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SERVIÇOS DE FINANÇAS

Concession Agreement of the Public Telecommunications Service

(Unofficial translation, for reference only)

CONCESSION AGREEMENT

- revision -

public telecommunications service

19. 10. 99

CHAPTER 1

BASIC PROVISIONS

Clause One

Purpose of the Concession

The Territory of Macao (hereinafter referred to as “Territory” or “Grantor”) grants the exclusive right to operate the following public telecommunications services, and install all telecommunications systems and equipment required for that purpose as set forth in this Agreement, to Companhia de Telecomunicações de Macau, S.A.R.L (hereinafter referred to as “CTM” or “Concessionaire”):

Local: The fixed telephone service, telegram service, fixed telex service, fixed service for data transmission and rental circuit services.

International: The fixed telephone service, telegram service and fixed telex service provide that they involve call addressing and be established in real time, fixed service for data transmission and rental circuit Services.

Transit: The fixed telephone service, the telex service, telegram service and fixed service for data transmission.

Clause One - A

Definitions

For the purposes of the provisions of this Agreement, the expressions hereunder shall have the following meaning:

Access/interconnection - connection between the CTM Telecommunications Network and the telecommunications network of other operators of public telecommunications services.

Concessionaire or CTM - Companhia de Telecomunicações de Macau.

Governor or Government — Up to 19 December 1999 the Governor of Macau, and after this date the Executive Chief or the Government of “Região Administrativa Especial de Macau”.

Telecommunications Infrastructure or Telecommunications Network - all the physical or electromagnetic means that carry the transmission, reception or broadcasting of signals.

Macau, Territory or Grantor - Up to 19 December 1999 the Territory of Macau, entity of public law (“pessoa colectiva de direito público”) and after this date the Government of the “Região Administrativa Especial de Macau” (Special Administrative Region of Macao).

Rented Circuit Service - offer for transmission capacity from the telecommunications network, in transparent mode, of temporary or permanent nature.

Switching Fixed Service for data transmission - offer for addressed data, with origin and destination at the terminal points of the telecommunications network, enabling any user to utilise the equipment connected to its terminal point to communicate with another terminal point.

Fixed Telephone Service or Voice Telephony - offer for addressed voice carrying in real time, with origin and destination at the terminal points of the telecommunications network, enabling any user to utilise the equipment connected to its terminal point to communicate with another terminal point.

Fixed Telex Service - offer for addressed telex messages carrying, with origin and destination at the terminal points of the telecommunications network, in conformity with the relevant recommendations of ITU, namely, Recommendation F.60, and using the international alphabet no. 2 of Recommendation S. 1, and transmission at 50 Baud, enabling any user to utilise the equipment of his terminal point to communicate with another terminal point.

International Service - means where either the originating or terminating points are within the Territory.

Local Service - means where both the originating and terminating points are within the Territory.

Telecommunications Service of public use - those provided by the operators for public use in general - users - or other operators - either in a direct way through its own systems, or in an indirect way through the interconnection to other operators systems.

Telegram Service - offer for a service of reception, transmission, reproduction and delivery to the messages’ addressee, in conformity with the relevant recommendations of ITU.

Transit Service - means where both the originating and terminating points are outside the Territory but where part of the telecommunications infrastructure to deliver these services is within the Territory.

Telecommunications - any kind of treatment, broadcasting or reception of signals, in writing, pictures, sound, or information of any kind, by means of wires, radio-electrical, optical or other electromagnetic systems.

Clause One - B

Competitive Services

One. Without any further formalities CTM shall keep the right to operate on a competitive basis those Public Telecommunications Services which is already operating on the date the Agreement in hand is executed. The Government of the Territory shall grant CTM the relevant licenses in accordance with the legislation in force at the time.

Two. Furthermore CTM shall be granted the right to bid for or otherwise to apply for the granting of licenses or permits for any new Public Telecommunications Services, on the same terms as those applied to any other interested party.

Three As regards the operation of services on a competitive basis, CTM shall be treated on the same grounds as any other authorised operator and be subject to the legislation in force at the time.

Clause One - C

Access to CTM Network

One. Subject to the other provisions of this clause, CTM shall not in any way refuse, discriminate or render more difficult to another operator of the public telecommunications service, of the competitive regime, the access/interconnection to its telecommunications network

Two. In consideration for the access/interconnection to its telecommunications network, CTM shall be entitled to receive a fee from the other operators of public telecommunications services under the terms of Clause Twenty-Five hereof.

Three. CTM can only be requested to fulfil its obligation to establish the access/interconnection to its telecommunications network once the value of the fee referred to in the previous number and technical compatibility have been established.

Clause Two

Life of the Concession

One. The Concession shall terminate on 31st December 2011 unless any of the termination clauses set forth in Clause Two - A occurs. The Territory and CTM shall proceed to a revision of the present Agreement in the fifth year prior to the end of the life of the Concession, and its conditions shall be agreed by the parties.

Two. At the end of the lift of the Concession, CTM shall transfer to the Territory the whole of the facilities involved in the franchised services free of any charges, encumbrances and liabilities. The facilities shall be transferred in good operating and maintenance conditions, ensuring that the service can still be provided without any loss in quality.

Three. CTM’s net tangible assets, which pursuant to Clause Thirty-Five must be totally depreciated by the end of the life of the Concession, shall revert to the Territory free of cost.

Four. The Agreement in hand may be amended at any time by mutual agreement of both parties.

Clause Two - A

Termination of the Concession

The Concession shall terminate:

At the end of the life of the Concession;

By mutual agreement between the Territory and CTM;

In case of redemption;

Due to public interest;

Due to default.

Clause Three

Redemption of the Concession

One. The Territory shall be entitled to redeem the Concession in the fifth year prior to the end of the life of the Concession, for such purpose having to inform the Concessionaire of its intentions with one year’s prior nonce.

