named HWL “BestManaged Company in HK” and “BestFinancial Management in HK”. HWL wasalso in the top three for “Best InvestorRelations in HK” [2], “StrongestCommitment to Enhancing ShareholderValue in HK” [2] and “Companies MostCommitted to Corporate Governance inHK” [3].The Asset Benchmark Survey, meanwhile, judged Hutchison “Best inCorporate Governance, Hong Kong.”

After greater-than-expected demand for Phase I units of Le Parc in the southern Chinese city of Shenzhen, the development continued its success when Phase II apartmentscame to market in February. Demand was so high that prospective buyers lined up the day before the opening, and 280units were snapped up in just three days. Thedevelopment boasts European-themed gardensand consists of approximately 3,200 units as wellas shopping facilities, schools and a clubhouse.

applause�

Five-star StatusThe Harbour Plaza Chongqing has been awarded “five-star hotelcertification” in recognition of its high-quality facilities and services.This 390-room luxury hotel boasts a high-tech business centre andtop-flight leisure facilities, including an indoor swimming pool, tennis court, cinema complex, bowling alley, shopping mall and ice-skating rink.

P R O P E R T Y & H O T E L S

White Rose Given Green Light

Le Parc Phase II in Demand

Better ConnectionsCorporate customers of Hutchison

Telecommunications (Hong Kong) canenjoy a comprehensive end-to-end

wireless enterprise solutionthat includes integratedemail, phone, SMS, WAPand organiser features following the commerciallaunch in May of theBlackBerry wireless e-mailsolution, developed byResearch In Motion(RIM) of Canada. BlackBerry operatesexclusively onHutchison Telecom’sGSM Dualband and

GPRS network in Hong Kong andMacau. Hutchison intends to further extendRIM’s technology to the Group’s 3G markets worldwide by working together todevelop 3G applications.

HONG KONG

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H U T C H I S O N U P D A T E S

The TOM Groupacquired controlling

stakes in five outdoor media companies inChina in the first quarter of 2002. The companies are Liaoning New StarProsperity Advertising (agreementannounced in February), Shenyang SanoJinxiang Advertising, SichuanSouthwest International Advertising,Xiamen Bomei Advertising and FujianSeeout Outdoor Advertising (MOUsannounced in March). Including the newacquisitions, the Group’s outdoor media network consists of 12 outdoor media companies with over 170,000 sq. m. ofadvertising space in 22 cities.TOM has also entered China’s audio-visualand entertainment industry following anagreement in March to acquire 50% ofGuangzhou-based Hong Xiang, China’s

leading manufacturerand distributorof music, filmand TV programmes. In January, TOMpartnered with CERNET Corp to establish two JV companies – CERNETInformation Technology Co and CERNET Online. CERNET Corp is thecommercial arm of China Education &Research Network (CERNET), China’slargest educational Internet provider. The co-operation includes production, distributionand sales of CERNET dial-up ISP accesscards, branding and creating CERNET ISPservices, and exploring telecom value-addedservice (VAS) opportunities.

GREATER CHINA

Newsbites

Building on its selectionof 3G services and

content offerings, Hi3G has reached anagreement with SEB bank that will allow 3G customers access to a selection of financial services, news and tools. Hi3G has also secured exclusive rights to send ice hockey content to 3G mobiles fromElitserien. The agreement with SvenskaHockeyligan covers content rights as well assponsorship of Elitserien. Moving forward with its network rollout,

Hi3G has signed agreements with BirkaEnergi and Vattenfall on placement ofHi3G’s antennas and other equipment at their power poles and transformer stations.The deal is in line with the policy of providing 3G infrastructure in a cost-effectiveand environmentally friendly way by utilisingcurrent infrastructure. Earlier, Hi3G signedframe agreements with PNB and Prenadcovering project management, design, construction and telecom pre-installations forbase stations in the Malmö region.

SWEDEN

T E L E C O M S

Creative ContentHutchison 3G’scustomers will

soon have access to the UK’s most potent mix of music-oriented brands following thesigning in March of a two-year deal with media andentertainment company Emap.Under the agreement, theEmap performance networkwill provide content from all itsmusic titles – encompassing Q,Mixmag, Smash Hits andKerrang! – as well as contentfrom lifestyle magazine brands such as FHM, New Woman and Empire.

UK

JV Stakes AcquiredHutchisonTelecommunications in

April announced that it would acquire AsiaGlobal Crossing’s (AGC) stake in theirrespective joint-venture companies in HongKong, namely AGC’s 50% interest inHutchison Global Crossing (HGC), its42.5% interest in ESD Services and its 50%interest in Hutchison GlobalCenter, for atotal consideration of US$120 million in cash.Under the agreement, HGC and HutchisonGlobalCenter will become wholly owned subsidiaries of Hutchison, while Hutchison willhave an indirect 85% stake in ESD Services. Hutchison and AGC have agreed to continueto use each other’s services.

HONG KONG

Software VendorsHutchison 3G hasrecently signed deals

with several software vendors to provide keycomponents of the middleware infrastructureof its 3G network. These include:

UK

TOM Extends Outdoor Network

TTI Telecom International

Manager of Managers (MOM) solution

Starbase

Starbase Collaboration Suite

Autonomy Corp

Intelligent Data Operating Layer (IDOL)

Network365

mzone avatar

Tertio

Provident

Ncorp

ljen

Ascential

DataStage XE

Volantis Systems

Volantis Mariner – Service Delivery Platform

Schlumberger/Entrust

Infrastructure and security services

Vendor Software Solution

Hi3G Developments

T E L E C O M S

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Agreements SignedIn the build-up to itsItalian launch, H3G has

signed a roaming agreement with TelecomItalia Group. In separate agreements that will also apply inother markets where Hutchison has a presence, Alcatel will supply its open servicesplatform to support H3G’s multi-media services; Ectel will provide NGN FraudView,a real-time fraud prevention and securitymanagement solution; and divine will supplyits divine Content Server Enterprise Edition(dCSEE), a platform for managing and distributing content.

ITALY

Shuttle Service LaunchedShantou International ContainerTerminals in April welcomed the 126-TEUvessel M.V. Tianma, marking the commencement of a regular shuttle servicebetween Shantou and Xiamen operated byChina Ocean Shipping Agency Xiamen.

Cranes Lift XICT’s CapacityTwo post-panamax quay cranes were deliveredto Xiamen International ContainerTerminals (XICT) in March. Along with fiverubber-tyred gantry cranes delivered inDecember, the cranes will lift handling capability by 40%. In May, XICT became a portof call in the new PSW-1/AES-1 pendulumexpress service of Kawasaki Kisen Kaisha.

Network Providers SelectedNokia in April signed acontract to supply the

core 3G network for Hutchison 3GAustria for an undisclosed sum.Earlier, Siemens signed a deal worth around

200 million (approximately US$186 million) to supply Hutchison with 3G radionetwork technology, including base stations.

Stake Raised in PartnerHutchison WhampoaLimited has acquired

13,778,668 Partner Communicationsshares from Matav Cable. Upon completionof the sale, Hutchison’s shareholding inPartner increased to approximately 42.7% and Matav Cable’s shareholding decreased to approximately 7.5%.

ISRAEL

A$600m Rights Issue HutchisonTelecommunications

(Australia) in April announced a pro ratarenounceable rights issue of convertible notesto raise approximately A$600 million (aboutUS$323 million) to fund the development and operation of 3G services. The notes will have a five-year term and will pay 5.5% interest per annum. If the conversion right is exercised, each note will entitle the holder to oneordinary share in HutchisonTelecommunications.

AUSTRALIA

One-Stop ShopLeading online officesupplies provider

bigboXX.com in April launched a corporate premium service. The bigboXXPremium Center provides over 150 products,ranging from desktop items and paper products to printing and floral services, aswell as customised services for client’s large-scale promotional requirements.

HONG KONG

Largest Cruise Liner CallsFreeport Harbour at Grand

Bahama Island in May welcomed the world’s largestcruise liner, RoyalCaribbean Cruises’Voyager of the Seas. The ship,which has a capacity rating

of 3,840 people, arrived for its annual dry-docking overhaul,

which was carried out at GrandBahama Shipyard.

