The Phone Wars Spread To Hong Kong

As a high-growth company in a protected market, Hongkong Telecom has long been a darling of foreign investors. But when the company announced on July 21 that it will cut rates to the U.S. and Canada by up to 21% to brace for new competition, the market response was swift. HKT's stock plunged by 4.7% in just two days before recovering. Why the panic? Many investors had thought HKT, which gave up its monopoly on fixed-line local calls on July 1, would still be the exclusive long-distance provider for 11 more years. Instead, local competitors are rushing through a regulatory loophole to offer international service at lower costs.

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