Two. In the event of this right being exercised, the universal whole of the establishment assigned to the operation of the services on an exclusive basis shall revert to the Territory, free from any charges, encumbrance or liability, and in such operating and upkeep conditions that will enable the continuity of the services in good working order, against a certain consideration to be determined by the addition of the following values:

net tangible fixed assets and non-obsolete stocks, reported to the values of the latest balance sheet approved by the General Meeting and by the Governor;

a compensation equal to two point five times the average annual profit before taxes resulting of the activities developed on an exclusive basis, settled in the three latest annual balance sheet before the notice of redemption.

Clause Three - A-

Termination due to Public Interest

One. The Territory may terminate the Concession unilaterally at any time whenever the public interest so recommend, regardless of whether CTM has violated any of its obligations.

Two. Should the Concession be terminated as provided for in item one above. CTM shall be entitled to a compensation. The amount of this compensation shall be calculated according to the terms established in item two of Clause Three above.

Clause Four

Deleted

Clause Five

Duties of CTM

One. In accordance with the Agreement in hand, CTM shall undertake to provide public telecommunications services, which fully meet the Territory’s needs. The telecommunications network supporting it must incorporate state-of-the-sit systems providing these have been properly tested; be designed and sized to meet promptly the demand at any location within the Territory; and assure a good quality and safe service.

Two. Within the scope of the Concession granted to CTM and as long as the Governor so requires, CTM shall, pursuant to this Agreement, provide those public telecommunications services provided in territories within the region with characteristics similar to those in Macao.

Clause Six

Public Use of Services

Except for the restrictions laid down in the legislation in force or in future legislation, CTM shall not refuse to provide any services to any person or entity as provided for in this Agreement, as long as the relevant service applicant meets the requirements as laid down in the legal provisions and regulations in force.

Clause Seven

Inviolability and Confidentiality of Telecommunications

One. CTM shall undertake to take all the measures required to ensure that all communications under its responsibility are kept inviolable and confidential pursuant to the legislation in force in the Territory.

Two. The confidentiality referred to above covers professional secrecy and all of CTM's staff and managerial members shall in no circumstances disclose the identity of the applicant or addressee, and the contents of the communications they become aware of in the course of their duties. Furthermore the said confidentiality shall prevent staff from disclosing to third parties any information related to them.

Clause Eight

Governing Legislation

One. CTM shall undertake to comply with the legislation in force in the Territory as well as any international treaties, conventions, agreements and regulations on telecommunications to which the Territory is bound irrespective of the name they shall be referred to.

Two. CTM’s advice shall be sought prior to publishing new legislation on telecommunications in the Territory.

Three. (Deleted)

Clause Nine

CTM's rights

One. CTM shall enjoy all rights granted by the governing legislation and those awarded to Macau General Post and Telecommunications Authority (hereinafter referred to as CTT) at the time of the execution of the Agreement in hand in respect of the provision of cables, lines and other telecommunications equipment. namely in what concerns the use of public areas, the setting up of servitudes, the expropriation based on public interest, the setting up of protection areas and the right of access to private land or buildings.

Two. Upon request submitted by CTM, the Governor shall ensure that the rights referred to above can be exercised.

CHAPTER II

CTM

Clause Ten

Corporate System

CTM shall be governed by the legislation in force in Macao.

Clause Eleven

Object of CTM

One. The object of CTM shall be the operation of Public telecommunications services pursuant to the terms and conditions as set forth in the Agreement in hand, as well as the carrying out of any activities that may be complementary, subsidiary and accessory to those services, as long as they have been approved by the Governor.

Two. In addition, CTM may provide telecommunications services abroad as well as carry out any other activities that may be complementary, subsidiary and accessory to those services.

Clause Twelve

Registered Office and Management Bodies of CTM

One. CTM shall have its registered office and central management in Macao and, at least, one of its managing directors shall reside therein.

Two. A director appointed by the Governor shall take part in CTM's Board of Directors representing the Territory’s shareholding in flit Company’s share capital.

Three. A delegate appointed by the Government may attend any meeting of the Board of Directors and Fiscal Committee. Within the period laid down in the Articles of Association, the said delegate shall receive copies of the relevant agendas and documents to be discussed at each meeting. As to the minutes of the meetings, these shall be giver to the Government’s Delegate within the period of time specified by law.

Clause Twelve-A

CTM’s Articles of Association

One. CTM's Articles of Association shall comply with and meet the Territory’s laws and the provisions under this Agreement.

Two. Whenever CTM wishes to amend the Articles of Association in what concerns the object, reduction of share capital, transformation, split-up. wind-up, the Governor’s approval shall be sought.

Clause Thirteen

Shareholders Equity

One. The share capital of the Concessionaire is one hundred and fifty (150) million Patacas, and it has been fully paid up as of the date of signature hereof.

Two. The Concessionaire represents that it shall proceed to increases in its equity capital, in one lump sum, that may prove to be necessary to guarantee that, during the validity of the Concession, such capital is never under forty per cent (40%) of the value of the net tangible fixed assets.

Three. Upon a duly founded application of the Concessionaire, and in order to enable a significantly high investment, the Governor may temporarily authorise the value of the equity capital to be lower than the Percentage of the value of the net tangible assets referred to in number two above, and will fix at the same time the applicable conditions.

Four. Any change occurred in the Ownership or percentage distribution of the share capital of the Concessionaire company, shall have to be authorised by the Governor.

Clause Fourteen

Transfer and Sub-Concession

One. Unless otherwise approved by the Governor, CTM shall not dispose of or in any way transfer the whole or part of its franchised rights on a permanent or temporary basis.

Two. The restriction referred to above shall not prevent a third party from providing or carrying out any services or works comprised in the exclusive services providing those services or works are provided or carried out under CTM’s orders and responsibility.