P O R T S

Streamlined LogisticsLogistics Information NetworkEnterprise (LINE) and Yue Yuenin April formed a JV company,SupplyLINE, to act as Lead LogisticsProvider (LLP) for the sports footwearand electronics industries. SupplyLINEalso welcomed Elitegroup ComputerSystems and Global Brands ManufactureGroup as new shareholders in the venture. Aspart of the deal, SupplyLINE will co-ordinateand manage its customers' supply chain by providing logistics services that manage the integration of the movement of goods and theflow of information. In February, LINE and Reebok announced therollout of a global supplier portal, the OrderVisibility Application (OVA), which will link all ofReebok's footwear and apparel manufacturersaround the world, as well as logistics serviceproviders and other business partners.

R E T A I L & M A N U F A C T U R I N G

Priceline (www.priceline.com.hk), the newInternet travel service operated byHutchison-Priceline (Travel), opened forbusiness in Hong Kong in April and inSingapore in May. The service offers a bilingual transactional website in Chinese andEnglish that allows travellers to name theirown price for air tickets and hotel rooms. Priceline has 25 Asian and international air-line partners and about 8,000 hotels around

the world on itsbooks. Travellerscan bid for tickets androoms in theAsia-Pacificregion, the US,Canada, Europe,Mexico, the Caribbean and Central America,with more destinations being added.

Priceline Launches in Asia

3G Game PlanHutchison 3G has formed partnerships with nine companies to develop and supply over 40 games for the 3G format. The companies

are: iFone, It’s Alive, Supedo, nGame, Codetoys, Simian Industries, Morpheme,Cheeky Wireless and Purple Software. Under the agreements, a range of new and classicarcade-style games, as well as traditional board and card games, will be available to allHutchison 3G’s operations worldwide.

GLOBAL

C

AUSTRIA

C O M M U N I T Y

SPHERESPHERE

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Zhang Jing had been lookingforward to the start of a newschool semester in her home-town of Lanzhou, in Gansu

Province.The little girl imagined herself walk-

ing to school along the banks of theYellow River, breathing the crisp morn-ing air and laughing with her friends.Lanzhou, at China’s geographic centre, isa pleasant environment to grow up in,even though earthquakes frequentlyshake its stark, mountainous terrain.

A few days before the new schoolterm began, Zhang Jing suffered a per-sonal earthquake of her own; she was hitby a car. At that awful moment, her lifechanged course.

Zhang Jing was fortunate to survive,but she lost her left leg.When she wokeup in hospital, everything she had oncelooked forward to now seemed out of

able to walk again but was also able topursue her dream of receiving an educa-tion at a local primary school. She stud-ied hard and made new friends. ZhangJing was smiling again.

The name Li Ka-shing may be wellknown to businessmen and journalists,but Zhang Jing had not heard it before.

This changed, however, on February20, 2001 when Mr Li paid a visit to theGansu Disabled Persons RehabilitationCentre. On this occasion, in a gesturethat caught everyone’s attention, he gavehis business card not to governmentofficials or business partners but to twodisabled girls. One of them was ZhangJing. She was able to proudly present herbenefactor with a school report – shehad scored marks of 97 and 100 respec-tively in Chinese Language andArithmetic. To everyone’s surprise, sheeven demonstrated the success of her

A HELPINGHAND

“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

�

reach. Not only was she in physical pain,but she had also lost the opportunity tolead a normal life. Instead of asking:“What will I do next?” Zhang Jing wasforced to ask: “What will I do now?”Her future was in ruins.

During the months of recuperationthat followed, Zhang Jing began to fearthat she might never attend school. Inthe mornings, she would hop on herright leg to catch a glimpse of the stu-dents walking past. Sometimes, tears ofdisillusionment rolled down her cheeks.

Then, in July 2000, her future beganto look more promising.

With help from the Gansu DisabledPersons Rehabilitation Centre, which is sponsored by the Li Ka ShingFoundation, Zhang Jing received anartificial leg at minimal cost.

It wasn’t long before the little girlregained her mobility. Not only was she

SPHERE

8

new leg by kicking a feather shuttle-cock, a popular game among Chinesechildren.

“One day when we enjoy moreadvanced technology, you may even beable to run,” a delighted Mr Li told her.

High school student Tian Nan, whowas born with a hearing and speechhandicap, also met Mr Li.With sponsor-ship and help from the RehabilitationCentre, she had learned to talk and wasable to enjoy a normal school life.

“Put the past behind you.The futurewill be much better,” Mr Li encouragedher.

He urged the girls to contact him ifthey were in need. It was a meeting allthree would cherish. On his return toHong Kong the next day Li Ka-shing fol-lowed up with letters of encouragement.

Mr Li faced his own challengesgrowing up in provincial China. He wasborn in Chaozhou in 1928. His father, LiYunjing, was the head of a primaryschool and he infused his young son witha love of learning and high aspirations.

In 1940, Japanese troops invadedthe country and the Li family fled toHong Kong. Shortly after their arrivalthe young Li, aged 12, began his careeras an apprentice. At 15, after the deathof his father, he took his first job in a watch strap company and began

supporting his family.Showing extraordinary aptitude, he

became a general manager at 19, and therest, as they say, is history. He rose tobecome one of the region’s most suc-cessful businessmen.

Amidst all his accomplishments,however, Li Ka-shing has never forgot-

ten his roots. As his business blossomed,he began to make significant contribu-tions to education and medical care pro-jects in Hong Kong and MainlandChina and subsequently to other parts ofthe world.After more than half a centu-ry of hard work, he believes the greatestadvantage of his success lies in being able

to make a difference to the lives of lessfortunate people. The scale of that suc-cess is reflected in the thousands of indi-viduals whose lives have been enhancedas a result of his targeted donations.

In July 2000, six months after ZhangJing received her sponsorship, Mr Li andthe China Disabled Persons Federationstepped up their efforts to help the phys-ically challenged with the launch of theCheung Kong New Milestone Plan.With a five-year implementation pro-gramme, its mission is to help disabledpeople to hold active roles in society bysupporting education and health care,promoting working ties between thedisabled and the public, and encouragingdisabled people to develop self-confi-dence and self-reliance.

Objectives include the establishmentof 200 attachment stations for artificiallimbs, employing 400 trained specialists.The goal is to provide 15,000 artificiallimbs each year and to benefit 60,000disabled people within six years. Thelong-term vision is to provide artificiallimbs for all 230,000 disabled people inChina by 2015. Since the programme’simplementation, 2,200 disabled peoplehave received artificial limbs at one-tenth of their normal cost.

Another goal is to train 500 teachersfor deaf students within six years, and to

C O M M U N I T Y

...almost 15 millionpeople will benefit

from the establishment of service centres

for the disabled...

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WHAT COULD YOU DOwith HK$4.5 billion? Fewindividuals have that sort of

spending power, but that’s the sum LiKa-shing has invested over the past 22years in helping other people.

Better known for his gift of turning aprofit, this is how Mr Li chooses tospend much of it.

The money has funded education,medicine, culture and welfare.The ben-efits have been so widespread and soprofound they’re more difficult to calcu-late than the cash itself. It’s impossible toquantify the impact on thousands of

individuals who have benefited from abetter education, improved health andcultural upliftment.

In March this year, the Foundationlaunched a website, in Chinese andEnglish, to keep the public abreast of itsactivities and to increase society’sawareness of the importance of helpingothers.

There is much of interest on thiseasy-to-navigate site. Visitors can learnmore about the Foundation – its mis-sion and objectives, the details of itsmany projects, and pictures relating tothe projects.

The website also gives a glimpse ofthe man behind the tycoon, offeringinsights into the forces that shaped aphilosophy underpinned by high regardfor learning and a relentless drive tohelp others. Mr Li is shown in casualattitude. Interviews, articles and videoclips of a 1998 RTHK documentary tellhis life story, beginning with his difficultformative years in rural China and charting the progress of his extraordinary career.

Mr Li himself never had the opportu-nity to receive a formal education. Beinga voracious reader, he is largely self-taught. He considers education to bethe single most vital resource of societyand he has spared no effort to makeeducation more accessible.

The website offers fascinatingfootage of an award-winning documen-tary film that Mr Li helped finance, enti-tled Knowledge Changes Fate, made byrenowned Mainland director GuChang-wei. Featuring some 40 individ-uals whose lives improved as a result ofthe education they received, the filmreceived an overwhelming response,inspiring people throughout HongKong and the Mainland to embrace life-long learning.

