SINGAPORE TELECOMMUNICATIONS PTE LTD (Maximisation of profits after public floatation)

Mr Heng Chiang Meng asked the Minister for Communications how he will ensure that the Singapore Telecommunications Pte Ltd will not increase prices to maximise the profits for its shareholders after its public floatation.

Mr Mah Bow Tan: Mr Speaker, Sir, Singapore Telecommunications Pte Ltd (ST) operates under a licence issued by the Telecommunication Authority of Singapore (TAS). A condition for this licence is that ST has to ensure that its telecommunication and postal tariffs and quality of service remain competitive.

ST is required to submit to TAS quarterly reviews of rates in comparison with comparable companies around the world. Any tariff change proposed by ST for these services will need to be submitted to TAS for approval. In evaluating the proposed tariff changes, TAS will consider, apart from rate competitiveness, other factors such as wage and consumer price indices, efficiency and productivity growth.

As a private company, it can still maximise profits by providing quality services at competitive prices to its customers. The price control framework is not to control the profits of the company, but to ensure that the public will continue to enjoy basic telephone and postal services at affordable and competitive prices.

Dr Wang Kai Yuen: Sir, would the Minister consider allowing market forces to determine the proper price for telecommunication services? On "market forces", I wonder whether he would allow other private companies to come in to provide services, in particular, value added services.

Mr Mah Bow Tan: Sir, when TAS granted the exclusive licence for ST to operate its services, particularly the international services, it did so with a fixed time period. This time period is five years for cellular services and 15 years for the other services. During this period, TAS is looking at liberalising other areas of ST's operations. But the reason behind giving ST an exclusive privilege for a certain period of time is to allow it to recoup some of the heavy capital expenditure that was invested in putting up these systems. Nevertheless, having said that, TAS is looking at various ways whereby the market can be further liberalised without compromising or without affecting the monopoly privileges that have been granted so far.