CHAPTER III

SETTING UP AND OPERATING THE SERVICE

Clause Fifteen

The Network

CTM’s telecommunications network shall comprise the following:

the local networks allowing the services under the Agreement in hand to be . provided, with all posts, terminals, interconnections and transmission and switching facilities;

the transmission and switching facilities for the international telecommunications services under this Agreement to meet the public needs and in accordance with the Asia-Pacific Regional Plan and the ITU’s World Telecommunications Plan, as well as other world and regional traffic plans as agreed internationally for regional and world communications.

Clause Sixteen

Network Expansion

One. With a view to secure good quality and safe services, CTM shall undertake to expand and improve its networks in order to enable them to meet the needs and requirements of services, users and traffic increase. The network expansion shall be conducted in accordance with the plans set forth in Clause Seventeen below.

Two. CTM shall remove at its own expense and within the term fixed and in co-operation with other entities likely to be referred to it, all overhead or exposed telephone accessories, cables and lines owned by CTM which are not in use.

Clause Seventeen

Planning

One. The general plan, the five-year plan and the annual plan are included in Enclosures I, II and III to the Agreement in hand. The aforesaid plans shall be part of the Agreement in hand.

Two. Every year and on or before the 30th November prior to the commencement of the period to which they refer, CTM shall present to the Governor the new five-year and annual plans for its analysis and eventual approval.

Three. Should the Governor fail to ask for any clarification and if CTM does not receive any message by the 31st of January following the date of their submission, the plans referred to in item Two above shall be considered approved.

Four. The period for approval shall be suspended if the Governor asks for any clarification.

Clause Eighteen

Rules Governing the Setting up of the Service

One. The design of facilities, the equipment to be used as well as the assembly methods shall comply with best technical standards at all times. The equipment characteristics shall meet the rules applicable as set forth in ITU-T and ITU-R’s or any other international standards of general use providing those recommendations have been approved by the Governor.

Two. In terms of the basic network, the external voice frequency transmission facilities shall be carried out on underground cables at all times, unless otherwise authorised by the Governor. The secondary distribution network shall be underground as well in urban areas and up to the subscribers’ distribution boxes. Installing and connecting local network distribution boxes shall always take place in a discreet way namely in locations of interest to tourism and in terms of monument protection.

Three. CTM shall undertake to replace at the shortest period of time possible, the switching and transmission systems, the type of sets or any other facilities elements which affect the quality of the service provided due to their condition, obsolescence or wear and tear. The quality of service shall be assessed based on the criteria agreed with CTM in accordance with item Three of Clause Twenty-Nine.

Four. Furthermore, CTM shall undertake to take all the measures required to protect any operation-related facilities against fire, cataclysms, rnalefactions and third parties’ actions.

Clause Nineteen

Operation Rules

One. The operation and maintenance of telecommunications facilities shall comply with the relevant ITU-T and ITU-R recommendations, other internationally accepted standards and those that are to be agreed with the inspection body.

Two. CTM shall undertake to keep its telecommunications facilities operating continuously and make the necessary arrangements to repair any outages promptly and irrespective of the cause.

Clause Twenty

Telegram Service

One. Without prejudice to the cases in which providing a different service is convenient, CTM shall set up and keep, direct or indirectly an efficient telegram service for such a period as both the Territory and CTM shall agree that such a service is in demand, namely:

Telegram acceptance service in Chinese characters for facsimile transmission subject to the correspondents’ ability to offer such a service;

Telegram delivery service by messenger to be provided by CTM or Macau Post Office subject to agreement and prior transmission by telephone or telex, when possible.

Clause Twenty-one

Fulfilling Applications

One. CTM shall fulfil promptly all applications for telecommunication installations as included in the fee table in force following a chronological order of submission.

Two. The Governor may grant CTM the right to assign priorities subject to the provisions set forth in rules governing the use of public services.

Clause Twenty Two

Relation with Clients

One. CTM shall not provide service to any clients unless they agree to abide by the rules referred to in item Two below which shall be made available to the said clients prior to installation taking place.

Two. The service provision conditions shall be included in a typical contract containing the rights and duties of the client, which shall be approved by the Governor. As regards the service contracts with the Administration, the public and businesses, CTM shall draft them in both Portuguese and Chinese languages.

Clause Twenty-Three

Maintenance

CTM shall undertake to maintain all facilities and equipment in good operating conditions and provide permanent maintenance service of a current and extraordinary nature as may be required by the stations and equipment. CTM shall further undertake to repair promptly all malfunctioning and breakdowns, giving priority to those facilities related to the Territory’s safety.

CHAPTER IV

TARIFFS

Clause Twenty-Four

General Principles

One. Those who use foe services provided by CTM shall pay the relevant fees as laid down in the tariff schedule as approved by the Governor and published in the relevant by-law.

Two. CTM shall not charge any fees that are not included in the said tariff schedule nor apply them in a manner different to that described in the said schedule or in any way increase the service prices.

Three. Fees shall be fixed as close to the cost of service as possible, taken as a whole, taking into consideration the need to obtain a return on the investments made by CTM; they must encourage the expansion of services and favour the relations between the Territory, Portugal and other regions of China.

Four. As regards specific services provided by CTM to certain subscribers in respect of whom no fees have been fixed, CTM may thirty days after submitting an application to the Governor to that effect, duly funded, use a provisional fee. The determination of this fee shall be based on commercial aspects or agreed with the user until such time as the Governor fixes the final fee.

Five. As soon as the said service is liberalised, the system referred to in the items above shall be. applied only to those exclusive services, and CTM shall be subject to the provisions under Clause Twenty-Six — A below.

Six. The terms for the revision of the fees to pay for the services provided by CTM must be approved annually by the Territory.

Clause Twenty-Five

Access/Interconnection Charge

The access/interconnection fee referred to in Article 1 - C shall be established by the Governor, after consultation with the Concessionaire and inc interested operators, and its amount may not prevent the development of new services, its value shall express in an appropriate and balanced manner, the several interests at stake, namely the costs that must be incurred for such purpose.

Clause Twenty-Six

Fees and Tariffs Revision

One. The current rental system in force for the Local Fixed Telephone Service shall remain unchanged throughout the life of the Concession unless otherwise agreed.