Browsers can learn more aboutscores of other interesting and usefulprojects funded by the Foundation,which has some remarkable successstories of its own. One of the largestand most successful education projects,for example, has been ShantouUniversity, which has received someHK$2 billion from the Foundation andwhich has already produced some20,000 graduates.

The Li Ka Shing Foundation is theonly “business interest” of Mr Li’s thatconsistently fails to produce a financialreturn. But there’s a pervading sensethat of all Mr Li’s investments this is theone he values most.

For details of the many projects sup-ported by the Li Ka Shing Foundation, aswell as a personal look at the names andfaces behind the numbers, log on towww.lksf.org. Readers are also invited towrite to the Foundation via the website.

set up a listening and language recoverytechnical school.

Twelve provinces in the mid-westregions of China will benefit fromschools for the blind. Three thousandteachers will be trained to educate blindchildren with the aim of raising theirschool enrolment rate to 80% from thecurrent 40%. More than 25,000 childrenwill be offered financial aid and 35,000blind people will be trained as masseurs.

In total, almost 15 million peoplewill benefit from the establishment ofservice centres for the disabled in 664underdeveloped prefectures.

Individual stories of hope can easilybe submerged in statistics, given the scaleof the Li Ka Shing Foundation’s influ-ence. There are many more like TianNan, who has learned to talk, and ZhangJing, who can walk again. For Mr Li, thegreatest satisfaction comes from know-ing that behind each figure on theFoundation’s spreadsheet is a tale of a lifechanged for the better.– With reporting by Tao Siu Tip

Everyone needs a helping hand at some point in their lives and the Li Ka Shing Foundation goes

to great lengths to reach out to less fortunate members of the community.

STO

CK

IMA

GES

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PRICELESS DIVIDEND

T E C H N O L O G Y

Apicture is worth a thousandwords.That’s one of the cru-cial differences between 3G(third generation) mobile

multimedia communications and 2G.Soon, when we communicate via ourmobile handsets we will be able to notonly talk to each other as we do with2G but also to show each other what we mean.

With the launch planned for theUK in autumn this year, and with Italy,Hong Kong and Sweden on track tofollow soon after, 3G is set to make areal difference to people’s lives, andHutchison will be in the vanguard ofthat change.

In the past two years, telecoms oper-ators have spent billions buying 3Glicences in the hope that they could dosomething spectacular with them.However, when the buying frenzy abat-ed some analysts concluded that pricespaid were too high for what amountedto little more than pieces of paper entitling them to a slice of the wirelessspectrum.

But not everyone is writing off thevalue of these licences. “The UMTSspectrum is like real estate,” says JeremyGreen, a research director at Ovum inthe UK. “It’s a limited commodity thatwill not go out of fashion – andHutchison knows a thing or two aboutreal estate.”

The Group has so far secured eightlicences, each within strict budget lim-its, and walked away from others thatdidn’t make sound economic sense.

Unfettered by 2G legacy networks

and services in Europe, Hutchison hasbeen building out infrastructure andstriking high-profile content deals to ensure that spectacular things willhappen.

Says Matthew Mo of J.P. Morgan:“In contrast to many European telecomanalysts, [Hutchison] believes that a 2Goperation is a burden as 2G operators donot have the right organisation to man-age, monitor, and generate products for3G users. We should bear in mind thatthe negative sentiment surrounding 3Gis created by 2G operators, which havegood reason to be bearish as their 3Grollout might eat into the profitability oftheir current 2G operation.”

Group Managing Director CanningFok is unequivocally upbeat about 3G:“The more I get involved, the more Ifeel confident,” he says. “The buildingblocks are 99% complete and we arenow in execution mode.”

READY...ONE, TWO, 3G

SPHERE

11

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

By Justin Quillinan

�

TRAILBLAZINGThe rollout will begin in a few shortmonths, with Hutchison 3G companieslaunching the new services under a newglobal brand. Starting in the UK andItaly, followed by Hong Kong, SwedenAustralia, Denmark, Israel and Austria,these companies will blaze a trail into anew world of mobile multimedia thatpromises to be as different from existingofferings as TV was when it overshad-owed radio.

Analysts differ over the timing, butthey generally agree 3G will be a keydriver into the next technology era.

“In the short term we are beingpragmatic about 3G’s business prospects,”says Declan Lonergan, ResearchDirector, Wireless at Yankee GroupResearch in the UK, “but in the longterm we fundamentally believe 3G willbe a success. Hutchison is coming intoan exciting market with some interest-ing ideas.”

The ink has already dried on con-tracts to offer richer content than everbefore.

Voice will still be there, of course,but 3G will go far beyond 2G’s low datarates to harness the power of multime-dia. It will create a wireless environmentoffering complex colour graphics, qualityaudio and video, and high-speed filetransfer for business use. New serviceswill include entertainment, news, currentaffairs, sport, and multimedia messagingin a way never seen before.

Those companies that do make asuccess of 3G stand to reap richrewards, though opinions differ on

3G

MIR

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T E C H N O L O G Y

how much revenue will be involved.The UMTS Forum, the indepen-

dent body that promotes the uptake of3G, recently published a study that con-cludes annual 3G service revenues willreach US$322 billion in 2010.

Forum Chairman Dr Bernd Eylertsays the opportunities ahead aren’t justfor “techies” and early adopters, but foreveryone. He advises operators to “reachout to their customers” and learn fromthe current 2G boom in text messaging(SMS) where children usually end upteaching their parents what to do. SMS’smulti-media alter ego (MMS) should besimple and enjoyable to use, he said.

Such ideas have been onHutchison’s agenda from the word go.The technical nuts and bolts behind thescenes will be crucial, but equallyimportant to 3G’s success will be thegreatly enhanced customer experience,which Canning Fok describes as“adding eyes to the ears” that everyoneis accustomed to in 2G.

Film clips and video postcards willsoon become commonplace. Parentswill be able to eyeball their childrenfrom their offices and not only wishthem a good day at school but also tellthem to comb their hair before they go!Business partners will video conferenceand exchange complex data without evermeeting up. In medical emergencies,patients’ vital signs will routinely reachhospital staff before the patient arrives,saving many lives.

Curiously, football – a Europeanobsession – could hold the key to opena treasure chest of opportunities for 3G.Whilst Hong Kong fans might favourhorse racing and Australians cricket,some of the biggest content deals struckso far have involved football action –20-second clips of championship matchhighlights, allowing fans to keep close tothe action wherever they are.

Illustrating the power of football toget people talking, mobile phone com-panies had to put up temporary basestations near the stadium to cope withsome 50,000 extra calls made duringthe Scottish Cup Final played inGlasgow in May this year.

Such deals don’t stop on the pitcheither. 3G’s ability to personalise servicesto suit customers’ interests includeslocation-based offerings. If you follow aparticular team, you might want toknow that its star player is doing a book-signing event a few miles from whereyou happen to be.Your 3G device willnot only alert you to the information,but also show you how to get there!

Such capabilities have long beenthe stuff of science fiction, now theywill soon be accessible to the generalpublic. 3G has the speed to deliver con-tent and applications in a way that 2Gand even 2.5G – General Packet RadioService (GPRS) – couldn’t hope tomatch.

“Some mobile operators claim that3G gives the same services as GPRS,only faster. This is absolutely untrue,”insists Bob Fuller, joint CEO of H3G Italy.

“3G is an entirely new market thathas nothing to do with previous tech-nologies.The network is broadband and10 times faster than GPRS. As regardsservices, only 3G can guarantee truemultimedia and interactivity in realtime, where the quality of the customer’sexperience feels ‘real’.”

With the launch a few months away,observers will be watching closely to seewhat has been achieved so far and whatexciting opportunities lie just ahead.

BUILDING BLOCKSHutchison 3G UK won Licence-A –the highest bandwidth of five – in theBritish auction in May 2000. In just 18

months it grew from a handful of staff to1,500 full-timers and 600 contractors.Employee numbers will rise to around3,000 over the next couple of years.

Managing Director Colin Tuckerconfirms that the building blocks of 3Gare largely already in place in the UK,namely the 3G devices, the network andthe middleware.

Hutchison has no intention of fol-lowing the example of some GPRSoperators who had nothing to sell whenthey launched. Customised 3G devices,manufactured by Motorola and NEC,will be available from Day One. Thesehandsets will support multimediacapabilities and allow seamless transitionbetween 2G, 2.5G and 3G systems.