Two. Tariff revisions may be effected by mutual agreement providing the Governor or CTM so requires and submits a duly explained proposal.

Three. For specific commercial purposes. CTM may apply fees lower than those legally approved, offering discounts on a non-discriminatory basis. In this case, CTM shall report them to the Governor at least one month prior to introducing the aforesaid fees.

Four. Tariff revision proposals submitted by CTM shall show that the revision is needed and shall take into consideration among others the following aspects:

The inflation rate and the evolution of production costs, which correspond to an efficient service, based on wise management;

The fees and tariffs charged by other telecommunications operators in countries and territories with characteristics similar to those in Macao, notably Hong Kong and Singapore.

Reduction in costs based on technological developments;

The obligation imposed on CTM to promote the regular development of the service in terms of quality, quantity and diversity and to secure a permanent updating of the facilities;

The impossibility to obtain productivity gains, which would enable to cover for the increase in costs that, based the request for revision.

Five. When fixing and revising international service fees, the rate between the pataca and the accounting units used in settling the international accounts as well as the applicable provisions of international treaties, conventions and agreements shall be taken into consideration in addition to the aspects referred to above.

Clause Twenty-Six-A

Liberalised Service Fees

As regards the approval and changing of the fees of the services provided it competitive environment, CTM shall be subject to the framework, governing the other operators and that established in future legislation.

CHAPTER V

INSPECTION

Clause Twenty-Seven

Power to Inspect

One. The Governor shall reserve the right to make all arrangements he may think fit to inspect whether the Agreement in hand is complier with and to check, when and in the manner he may think fit, the correctness of the data and information rendered by CTM.

Two. CTM shall undertake to provide the Governor with all clarifications and information to enable the latter to exercise the rights referred to to item one above.

Three. The inspection shall be performed by a telecommunications overseeing entity.

Clause Twenty-Eight

Scope of Inspection

For the purposes of Clause Twenty-Seven above, CTM shall undertake to:

Give access to all facilities;

Make all books, records and documents concerning CTM’s activities available to the inspection entity and providing all clarification that the said inspection entity may find necessary;

Supply all data and information that may be requested including statistics used by the management and required by the inspection;

At the inspection request and if so required, with -the presence of inspection representatives, carry out tests to assess the equipment’s operating conditions and characteristics,

To report promptly to the inspection any total or partial outages and confirm them in writing on the following working day stating the reasons which in its opinion may explain it.

Clause Twenty-Nine

Assessment of Service Quality

One. CTM shall provide data and statistics, which enable the quality of the service in all of its features to be checked on an ongoing basis, namely as regards the following:

Telephone, telex posts and other subscribers’ facilities assembled or otherwise;

Subscribers’ installation applications submitted, provided and waivers;

Wait lists and their duration;

Average delay in installing basic and supplementary telephone posts, telex posts and other services;

Outages reported, repaired and average delay of repairs;

Regularity of operation in the local and international services.

Various complaints including billing.

Two. The inspection and CTM shall agree on how to supply the said data and statistics and how often they shall be supplied.

Three. With CTM’s co-operation, the inspection shall prepare basic quality indicators on the service provided and the objectives to which CTM shall undertake.

CHAPTER VI

STAFF

Clause Thirty

Recruitment

CTM’s staff shall be as much as possible recruited amongst residents of the Territory.

Clause Thirty-One

Staff Rules and Regulations

One. The staff of the Concessionaire shall be governed by a specific statute and by the remaining law on labour relations applicable in the Territory.

Two. Any modifications in the staffs statute shall be approved by the Governor under proposal of the Concessionaire.

Three. CTM staff assigned to the telecommunications services, who have transferred to CTM’s staff structure shall keep all rights they were entitled to at the time the said transfer took place in respect of the following:

Retirement;

Special leave pursuant the legislation in force;

Entitlement to free housing in case of free housing was granted by CTT;

Free medical scheme (hospital and medicines).

Four. The rights referred to in paragraph c) and d) above may be subject to negotiation between the ex-CTT staff and CTM; the former may waive such rights without prejudice to the rights set forth in paragraphs a) and b).

Clause Thirty-Two

Staff Training

One. CTM shall provide its staff with suitable training in order to make sure that they are able to run the company and operate the service.

Two. As long as the number of trainees so justify, training shall take place in Macao at CTM’s training centres.

Three. The staff-training programme to be run by CTM during the life of the Concession is shown in Enclosure IV to the Agreement in hand, which is an integrand part of this agreement.

Clause Thirty-Three

Staff Structure

One. CTM shall undertake to have a duly qualified staff structure and enough staff numbers to assure that all services are operated perfectly and all obligations arising from the Agreement in hand are fully complied with.

Two. CTM may recruit experts on a temporary basis to repair any abnormal service outages and introduce new projects and technologies.

CHAPTER VII

CTM’S BOOKS

Clause Thirty-Four

Bookkeeping

One. CTM shall undertake to keep at its registered office in Macao, its books duly organised and up-to-date, written in Portuguese and Chinese, expressed in Patacas and in compliance with the relevant legislation.

Two. The tangible fixed assets inventory shall have attached thereto suitable documentation and be prepared in such a way as to enable all of its components to be identified clearly.

Three. Every year, the Business Report duly prepared and the annual accounts shall be submitted to the Governor within fifteen (15) days after being approved.

Four. Whenever CTM provides other telecommunications services as provided for in the Agreement in hand, in addition to those comprised in its Concession, CTM shall secure that the profits and costs as well as the related assets and liabilities are properly separated.

Clause Thirty-Five

Depreciation of Tangible Fixed Assets

One. Considering that the present Agreement has a fixed term, at the end of which the net tangible assets allocated to the operation will revert, free of cost, to the Territory, CTM is hereby authorised to proceed to the depreciation of the referred assets in order that its net value is annulled at the end of the life of the Concession.