Equally important will be the corenetwork infrastructure that will makethe devices work.

“We can look at the infrastructurebehind the handset in two layers,” saysTucker. “There’s the radio networkwhich provides the connectivity out tothe handset, and then there’s the appli-cations platform which ensures thatcontent can be deciphered.”

The radio network is the connec-tivity bit – switches, transmitters, fibre-optics etc. Several vendors have beenchosen to help build the networks,including Nokia, Siemans-NEC, 186k,Nortel Networks, Ericsson andMotorola.

“On top of the network is the appli-cations platform,” Tucker explains (seesidebar, p.13). “As we needed to movefast, we decided to take ready-madelarge blocks of software – a billing sys-tem, the ISP to deliver the content andso on.We modified these, and then tiedthem all together with the EAI(Enterprise Application Integration)level.The EAI acts as a highway betweenall of these pieces. All the communica-tions are done across this layer.”

In the past, most of the 2G architec-tures were effectively one piece of soft-ware and therefore much harder toupgrade. However Hutchison’s approachallows it to quickly build complex func-tionality by taking significant pieces ofready-made software and plugging themtogether through this standard interface.

“If we decide to deploy a moresophisticated system, we can remove onepiece and replace it with another with-out replacing all the pieces,” says Tucker.

Care has also been taken with thelocation of base station sites using exist-ing sites where possible to speed thingsup and reduce environmental impact.

Services will embrace content from

“The building blocks are 99%

complete and weare now in

execution mode.”

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many sources and the technical “transla-tion” work to enable content to bebroadcast to 3G devices has been out-sourced to the BBC.

“We can save a significant amountwhen buying equipment and softwarebecause we’re buying in bulk,” Tuckeradds. “The same goes for content – weget a good deal because we will bringlarge audiences.”

RINGING THE CHANGESIn contrast with the current mobilemarket, which is all about a limitednumber of packages usually based ontariffs, 3G will enable person-to-person

marketing by amassing information onpeople’s interests, spending patterns andphysical whereabouts. Lisa Gernon,Hutchison 3G UK Marketing &Strategy Director, describes 3G as a“category shift” in the mobile industry.

“We’re not a traditional mobilecompany. 3G is about bringing broadcasting, media and the Internetinto one experience,” says Gernon.

“Our services will empower all thesenses to give customers a personalisedexperience that will reflect their lives.People are on the move or at work allday, so it’s about extending their inter-est throughout the day – everyday stuff

plus everyday exploration.”Gernon points out that the deals

with the UK Football Premiership willbe the tip of the content iceberg. “Thisisn’t just for blokes.A lot of women fol-low football anyway, but there will bemuch more, such as music, games, enter-tainment and dining information – thelist is endless.”

It is hard to predict which applica-tions will take off, but crucial to successwill be a sophisticated customer rela-tionship management system (CRM),which will provide a marketing edge.The platform to be used globally iscalled E-piphany and is similar to the

3G

ARCHITECTURAL

EDGE

TO PROVIDE THE BESTpossible customer ex-perience, Hutchison 3G

has designed an IT infrastruc-ture that allows complex anddiverse data to be integratedand processed through a com-mon platform that is scalableand flexible.

This platform is comprised ofvarious software programmesthat “decipher” informationfrom different sources and areplugged in to an EnterpriseApplication Integration level(EAI) which acts as a highwayfor all communications.

The result is that variousprocesses and components areable to communicate withunderlying applications to deliv-er smooth functionality of theentire system to the user.

Customer Experience

AutonomyA search engine

that delivers location-specific information to

customers

CMGUnified data and voice messaging

platform

ADCConvergent billing

solution that allows customers to manage

account finances

Network 365Secure payment

platform and electronic wallet

services

CustomerRelationshipManagement

(CRM)

E.piphanyAnalytical CRM enables business analysis based on customer behaviour

AscentialProvides a concise view of customer needs and behaviours

Chordiant SoftwareCRM solutions that handle service requests from subscribers

Enterprise Application Integration

StarbaseCollaboration

suite manages soft-ware requirements,

configuration, changemanagement, defecttracking, and testing

TTI TelecomProvides Manager

of Managers (MOM)integrated software

solutions

TertioReal-time service activation that

automates provision of convergent

services

IntecIntercarrier mediation and billing products

ensure accurateand smooth billing

processes

EmbarcaderoUnified modelling

language tool

Business ObjectsBusiness

Intelligenceanalytical tool

TibcoMiddleware interaction software provides the

process execution that integrates IT

All information was accurate at time of going to press.

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T E C H N O L O G Y

system used by Amazon, the onlineretailer.

“We don’t intend our devices to bea mini-TV” says Gernon. “It’s all about‘snacking’ on the information that youas an individual are interested in. In fiveyears time I believe people won’t knowhow they managed without 3G. It’s thenatural next step in the evolution ofcommunications.”

H3G Italy’s Bob Fuller predicts that3G will open up thousands of newopportunities. “Italians love TV, fashion,soccer, and mobile communications,” heobserves, “in fact, Italy is the secondbiggest mobile-phone market in Europewith 87% of its 58 million population

using wireless phones. Mobile expendi-ture accounts for 2% of the GDP.”

Ericsson and Siemens-NEC arebuilding the network for H3G Italy andthe company has a roaming agreementwith the main Italian mobile operator –Telecom Italia Mobile (TIM) – forinterconnection and site sharing. H3Ghas also signed content agreements with11 soccer teams, which include the win-ners of the last 10 Italian championships.

H3G Italy is also in the process ofclosing agreements with some of itsshareholders, who are major players inpublishing, Internet and new media.These include CIR, which controls LaRepubblica, HDP, which holds Il Corriere

della Sera, and Tiscali, the leadingEuropean Internet service provider.

3G services will be available in 50major Italian cities from the last quarterof this year. Expected coverage will be45% by the end of 2002 and 80% by2004. In the meantime, roaming agree-ments will fill in the gaps.

“Our clear objective is to succeedwith an ‘explosive’ development of themarket,” says Fuller.“We have more fre-quencies, the best technologies, the bestcontent and the best human resources tosatisfy our customers’ needs.”

Sweden and Denmark will followafter the UK and Italy. This, says Hi3GAccess Managing Director Chris

PERSONALISED MULTIMEDIAcommunications are about tobecome an everyday reality. Your

3G device will give you the power toprocess massive amounts of data in theblink of an eye – without cables.

Just think: here is a “phone” that willprovide video and audio streaming suchas live news and sports broadcasts, music-on-demand, multimedia messaging, instantaccess to area-specific information,mobile e-commerce, interactive gamesand even remote surveillance.

3G will add an invaluable dimension tomodern life. It will open up a world ofservices tailored to suit you, as well ashelp you explore the world. It will enablenew, more flexible working practices withusers enjoying access to vital datawhether they are in the office or not, andit will greatly improve distribution sys-tems for goods and services.

As 3G is put to work it will unleash atidal wave of possibilities. Imaginative newapplications will no doubt emerge, furtherenhancing both business and leisure,adding variety and colour to our experi-ences and making life simpler and moreenjoyable.

Here’s a glimpse of possible things tocome.

Note: Names and activities depicted are fictitious,serving only to illustrate possible 3G applications.

London art student Emily Jones finds her3G useful for almost everything.

It’s the perfect tool for staying in touchwith family and friends. She has great funswopping “postcards” and cartoons withthem and can even show off her latest“masterpieces”.

Emily can’t resist the fashion, beautyand horoscope sections which she’sbookmarked along with the listings sec-tion of London’s dance club scene. Sheloves the fact that her 3G lets her watchher favourite music video clips whenever(and wherever) she wants to – on thebus, in the park, at her studio.The deviceactually tells her when her favourite starswill be performing in the city, allows herto buy tickets and alerts her when she’s

reached her budget limit for the week.Besides all the fun aspects, her 3G is

also a powerful research assistant, givingEmily access to a vast inventory of infor-mation on the Web to help with her arthistory research.

“I get the material I want quickly andwith the minimum of effort,” she says.

Emily’s only gripe about her 3G deviceis that her boyfriend, Ron, keeps borrow-ing it to watch football clips and to playinteractive games!