Two. Normal depreciation rates to be used by CTM shall be those shown in Enclosures V unless otherwise agreed between the Governor and CTM in view of the technological development and evolution.

Three. The depreciation values taken into consideration every year pursuant to the steady quota method and in accordance with these Specifications shall be considered operating costs.

Clause Thirty-Six

Assets Revaluation

One. The Concessionaire may carry out the revaluation of its tangible fixed assets allocated to the operation, on an exclusive basis.

Two. The parameters for revaluation must be established by means of agreement between the Concessionaire and the Territory, taking into consideration the different classes of fixed assets, and their technological obsolescence and actual value.

CHAPTER VIII

ROYALTY AND TAX SYSTEM

Clause Thirty-Seven

Royalty

One. CTM shall pay the Territory a royalty amounting to nine per cent (9%) of the total operating revenue. For this purpose revenue shall be all amounts billed to the customers regardless of the relevant settlement terms.

Two. The payment shall be made quarterly within thirty days following the quarter it refers to, with the following breakdown: eight per cent (8%) to the Government Finance Department and one per cent (1%) to CTT.

Three. Once the services rendered are liberalised, the royalty referred to above shall be calculated taking into consideration the gross revenue arising from franchised services. Therefore, CTM shall be subject to a treatment identical to that of its competitors in respect of any liberalised services and in accordance with the law in force.

Clause Thirty-Eight

Tax System

During the life of the Concession, CTM shall not be liable to customs dues in respect of imports of any material required for the operation. CTM shall be further exempted from sales tax both in terms of goods and services it may purchase, as well as goods and services provided by CTM within the scope of the Concession.

CHAPTER IX

PENALTIES

Clause Thirty-Nine

General principles

One. If CTM fails to comply with its obligations arising from the Agreement in hand the penalties laid down in this chapter shall apply.

Two. Where any of the penalties referred to herein are applied, CTM shall not be exempted from its responsibility before third parties nor does it prevent the relevant authority from deciding on any other penalties as provided for in the legislation in force in the Territory.

Three. In case of an act of God CTM shall be exempted from all its undertakings under the Agreement in hand providing it has taken all reasonable measures to avoid its consequences and if it is found that there was no negligence or intent on CTM’s part.

Four. For the purposes of the Agreement in hand, an act of God shall include, the following meaning: war, social unrest, fire, cataclysm, wrongdoing or third parties intervention duly evidenced.

Five. The Government of the Territory shall decide on the application of the penalties referred to in this chapter.

Clause Forty

Fines

One. The following infringements shall be subject to fines of ten thousand (10,000) to five hundred thousand (500,000) Patacas:

Poor quality of the service provided, according to clause 29, no. 3 of this agreement;

Infringement of telecommunications secrecy by fault that, pursuant to clause 7, is attributable to the Concessionaire or its staff on duty;

Failure to comply with the obligations undertaken by CTM concerning service set-up and operation;

Any unjustified refusal to provide the information required under the terms of Clauses Twenty-Seven and Twenty-Nine; giving of false information; denial or creation of unjustified obstacles for the access to facilities of the supervisory body’s representatives;

Charging fees which have not been authorised by the Governor or the levying of fees in a fashion other than that set forth in the approved tariff system;

Unjustified refusal to provide a service which CTM is obliged to provide under the terms of the Agreement;

The obligation imposed upon CTM to promote the steady development of the service in terms of its quality, its quantity and to ensure the permanent upgrading of its facilities;

Infringement of the provisions of Clauses Thirty, Thirty-Two and Thirty-Three;

Infringement of the legal norms forming part of the regulations governing public use which CTM is to obey under the terms of the Agreement in hand;

Other non-specified infringements under this agreement.

Two. Should there be any delay in the payment of the instalment or other sums required by the Agreement in hand, CTM shall pay the Territory penalty interest which shall be determined in the following manner:

Two per cent (2%) a month during the first month;

Three per cent (3%) a month during all subsequent months;

Three. Fines and penalty interest shall be paid within thirty (30) days of the date on which CTM is notified that it is to be levied. The Territory shall reserve the right to be paid from a pledge deposit as foreseen in Clause Forty-Three below if this deadline falls to be observed.

Clause Forty-One

Termination by Default

One. The Concession agreement can be unilaterally terminated by the Territory. whenever one of the following infractions occur:

Abandonment of operation;

Delay in the payment of sums due under the terms of the Agreement in hand exceeds six months;

Should the value of the pledge deposit not be replaced within the deadline indicated in Clause Forty-Three below;

Alienation or transmission, wholly or in part, of the Concession, and either temporary or definitive, without prior authorisation of the Governor;

Modifications introduced into the object of the Companhia de Telecomunicacoes de Macau, without the prior authorisation of the Governor;

Unfounded refusal to allow other operators access to its Networks or circuits or failure to remove administrative or operational difficulties with the intention of gaining competitive advantages over them in the provision of liberalised services;

Imposing of fines of more than one and a half million Patacas.

Two. Termination by default shall be pronounced in a law issued by the Governor.

Three. Termination by default confers the right upon the Governor to take on the direct management of the service forthwith or to grant it to another body.

Four. Termination by default shall entail the reversion of all property allocated to operations back to the Territory.

Clause Forty-Two

Sequestration

One. The Concession may be seized under the following circumstances:

Should the unfounded interruption to the respective operation occur or be imminent;

Should there be serious disruptions to, or shortcomings in, CTM's organisation or operation or in the general state of repair of the installations and material used for the said operation;

Two. During the course of the seizure, Territory representatives shall secure the operation of the Concession. Any expenditure required for the upkeep and standardisation of the operation shall be borne by CTM.

Three. The seizure shall remain in force whilst deemed necessary, the Territory being empowered to advise CTM to resume operation of the Concession upon completion of the said seizure. Should CTM be unwilling to resume operation, the Concession shall be terminated in accordance with Clause Forty-One above.

Four. In the event of any of the situations referred to in items a) and b) of number one occurring, the Governor shall notify the Concessionaire to remedy the situation and repair the consequences, within a reasonable period not exceeding 10 days; if the Concessionaire fails to do so, the provisions of the previous numbers shall apply.

Clause Forty-Three

Bond

One. Commitments of a pecuniary nature undertaken by CTM under the terms of the Agreement in hand shall be assured by a bank guaranty first demand made payable to the Territory for the sum of two million Patacas.

Two. The figure indicated in item One above shall remain in force throughout the life of the Agreement, CTM having to replace it should it be reduced for whatever reason. This compensation shall be effected within thirty (30) days as from the date on which CTM has been advised to do so.

CHAPTER X

ARBITRATION AGREEMENT

Clause Forty-Four

Court of Arbitration

One. All disputes arising between the Territory and CTM in connection with the interpretation and enforcement of the Agreement shall be finally settled by a Court of Arbitration operating in Macau and shall comprise three arbitrators, one being appointed by the Governor, one by CTM and the third, who shall serve as Chairman, by the parties to the Agreement.

Two. Should one of the parties fail to appoint their arbitrator within one month of the date on which they have been invited to do so by the other party, or should the parties fail to reach an agreement with regard to the choice of the third arbitrator, the arbitrator (s) required shall be chosen by the Court with General Jurisdiction of Macau at the request of either party.

Three. The Court of Arbitration shall pass sentence according to the law of Macau and no appeal may be made against its decisions, except in the case of violation of law.

Four. Any expenditure made setting up and running the Court of Arbitration shall be borne by the losing party proportionally to its blameworthiness.

CHAPTER XI

MISCELLANEOUS AND PROVISIONAL PROVISIONS

Clause Forty-Five

Property to be Rented from the Territory and CTT

CTM shall rent all of the land, buildings and facilities allocated to the operation set forth in Enclosure VI from the Territory and CTT for the price indicated therein. This price shall be updated in accordance with the legislation in force in the Territory.

Clause Forty-Six

Traffic Agreement

Within the scope of the Agreement in hand, the Traffic Agreement set out in Enclosure VII shall be applicable.

Clause Forty-Seven

International Relations

One. Whenever the Territory is unable to have direct representation, it shall be represented in international telecommunications organisations by the supervisory body empowered to oversee telecommunications in the Territory, by means of its Portuguese counterpart. This same body shall also ensure the co-ordination of the ratification of all international treaties, agreements and conventions.

Two. CTM may, should it deem fit, be represented at meetings of the said international organisations, its representatives forming part of Portuguese delegations, whenever the Territory is unable to have direct representation, or of Territory delegations.

Clause Forty-Eight

Exporting capital

One. CTM is hereby authorised to make payments abroad of any sums spent there on installation, maintenance and expansion of telecommunications’ services and also of any sums required to pay foreign administrations or operators for bills resulting from the operation of telecommunications’ services under the terms of the Agreement in hand.

Two. CTM is furthermore permitted to send overseas any sums resulting from the dividends of its operations as well as any payments made to them by the Territory following the termination of the Concession.

Three. CTM is authorised to take out loans and to make payments of interest and principal in respect of the said loans on an international level, It shall, however, give preference to local banking institutions if the conditions offered are equal.

Clause Forty-Nine

Radio frequencies

One. The setting up and use of radio communications by CTM requires the prior authorisation to be granted under the terms of the prevailing legislation.

Two. CTM shall undertake to take all measures required to ensure that all stations run by it do not cause interference which may harm other authorised stations and shall undertake further to accept the instructions and recommendations related to the operation -of such stations as issued by the body overseeing telecommunications.

Three. The telecommunications supervisory body shall endeavour to ensure that CTM is allocated the frequencies in the radio spectrum it requires to comply with the commitments it has undertaken in the Agreement in hand within reasonable time. Furthermore, it shall take any measures required to prevent CTM’s radio communication resources from being effected by any harmful interference.

Clause Fifty

Right of Preference

Once the Agreement in hand has expired, CTM shall have the right of preference should the Governor wish to grant a new concession, all other conditions being equal.

Clause Fifty-One

Miscellaneous

One. Six originals of the Agreement in hand have been drawn up, two being written in Portuguese, two in Chinese and two in English. The Governor and CTM shall each keep three originals, one being in Portuguese, one in Chinese and one in English.

Two. In case of doubt the Portuguese and Chinese texts shall prevail.

Three. The Portuguese and Chinese languages shall always be used in any dealings between the Governor and CTM, though a translation into English may be attached.

Four. Any communication the Governor may make to CTM under the terms of the Agreement in hand shall always be addressed to the CTM’s registered offices in Macau.

Five. Any communication CTM may make to the Territory under the terms of the Agreement in hand shall always be addressed to the Governor.

Clause Fifty-Two

Enforcement of the Agreement

The enforcement of this Agreement shall be subject to the constitution of the bond referred to in article forty-three, and to its full publication in the Official Gazette of Macao.

Clause Fifty-Three

Provisional System

Unless offered under the terms of a competitive system, the telecommunications’ services beyond the scope of this Agreement shall be subject to the regulations laid down by the legal and contractual norms regarding the services provided on an exclusive basis.


Attach I

CTM PLAN FOR THE YEAR 2000

Technical Platform

  • Development of the local switch network:
    • Upgrade of digital 4 and digital S exchanges
    • Contract for digital 6
    • RLU migration
  • Development of the international network:
    • Contract for the upgrade of the international exchanges ISC1 and ISC2
    • Contract for the Supply of a new Macau—HK SDH Microwave link.
  • Development of interconnect facilities:
    • Switch and Transmission Installation
    • Billing System Upgrade
    • Number Portability.
  • Development of a broadband national network:
    • Trial and launch of an access network
    • Trial and launch of an ATM switch.
  • Line Plant Development
    • UTP blockwiring (unshielded twisted pairs)

Fixed Services

  • Introduction of IN based value added services.
  • New marketing programmes for international telephony.
  • Development of Internet:
    • High speed access to Internet over the national broadband platform
    • Electronic commerce
    • On line billing
    • Virtual shopping mall
  • Joint venture with Government and local businesses to provide EDI services.
  • General expansion and enhancement of Customer services.