Gotland-based taxi company GotCab understands the bene-fits of offering excellent, speedy service. To streamline itsoperation, the company has provided each of its drivers witha 3G device. Using the “always on” Global Positioning System(GPS) function, the central control office is able to keep tabson the location of each taxi in real time. In turn, the driversenjoy superb navigation assistance, with instant access tostreet maps, traffic reports and weather information.When acustomer calls the control centre, the nearest available taxican be deployed immediately. Furthermore, customers callingvia a 3G device can be directly linked to the nearest cab andlocated easily, again through the GPS. Customers can also payusing their 3G electronic wallets.

3G-WHIZ!

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Bannister, will give the company achance to learn from the pioneers.

Like its sister companies, Hi3G willoffer top-tier sports content, includingfootball and ice hockey.

“But the Scandinavian mobile mar-ket has always been highly sophisticated,and Hi3G will initially target businessprofessionals who are not impressedwith hype. In Europe, Scandinavia leadsin PC penetration, Web usage, Internetbanking – they are a very technological-ly savvy people,” says Bannister.

“There are more m-commerce trialsgoing on in this region than in the restof Europe.There’s a hunger for technol-ogy which we aim to satisfy by bringing

a keen marketing edge to our servicesand delivering real benefit rather thangimmicks.”

Hi3G and two of its competitorshave created a JV company, 3GInfrastructure Services, to build a com-mon UMTS infrastructure outsideSweden’s major urban areas. This willsignificantly cut costs while leaving theoperators free to compete where itcounts – providing content and services.

The full menu of content and appli-cations has yet to be revealed, but with aglobal footprint covering some 170 mil-lion people, the eyes of the world will befirmly focused on Hutchison’s 3Glaunch this year.

“This is going to happen whateverthe cynics say,” Tucker enthuses. “3Gwill improve people’s lives – it really will.”

Reacting to a presentation by H3Gin May, John Godfray, head of conglom-erates research at ABN AMRO Asia,said: “This is a seriously exciting story,and I can now understand why CanningFok told me two years ago this was themost exciting project he’d ever workedon. We (the analysts) were gobsmackedby the whole thing.”

The building blocks are in place, thecustomers are out there and it’s almosttime for the show to begin.– With reporting by Mark Caldwell

3G

Romeo Galanti, a Milan-based banker, is in Rome on business. Althoughhis day is filled with meetings, Romeo makes time to call florist MariaRossetti for a special bouquet for his wife Juliet, on the occasion of theirfifth wedding anniversary. Using the camera on her 3G handset, Rossettishows Romeo her selection of floral arrangements. Romeo chooses abouquet, adds a special email card and also forwards Juliet’s address withinstructions on when the flowers should reach her. Finally, Romeo pays forthe service by keying in his secure payment pin number.All this in a spanof six minutes.

Later, Rossetti hops on her delivery bike and uses her 3G device to findthe quickest route to Juliet’s office. Naturally, Juliet is delighted to receiveher bunch of red roses and sends a thank-you MMS with kisses and rosesto her husband.

Lucky Wong knows the importance ofgood timing and values his time. Like manyHong Kong residents, he thrives on busi-ness, follows the markets, appreciates qual-ity, and loves the horses. It’s Wednesdayevening and Wong, who is returning byferry from his manufacturing plant inGuangzhou, doesn’t want to miss theHappy Valley races, which are in full swing.

From the form-guide obtained throughhis 3G handset, Wong thinks “SpeedyMoney” has a very good chance. With afew clicks he places a bet which is auto-matically charged to his Hong KongJockey Club account.Then he watches therace on the small but high-resolutionscreen.To his delight, the horse wins by aneck.With odds of 6 to 1,Wong has made

a nice profit.The windfall will justify his splashing out

on the Ming Dynasty vase he’s been eye-ing.Wasting no time, he bids for the pieceon Sotheby’s auction site. Since fortuneseems to be smiling on him,Wong logs onto his UK stock trading account and addssome shares to his portfolio.

As the ferry approaches its mooring, anicon of a limo appears on Wong’s 3Gscreen.With one click he is in contact withhis driver who is waiting outside to takehim to the racetrack – in good time toenjoy a light supper and watch the last tworaces. Approaching Happy Valley, an MMSappears on his 3G screen: he has won thebid for the vase. Ah, timing is everything! – MC

C O V E R S T O R Y

Imagine 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.

Neither the trams nor the Mass Transit Railway is running.Escalators and elevators don’t move,TV and radio channels aresilent, industrial machinery has ground to a halt, and even thestock exchange has ceased to function. By nightfall, instead ofbeing illuminated by its famous neon lights, “the city thatnever sleeps” would be shrouded in darkness.

Thanks to Hongkong Electric Company, this scenario isunlikely to occur, except perhaps in the imaginations of its536,000 customers. For 112 years, the company has energisedthe city’s live-wire Central District and maintained a steadyflow of power to the people.

Hong Kong’s emergence as an economic dynamo wouldnot have been possible without its continuous supply of elec-tricity, delivered with unobtrusive efficiency. The company’senviable record stands as testimony to solid management and acommitment 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 ElectricHoldings (HEH), Hongkong Electric’s parent company. “Lastyear marked the sixth year in a row that the company achievedsupply reliability of 99.999%, a record that only a handful ofcities in the world can hope to match.”

�

For more than a century, Hongkong Electric has provided the vital energy that has

powered Hong Kong’s development.

By Arun Sudhaman

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C O V E R S T O R Y

TRACK RECORDThe company started operations at the 100kW Wan Chaipower station on December 1, 1890 when electric streetlightswere turned on in Central for the first time.

As the city developed, demand for electricity grew, and in1919 a new 3MW power station opened at North Point. In1968, a state-of-the-art power station was commissioned, thistime at Ap Lei Chau.This facility had an installed capacity of1,061MW when it was fully developed, meeting the require-ments of a city that was now entering the glob-al limelight.

The Lamma Power Station project wascommissioned in 1982.To hedge against volatileoil prices it was designed to generate power pri-marily through coal firing instead of oil, withgas turbines on hand as back-up in emergencies.Today, Lamma Power Station is the sole gener-ator of power for Hong Kong and Lammaislands with a capacity of 3,305MW, includingeight coal-fired and seven gas-turbine units.

By global standards, the 50-hectare site atLamma is compact, but the machinery it hous-es is among the most advanced. Consequently,the plant is immaculately run with none of theclutter and debris one might expect to find insuch a set-up, and people are conspicuous, inlarge part, by their absence.

“We use computer technology to control most of theplant’s work,” says Technical Services Engineer Kam Wing Fai.“But the human element is of course still crucial to oversee alloperations.”

HUMAN DYNAMOSMr Tso stresses the vital contribution of the employees.“Whilethe technology is pivotal in providing superior service deliv-ery, the company owes much of its considerable success to aworkforce that is highly motivated and experienced,” he says.

“At Lamma Power Station, new recruits – mainly engi-

neering graduates – enter an atmosphere where it is easy tolearn from their more experienced seniors. We train ouremployees thoroughly and make sure they can benefit fromon-going professional education. Simulators are used to con-tinuously hone their skills and many are sent abroad for furthertraining.”

By Hong Kong’s standards, staff turnover is insignificant atbarely 3% to 5% per year, mainly from retirements.There areeven instances of three generations of one family working for

the company at the same time.“It is very important to have mutual under-

standing with the people who work for you,”Mr Tso adds. “We share a common vision:every staff member is dedicated to contributingto the smooth running of the operation.”

This unwavering focus on increasing effi-ciency and productivity has produced extraor-dinary results: over the past 10 years, units soldper employee have soared 83%.

CENTRAL CONTROLOnce generated, the electricity flows throughsubmarine cables from the power station toHong Kong Island. It is at the System ControlCentre at Ap Lei Chau that the company’stechnological edge is most apparent. A gleam-ing haven of silent efficiency, the System

Control Centre deploys some of the most advanced equipmentever seen in the business, enabling remote control of the powergeneration process, transmission, and each of the 3,444 distri-bution substations. Engineers monitor wall-sized screens thatshow the entire distribution network, allowing them to pin-point and remedy problems accurately and effectively withinminutes.

“Power distribution systems worldwide rely on a similarsystem of distribution substations, but very few are remotelycontrolled from a single centre, and fewer still can boast thesort of technology employed at the System Control Centre in

...over the past10 years,units sold

per employee have soared

83%...