Mobile Services

  • Expand Home Location Register to increase customer base.
  • Installation of a second Main Switch Center.
  • Development of GSM 1800 BTS (15-20 new transceivers).
  • Enhancement of pre-paid card services.
  • Software upgrade of existing main switch (R6.1 to R7).
  • Development of the Valued Added Services platform:
    • Banking/Sales transactions
    • Data applications
    • Provision of information access.

Information Technology

  • Enhancement of tariff/billing systems.
  • Development of Web based service applications. Various projects on integration of systems.
  • PC system management.
  • Enhancement of existing applications.
  • Provision of systems to interconnect with other operators.

Corporate and Regulatory Affairs

  • Annual Tariff Review.
  • Follow up new legislation on telecommunications.
  • Development of interconnect agreements.

Growth Forecast of Basic Services

        % variance
PSTN new connections    3961    +2.2
New mobile customers    24184    +27.6
Minutes of IDD traffic
O/G     5.6x106    +4.3
I/C    -0.58x106    - 0.6

Attach II


Attach III

TEN YEAR DEVELOPMENT STRATEGY

  1. Introduction

    The exclusive services awarded to CTM under this Franchise are carried over the fixed network and the strategy document below covers the development of the fixed network platform.

  2. Future Platform

    New platform designs should be flexible and able to expand to meet demands for new services for many different customer profiles. These platforms are software driven and of modular design. They will enable CTM to test new technologies and offer new services on a small scale to test the market. If the demand changes from one type of service to another, the platform can be adapted within a very short time.

    With advances in Internet and IP technology almost all data platforms now support the TCP/IP protocol. IP based standards for hardware and applications will continue to grow. In the coming years there will be an evolution from circuit based switching to IP based switching.

    Therefore, a new road map has been created to upgrade the CTM current platform. This is a very important guideline for both Engineering and Business development purposes.

    • 2.1    Road Map

      The existing infrastructure and platform has been built up for sometime and it is still the most effective way to provide voice or data only services. System investment in the existing infrastructure will continue but decrease and at the same time a new platform will be built as a second layer that can adapt to the new technology and provide just in time and up to date services to the customers. CTM will employ the modular concept to construct the building blocks for different applications. This will minimise the initial investment cost and make best use of the latest technology.

      The road map for the next platform strategy will start with Broadband services based on Asymmetric Digital Subscriber Lines (ADSL) and Asynchronous Transfer Mode (ATM) switching to provide Fast Internet Access. Once this service has proved successful, CTM will install another ATM switch with a voice interface to provide Voice and VPN services using the IP protocol. With the ATM switch installed, CTM can interconnect with the 3rd Generation Mobile network, which also uses ATM as the switching mechanism. The 3G mobile can then access Internet and obtain other value-added services via this Broadband network.

    • 2.2    Backbone

      The backbone network, which is based on 5DM technology will gradually convert into an ATM based network using Wavelength Division Multiplex (WDM) technology to catty the signal over optical fibre. Broadband switches, initially based on ATM will become the main core switches in the future. The existing voice grade exchanges will be maintained as the most cost-effective way to switch voice circuits and interconnect with the other countries. As the Network Management aspects of IP based switches improve, so we can expect to see a migration of voice services from traditional circuit switched technology to the newer IP based hardware.

    • 2.3    International Transmission

      The growth and demand for Internet and Broadband services will require CTM to make further investments in submarine fibre optic capacity to the U.S.A.

    • 2.4    Access

      For the access network, initially CTM will be using the traditional copper pair to carry the broadband signal. Unshielded Twisted Pair (UTP) cables and optical fibre will supplement this. As more people take advantage of the broadband service CTM will start to offer optical fibre connections to the home.

    • 2.5    Switch

      The existing exchanges and data network will be maintained with suitable upgrades in order to maintain the basic services and to enhance the value-added services. At the same time CTM will start to migrate from the existing system to a new platform without impacting on existing services. The new platform will be based on Asynchronous Transfer Mode (ATM) switches, which provides a better interface for interconnecting with IP, Frame Relay, real-time multimedia and the new 3G mobile services, which are the basis for all future services. Voice and multimedia services can be offered over this platform.

    • 2.6    New services

      With the large bandwidth that is available from ADSL, many new applications can be introduced in the near future based on this technology. Fast Internet Access will be the first application to be rolled out over the Broadband network. Tele-education, remote clinics, tourist information etc. will also be developed.

      The ten year plan for the platform can be considered in three distinct phases as shown in the charts attached. In the first two years CTM will enhance the existing PSTN network as Fast Internet services are introduced and old switches replaced. In years 2 to 5, Multimedia and 3G services on Mobile will grow which will require the build up of a second layer ATM based network. From the 5th year onward, the PSTN switches will become service nodes connected to the core Broadband switch which will also interconnect directly with a range of new services based on Multimedia, Internet and 3G Mobile.

  3. Interconnect Development

    CTM will provide interconnect between its platform and the networks of other telecommunications operations within the framework of the appropriate legislation and regulation policies. To that end interconnect agreements will be negotiated with the competitors. These will cover charging methods as well as the provision of services and facilities for interconnect.

    CTM’s switch and transmission networks will be adapted to prepare for interconnect and billing systems will be upgraded to cater for inter-operator accounting. Number portability will be introduced.

    Service providers will also be given access to the CTM platform under the terms of the law and relevant agreements.

  4. Development of Information Services

    The development of CTM Information Services wilt be driven by CTM business as well as technology development. In order to increase customer satisfaction and reduce operating costs CTM will, continuously enhance its billing systems and other major applications. In the coming years CTM will integrate various individual systems and prepare for interconnection with other operators. CTM will use new technologies, like ATM or Gigabit routers, to upgrade its Local Area Network in order to support Web based applications that will deliver video and sound besides the traditional data delivery. A PC central management system will be implemented to increase business efficiency.

  5. Land and Building

    Depending on the rate of growth of the franchise services and technological developments, CTM may require additional space for its operations particularly land and buildings for office and equipment installations.

    The situation will be monitored so that applications for land and plans for new buildings will be made when required.

    Figure 1 - 10 Year Development Phases


Attach IV

CTM’S TRAINING PLAN FOR 10 YEARS

In the next ten years CTM's workforce is likely to exceed the 1000 headcount. Most of the staff will be locally recruited. The expatriated staff is expected to remain at the present level of 8 people, or will reduce, whereas the number of local staff with tertiary education, which now stands at about 206 will increase. This reflects new demands on the academic education of recruits as well as the availability of higher education provided by the Territory.

As a result of this new environment sponsorship of staff education programmes will gradually be phased out and CTM will focus on providing staff with highly specialised professional training in the following main areas:

Telecommunications Engineering

  • lP Telephony
  • Wireless Communications
  • Submarine Optical Fibre Cables
  • ATM Switching
  • Signalling
  • Teletrafflc
  • Data Network & Transmission
  • Satellite Transmission
  • International Services and Leased Circuits
  • Video Services
  • Digital TV Transmission
  • Satellite Mobile Communications and VSAT
  • ISDN
  • SDH Standards
  • Navigation Systems
  • Interconnect Design, Planning & Dimensioning.

Advanced Information Technology

  • Java, Programming
  • LANS, WANS and Networking
  • Servers, Routers and Internetworking
  • Internet Protocols and Applications
  • Oracle Data Base
  • lntranet and Microsoft NT
  • Network Management and Security.
  • Web Based Technology

Management

  • Contract Management
  • Fraud Management
  • Quality Standards
  • Coaching Skills
  • Team Briefing
  • Financial Management
  • Accounting
  • First Aid, Office Health & Safety
  • Interviewing Skills
  • Project Management
  • Interconnect Agreements
  • Regulatory Accounting
  • Leadership Workshops
  • Management of Resources
  • Negotiation Skills
  • Problem Solving and Decision Making
  • Time Management
  • Report Writing
  • Strategic Planning
  • Communication and Presentation Skills

Customer Services

  • Advertising and Promotion
  • Buying and Selling on the Internet
  • Market Research Techniques
  • Strategies for Product Launching Marketing Telecoms Solutions
  • Communication Skills
  • Customer Care and Retail Sales

Competency Development

  • PC Software Applications
  • Languages

The following resources will be used for the provision of CTM staff training:

CTM Trainer   C&W HKT Trainer   Supplier Trainer   Consultant
In-house   X X X X
C&W HKT premises      X
Supplier premises         X
Hotels. Conferences & Seminars            X

The number of man-hours of training planned for the first year of the period is 31,000.

Over the period of the franchise this figure will evolve and will be influenced by factors such as staff headcount, the education system in the SAR, technological developments and the needs of the business. It is forecast that the volume of staff training provided by CTM could grow to a maximum of 43,000 man-hours per annum.


Attach V

REINTEGRATION RATES

Major Asset Classification

Expected useful
asset life
Years
%

Percentage
Site & Buildings 40 2.5
Building Services fair conditioning, lifts, fire system, etc. 7- 10 10- 14
Exchange Equipment
     Switch Hardware 10 10
     Switch Software 10 10
     Exchange Batteries 7 14.3
     Central Process Unit 5 20
     Value Added Services 3 33.3
Telematics
     Integrated Service Digital Network (lSDN) 10 10
     Automatic Telex Exchange (ATX) 5 20
     Digital Data Network (DDN) 0 20
     Electronic Data Interchange (EDI) 5 20
     Leased Circuit 10 10
     Packet Switching 5 20
Line Plant
     Civil 20 5
     Cables 15 6.7
     Building Block Wiring 5 20
Radio System 10 10
Transmission Equipment 10 10
Sea Me Wee 3 Submarine cable 15 6.7
Vehicles 4-5 20-25
Customer Apparatus
     Payphone and Customer Apparatus 5 20
     Telex Equipment 3 33.3
Office Equipment 5 20
Tools, Test Equipment 8 12.5
Furniture & Fittings 5 20
Information System
     Hardware 5 20
     Software Development 5 20
Multimedia 3-5 20-33.3

Attach VI

BUILDINGS, LAND AND OPERATIONS RELATED FACILITIES TO BE RENTED BY THE CONCESSIONAIRE

To rent from CTT

Location    Annual Rental in $MOP
CTT Building    1.152.391.00
Barra Station    78.750.00
RLU at CTT Building, Taipa    72.187.00
RLU at CTT Building, Coloane    38.410.00
Staff Quarter for DCEO    146.580.00
Total:  1.488.318.00

To rent from the Territory

Location    Annual Land Rental in $MOP
CTM Building, Macau    20.000.00
Telecentro Building, Taipa    55.510.00
Total:  75.510.00

Conditions

  1. The annual rent shall he settled in Macau at the end of each quarter
  2. The rent does not include sewage contribution and taxes
  3. The rent does not include amounts for water, gas. electricity, heating, alt conditioning and cleaning services
  4. CTT shall be responsible for structure and maintenance works of buildings including external piping, machinery, furnaces, etc, as well as external maintenance The concessionaire shall be responsible for internal maintenance well as for the air conditioning of rooms for storage of telecommunications equipment.
  5. The concessionaire is entitled to place signs indicating its presence and may undertake all internal alterations deemed necessary for the operation of telecommunications as per agreement with CTT.
  6. The concessionaire shall not be liable for damages, losses or destruction of buildings, except for reasons of its direct responsibility.
  7. The concessionaire is entitled to renounce the use of the buildings and consequently cease to pay rent and remove its assets, with 6 months prior notice.

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