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

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AT MIDNIGHT ON JUNE 30 1997, MILLIONS OF people across the world watched the Handover cere-mony at the Hong Kong Convention and Exhibition

Centre, which was attended by thousands of guests, includingChina’s President Jiang Zemin and Britain’s Prince Charles.

While the world’s attention was focused on the historicevent in Wanchai, a special Hongkong Electric task force, head-ed by the Group Managing Director K.S. Tso himself, wasworking behind the scenes to ensure there would not be theslightest disturbance or flickering in the supply network.

For six months, the task force had been implementing ameticulous plan to meet the unique challenges posed by theHandover. In all, the task force worked 1,500 man-days, andmore than 130 staff were on standby on the big night.

Unsurprisingly, the company’s efforts went virtually unno-ticed, which translates to a high level of customer satisfaction.“We aim to give whatever we can for the convenience of ourcustomers,” says Mr Tso. “Our staff take it as a personal chal-lenge to meet the customer service standards.We use a char-ter of 18 service standards to ensure that all customer servicesare first-rate. Standards in 2001, for example, set the averagetime for supply restoration after interruption at within twohours; the average waiting time for counter services at theCustomer Centre at less than three-and-a-half minutes; and theaverage waiting time for telephone calls to the CustomerEmergency Services Centre at less than 10 seconds.”

All 18 pledges were comfortably met and exceeded lastyear, as they are every year.

Mr H.K. Lung, one of the most experienced members ofthe Emergency Services Unit, believes that the number ofcommendations the company receives each year providesample proof of its dedication to customer service.

In 2000 and 2001, the company received 1,730 commenda-tions from satisfied customers.

Mr Lung personally receives 30-40 thank-you letters fromhappy customers each year, and has been the recipient of sev-eral company service awards.

“The intention to help is the most important element incustomer service,” says Mr Lung. “People should feel it reallycomes from the heart.”

Hongkong Electric was first to introduce concessionarytariffs, in January 1994. Today such tariffs apply to variousunderprivileged groups, including the elderly, the disabled,single parent families and the unemployed who are on orhave qualified for public assistance.

The company was also among the first of its kind to imple-ment a Braille billing service, which came into operation inJune 1993.

For the majority, these personalised services go unnoticed,but they make a huge difference to those affected. It is pre-cisely this kind of approach that has led to such a high degreeof satisfaction among Hongkong Electric’s customers.

POWERFUL SERVICE

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1. Ocean-going vessels deliver coal to the Power Station’s dockside. It is conveyed to the junction tower then on to the coal storage areas or fed to the boiler bunkers via a duplicate conveyor system.

2. Coal is stored in one storage yard with a total capacity to meet six weeks’consumption.

3. Each generating unit storescoal in five coalbunkers.Thecoal is fed to the boilers,which produce steam at tem-peratures between 541°C and569°C.

4. Steam passes through theturbine, which converts the

energy to mechanical energyfor driving the generator.

5. The generators produceelectricity at 12.5kV to 22kV.

6. Transformers step up thesevoltages to 275kV.

7. All the electrical power pass-es through the Lamma 275kVSwitching Station.

8. Electricity is transmitted toHong Kong Island via two separate 275kV submarinecable routes across the EastLamma Channel.

9.The power arrives at 20switching stations (9a) and 25zone substations (9b), whichare equipped with remote

control and monitoring facilities. In the major load centres, large-capacity transformers step down thevoltage to 11kV before distri-bution. Electricity is then dis-tributed to 3,444 customersubstations (9c), and furtherstepped down to 380/220Vfor final distribution.

10. The transmission and dis-tribution network is remotelymonitored and controlled atthe System Control Centre.

11. Rigorous tests are carriedout on all meters before beinginstalled in customer premises.

12. Power is available to all atthe flick of a switch.

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Ap Lei Chau,” says Paul Cheng, Chief System ControlEngineer. “The engineers comfortably anticipate most cus-tomer emergency calls. It is very rare for an emergency call tocatch our team unawares.”

So, while the logistical complexity of achieving 99.999%supply reliability might be enough to short-circuit the humanbrain, the System Control Centre ensures this figure is met,and often surpassed, every minute of the day.

GROWING THE BUSINESSIn the past few years, HEH has embarked on a strategy ofextending its operations.

Robust returns from Hongkong Electric, boosted by a“sovereign” credit rating from Standard & Poor’s have enabledHongkong Electric to secure competitive financing for busi-ness expansion.

“We had a wonderful year in Australia last year,” Mr Tsorecalls, “it was very hot.”

But if glorious days on a beach “Down Under” spring tomind, think again. Mr Tso is referring to the company’sAustralian utilities investments in Victoria and South Australia.

In January 2000, Hongkong Electric International (HEI), awholly owned subsidiary of HEH, together with Cheung

Kong Infrastructure (CKI), acquired under a 200-year lease theElectricity Trust of South Australia (ETSA), the major elec-tricity distribution company serving the state of SouthAustralia. In August 2000, HEI/CKI also acquired PowercorAustralia Limited (Powercor), the largest of the five distribu-tion/retail companies in the state of Victoria.

With these two deals, which had a combined worth ofA$5.565 billion (about US$3.1 billion), HEI/CKI became thelargest electricity distributor in Australia, serving over 1.4 mil-lion customers.

Both companies have provided solid returns, and last yearthe sale of Powercor Australia’s retail division resulted in a one-off gain of HK$344 million (US$44 million) for HEI.

“The company’s philosophy is to invest in companies withpredictable returns and relatively low risks,” Mr Tso says.“Thisis the thinking behind our Australian acquisitions; it is a regu-lated business with returns that are fixed by a formula.”

He notes that HEI has timed its acquisitions well. “Shareprices of utility companies reached historic highs in the mid-90s, but came down to more realistic levels following globalmarket turmoil in 1997. Prior to this, we viewed power util-ities as overpriced. Now we are looking to consolidate ourAustralian successes and add to our portfolio.”

An aerial view of the LammaPower Station. left, and thecoal storage area, above.

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CLEAN, GREEN AND UNSEEN

ACENTURY AGO, “ENVIRONMENTAL PROTEC-tion” was almost unheard of, but that did not stopHongkong Electric from taking steps to improve the

burgeoning city’s environmental safety. In 1902, smoke fromthe company’s Wan Chai power station posed an environ-mental risk to Hong Kong’s Central Business District. Toremedy the problem the company immediately purchasedsmoke-consuming apparatus from England.At the next generalmeeting, Hongkong Electric’s chairman pledged that thecompany would no longer produce such emissions, eliciting around of applause from the gathered shareholders.

One hundred years later, Hongkong Electric continues totake its role as a responsible corporate citizen very seriously.Working closely with the Government’s EnvironmentalProtection Department, the company has successfully imple-mented a HK$4.9 billion (about US$628 million) programmeto raise environmental standards to levels much higher than

those required under existing legislation.“We make every possible effort to

ensure our operations are environ-mentally sound. We maintain stringentcontrols to prevent air, noise and waterpollution, we recycle waste, and weactively protect and enhance the nat-ural landscape,” says Group ManagingDirector K.S. Tso. “State-of-the-arttechnologies are adopted wheneverpractical and commercially available toensure the environmental impact of ouroperation is kept to a minimum.”

To maintain air purity, a flue gasdesulphurisation system removes atleast 90% of sulphur dioxide emissions.Low nitrogen oxide burners aredeployed in coal-fired boilers to reduceby two-thirds concentration of NOx inthe flue gas. Electrostatic precipitatorsclean furnace gases further before dis-charge from the 215m-high chim-neystacks, dispersing emissions awayfrom populated areas. Meanwhile, mon-

itoring stations on Hong Kong and Lamma islands keep checkon ambient air quality.

The company also employs comprehensive waste-recy-cling strategies.“There is very little waste that is not recycledfrom the Lamma Power Station,” notes Technical ServicesEngineer Kam Wing Fai, who is charged with honing the plant’sefficiency.“For example, coal ash and gypsum by-products aresold to be used for construction materials.”

With an idyllic location overlooking the West LammaChannel, the company pays equally close attention to the sur-rounding waters. Local anglers testify that fish are plentiful,attracted perhaps by the flow of warm water which, havingcooled the plant, is pumped back into the sea. Furthermore,the company has co-sponsored a research study on the use ofcoal ash as artificial reefs for marine conservation.

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 inThailand that will consist of two 700MW coal-burning plants.

Again, returns are highly predictable as the power stationhas a power purchase agreement with the ElectricityGenerating Authority of Thailand, which is state owned.Theproject is at the final stage of securing approval from the Thaigovernment.

With an investment philosophy that bears obvious rewards,it is little wonder that shareholder confidence is high. In 2001,net profit rose 18% to HK$6,507 million.

“Many of our 16,300 shareholders invest in our companybecause of its stable earning power,” Mr Tso observes.

BRIGHT FUTUREBecause electricity is such a vital commodity, it is not uncom-mon globally for governments to exercise some form of regu-latory control.

Hongkong Electric is party to the Scheme of ControlAgreement with the SAR Government, under which utilitycompanies are seen to balance the benefits for both customersand shareholders.

The scheme safeguards consumers by ensuring them ofreasonable tariffs andreliable services. Inturn, shareholdersreceive a specified“permitted return”provision for theirlong-term invest-ments.

The Agreementis set to expire in2008 and Mr Tso isconfident that a newarrangement willprove agreeable to allparties.

Taking the longview, HongkongElectric has begunwork on the fourthstage of the LammaPower Station tocope with electricitydemand that contin-ues to grow atbetween 3% and 5% per year.

Some observers believe a fully liberalised electricity market would better serve consumers. Others argue that liberalisation is impractical, especially in a territory defined by its critical shortage of suitable sites and a relatively smallmarket.

It is unlikely that significant market liberalisation wouldreduce costs to consumers or improve on the already near-perfect reliability. True, Hongkong Electric is the sole utilityprovider in its domain, but it nevertheless is a highly compet-itive operation, constantly balancing the interests of its cus-tomers, the environment and shareholders while achievingever-greater efficiency.

As the record shows, the company has been well pluggedin to its environment for almost 112 years. It is also impecca-bly equipped to illuminate the future.

The Admin Building at Lamma Power Station.

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The plant’s location has presented the company with anadded environmental challenge. Power reaches Hong KongIsland on its south side but most of it is consumed on thenorth side, with a chain of picturesque hills in between. Thetraditional solution would be to use overhead transmissionlines, but despite their relatively low cost, installation of thesewould be disruptive and would require excavation in some ofHong Kong’s country parks.

“So the company took a more difficult, but environmen-tally sensitive approach – tunnelling through the mountains,”says Chief Engineer (Transmission & Distribution) S.S. Yuen.“Two tunnels were built, keeping the cables out of sight andconserving Hong Kong Island’s natural beauty.”

At the other end of the supply chain, Hongkong Electrichas made every effort to ensure that its network of 20 switch-ing stations, 25 zone substations and 3,444 distribution sub-stations blend in. “The substations are designed to achieve aperfectly harmonious relationship with the environment,” MrYuen explains. “Each location is unique, so each substation isspecially designed to fit its surroundings.”

Hongkong Electric also supports research on renewableenergy and alternative fuel sources. It has sponsored a researchproject into wind power on Hong Kong’s Po Toi and Lammaislands, 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

Efficiency Centre at the Hong Kong Science Museum, and pro-vides energy-efficient teaching kits for primary schools.

Furthermore, the company conducts and sponsors corpo-rate afforestation schemes in Hong Kong and China. OnLamma, for example, over 50% of all trees were planted byHongkong Electric.

In June 2000, the Hong Kong Government approved a com-pany proposal to extend the Lamma Power Station. The gov-ernment noted that when the six new 300MW gas-fired unitsare completed, total annual gas emissions are set to drop by asmuch as 60% while electricity generated will increase 43%.

“Contrary to the general perception,” the Governmentnoted in a report,“the Lamma Extension Project would in factbring considerable environmental benefits in reducing theoverall emissions.”

Not only is Hongkong Electric fully prepared to meet elec-tricity needs well into the new century but it is also fully com-mitted to maintaining a clean and safe environment for futuregenerations.

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Socialising, entertainment, fast-food dining and shopping all rollinto one in the Philippines.They call it “malling”. In the

world’s second-youngest country, wherehalf the population is under 20 and thestreets are too hot to be hip, megamallsthat stretch as far as 1.5 km over severalfloors are modern-day community cen-tres for youthful crowds who congregatein their thousands.

The air-conditioning is one attrac-tion – but there’s much,much more. Popstars perform mini-concerts, outside-TVbroadcasts feature the country’s mostpopular entertainers, and glamorousmodels strut the catwalks.

Cinemas screen the latest block-busters, giant fast-food courts feed themultitudes, cavernous arcades howl andexplode to the sound of video games,Internet cafés attract long queues andmusic, the lifeblood of this most musicalnation, plays constantly.

Then there’s the shopping. Filipinosfamously love to look good, and theycheerfully spend as much as 20% of theirincome on fashion, beauty and groom-ing products. Girls are adept at their own make-up at an early age, boyshabitually splash on deodorant after basketball practice and men don’t blink at the thought of manicures or pedicures.

OPPORTUNITY KNOCKSTough trade restrictions have untilrecently kept international retailers sit-ting on the sidelines of this emergingmarket. However, when the Retail

Liberalisation Act was passed in thePhilippines last year the door wasthrown open.

Some foreign companies remainwary of national statistics indicating anaverage pay packet of just US$6 a day –misleading because financial contribu-tions from an army of eight millionoverseas workers substantially bolstermost household incomes.

But for Hong Kong-based Watsons,Asia’s leading chain of health, drug andbeauty stores owned by HutchisonWhampoa Limited, the Philippines rep-resents a golden opportunity. Watsonshas moved rapidly to become the first“household name” to enter the newlyliberalised market – and it is doing so ina big way.

With a 174-year history, the A.S.Watson Group is among the best-knowntrading names in Asia with over 630branches of Watsons Your Personal Storespanning Hong Kong, Mainland China,Macau,Taiwan, Singapore, Malaysia and

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Thailand. These branded stores haveproved adept at catering to the uniquecharacteristics of each market whileretaining Watsons’ distinct “discovery”themed shopping formula which incor-porates tremendous product diversityunder the simple concepts:“Look Good.Feel Great. Have Fun.” It’s a compellingmix that attracts two million customersper week.

The Philippines represents Watsons’biggest-ever expansion programme.Thisyear, more than 60 ShoeMart stores willbe re-branded with the Watson’s identity,15 new stores will open and at least 150new outlets are planned over the nextfive years. The ceremonial grand open-ing of its first two flagships was on April26 in two of the biggest and most pres-tigious malls in Metro Manila.

“We’re registered as number 0001 inthe Department of Trade and Industry’sfile of international retail investors regis-tered under the new law,” says DennisCasey, Managing Director of WatsonsPersonal Care Stores in the Philippines.“We see enormous potential.”

PERFECT PARTNERThe campaign is through a joint venturepartnership with the ShoeMart (SM)Group, the leading and largest owner,developer and operator of shoppingmalls in the Philippines. It owns andoperates 11 super-malls – seven inMetro Manila, with others in Cavite,Cebu, Iloilo, Pampanga and Davao.

One of the country’s largest con-glomerates with interests also extendingto banking, real estate development,

ISLANDSHOPPING

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

By Tim Metcalfe

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R E T A I L

cement manufacturing, tourism andentertainment, the SM Group is headedby Henry Sy Sr., one of the country’smost highly regarded business tycoons.

“We’ve been talking to ShoeMartfor many years and have always beeninterested in taking the Watsons conceptto the Philippines,” says Philip Ingham,CEO of A.S.Watson Group Retail Non-Food Division. “But before the changeof law we could only have taken aminority stake, and we’re only interestedin business where we at least have man-

WHEN DR T.R.Colledge foundedhis first Watson’s

the Chemist dispensary inCanton in 1828, pharmacistswere at the front-line of healthcare. Customers related thesymptoms of their ailments,and pharmacists dispensed pillsor potions to treat them.

This was the role of “old-style” pharmacists. Seriously ill

patients were, of course, directed to the nearest doctor; but apharmacist was sufficiently knowledgeable of medicine andexperienced to recommend common cures.

Over the years, the key role of a pharmacy in public healthcare in Hong Kong has substantially diminished. No longer arepharmacists regarded as community health-care professionals.If we are very sick, we go to a doctor. If we are feeling off-colour, we look for cures ourselves in a chemist. Often, werely on advertising for advice.

Meanwhile, public health has changed dramatically. Society isno longer ravaged by typhoid, cholera and such; but otherchronic diseases have taken their place. Today, living longerwith more stressful modern lifestyles, we are much morethreatened by heart disease, cancer or diabetes.

Most of these “modern” diseases need not be fatal, so longas they are diagnosed early. But the unfortunate irony is thatold-fashioned pharmacists are no longer on hand to spot thealarm signals in customers who are feeling unwell. Instead,chronic conditions build up over the years, to the point wherethey become much harder to treat.

In a major initiative to counter the problem,Watsons is nowtaking a leaf out of its original founder’s book and is leading agroundbreaking 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 ofHong Kong’s School of Pharmacy, leading pharmaceutical com-

panies Glaxo Smith Kline and Bayer Diagnostics, and healthcare professionals to enhance community health awarenessand provide the Hong Kong public with greater access thanever before to simple, relevant health information and advice.

Initially being implemented in Watsons stores, with the aimof eventually extending to all pharmacies, the programme isproviding Health Fact Sheets, Risk Factor Tick Tests and sim-ple Risk Detection Kits alongside advice and guidance fromWatsons-trained teams of pharmacists and health & fitnessadvisors.

First, the programme is focusing on diabetes, one of themost serious and fastest-growing chronic illnesses in HongKong, affecting an estimated 600,000 people – half of whomare not aware of it.

Advice is also being offered on 11 other “everyday” ailmentssuch as headaches, coughs and colds, together with informa-tion about the correct use of vitamins.

“This is a much-needed programme that we’re enthusiasti-cally supporting,” says Dr Vivian Lee of the CUHK School ofPharmacy. “Hong Kong needs pharmacists to play a moreactive role.”

The initiative is modelled on a programme developed by thePharmaceutical Society of Australia, which has run successfullythere for 15 years.

“We want to change the way the public thinks about phar-macists and uses them,” says Andrew Brent, regional MarketingDirector of Watsons. “It’s a genuine example of Watsons try-ing to address a growing problem and do something for thepublic good. It’s what we’re all about. It’s also taking Watsonsback to its Canton roots as a community pharmacy.”

agement control. In the event, we nowhave a 60:40 majority holding in thejoint venture.”

The deal was in fact brokered by SMGroup President Teresita Sy-Coson,Henry Sy’s daughter, who is leadingShoeMart into its latest cycle of expan-sion. She took charge of the chain in1990 and has continued its evolutionfrom a simple shoe store to an aggressivesoft-goods retailer and shopping malloperator, leading the company to adoptnew technologies like bar coding, which

is unusual in the Philippines.“The retailing business is dynamic,”

she says. “You have to constantly reno-vate, innovate and change to keep upwith consumer tastes and be ahead ofthe competition.”

LOCAL STRATEGYThe partnership with Watsons, under thename Watsons Personal Care Stores(Philippines) Ltd., is destined to ensureShoeMart remains in the retail drivingseat. But it is not simply a case of trans-

BACK TO BASICS

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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 thePhilippines. For one, the operation hasthree arms. Health and beauty stores willmost closely resemble Hong Kong oper-ations, with a familiar mix of toiletry,grooming and health products.

Watsons is also revamping 60% ofSM’s Family Drug pharmacies with amodern facelift, focused entirely ondispensing prescriptions and enteringinto open competition with traditionaldrug-stores. Uniquely, explains Ingham,doctors rarely dispense medicine in thePhilippines; they only prescribe, so 80%of prescriptions are dispensed by pharmacies.

“In the Philippines, pharmacies areprimary health care providers,” he says.

“People go to them not only for pre-scriptions, but also for advice.”

Finally, Watsons is taking overthe running of beauty and cosmet-ics counters in 16 ShoeMart

department stores.Each new

expansion pre-sents its ownchallenges – asWatsons haslearned fromextending intosix countriesover the last15 years.

“We are

giving Watsons a Philippines touch,”says Casey, who has overseen the launch. “Here it’s mostly the merchandising, especially the sizing of products. Since disposable income islower, customers prefer smaller sizes ofproducts.

“In Hong Kong, shaving creamcomes in 75 grams; here it’s 25 grams.The same goes for lotions, which comein 50-ml containers, rather than 250-ml. On the pharmacy side, while aHong Kong customer is likely to buy anentire prescription at once, in thePhilippines customers like to buy a day’ssupply at a time. They buy five tablets,for example, rather than 25. It’s about

...The PhilippinesrepresentsWatsons’

biggest-everexpansion

programme...

affordability. People buy what theycan at the time.”

ADDED VALUEAlthough the new Retail LiberalisationAct stipulates that 30% of pro-ducts must be sourced from thePhilippines, this restriction is not anissue, since Watsons buys productsfrom multinationals like Procter &Gamble, Colgate and Gillette whohave well-established productionfacilities in the country.

More pertinently, the expansionrepresents a significant employmentboom. Since each store will have astaff of around 20, Casey says thepotential new workforce shouldnumber at least 5,000.

Philippines Trade and IndustrySecretary Manuel A. Roxas II alsoexpects the entry of HutchisonWhampoa to inject fresh blood andmodern ideas. “The entry ofHutchison into the Philippines retailtrade sector will undoubtedly giveFilipino consumers greater value fortheir money and provide impetus forgreater efficiencies in retail servicesand supply chain operations,” he says.

“This is a testament to the strengthof our domestic economy and will bea boon to our local manufacturers.Weare particularly happy that the outletsfor pharmaceutical products will offer

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medicines at affordable prices.”In turn, Roxas is confident that

Philippines’ products will gain access tothe Watsons worldwide network of retailstores.

Imported products are usually pricedat a premium in the Philippines, butWatsons has perfected the art of keepingprices down by sourcing directly frommanufacturers and by-passing middle-men, notes Casey. “People always likethe idea of imported products at afford-able prices.”

Staffing the outlets is not a problemeither. “Unemployment is high ataround 11-12%, yet educational levelsare also high and people prefer workingfor companies with a good name. Youhave to be a graduate in science or nurs-ing to work in a pharmacy here, andwe’re having graduates lining up forinterviews.”

Watsons plans to “penetrate majorcities first”, says Casey. But the aim is toexpand wherever possible. “We’re talk-ing to the other major megamall ownersin the Philippines, including Ayala andRobinson’s, and looking anywhere elsewe can – from airports and hospitals touniversity campuses.”

“Overall,” adds Ingham, “there aresome really exciting prospects. It’s goingwell so far and if this continues, ourexpansion target for the next five yearsmight increase significantly. There couldwell be 300 new stores, not 150.”

SHOPPERS IN TAIWAN HAVE been enjoying even greater varietysince the introduction of British-

brand Boots products in Watsons stores.Both companies have been delighted

with the results of a trial that started inJuly 2001 and received an overwhelming-ly positive response from consumers.

“The addition of unique products soldby Boots has enhanced the feeling of‘discovery shopping’ in Watsons wherecustomers are highly appreciative of theextra choice and convenience,” saysPhilip Ingham, CEO of A.S.Watson GroupRetail Non-Food Division. “The partner-ship with Boots is a breakthrough in theindustry which we see will benefit con-sumers.We want them to look good, feelgreat and have fun.”

The rollout plan commenced in Marchthis year and will be completed by early2003 with around 100 Watsons storeson the programme. Boots’ net invest-ment will be some £2 million (aboutUS$2.9 million).

Watsons has an island-wide chain ofexcellent retail stores in Taiwan whileBoots has a strong established brand thatcompliments Watsons’ extensive product

range.The tie-up thus not only creates acompelling offer for consumers but alsoreal value for each partner.

The implants will occupy approximately10% of Watsons floor space and offerbetween 800 and 1,200 beauty and per-sonal care products featuring Bootsbrands. Watsons will benefit by the cre-ation of a differential in their offer againstthe competition, leading to increasedfootfall and sales.

Watsons first opened in Taiwan in1987 and now operates 223 storesisland-wide while Boots has been oper-ating in Taiwan for about 18 months.Consideration is being given to expand-ing the partnership into other Asianmarkets where Watsons has stores.

TAIWAN TIE-UP

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