The Evening Star. THURSDAY, MARCH 17, 1932. THE INVESTOR’S RISK.

Evening Star, Issue 21054, 17 March 1932, Page 10

The Evening Star. THURSDAY, MARCH 17, 1932. THE INVESTOR’S RISK.

The headquarters of the Pacific Cable Board are being removed from Wellington to Auckland. This involves making the latter place the terminus of that cable, and it is announced that the change is being made in tho interests of economy. Tho Pacific Gable Board is now associated with Imperial and International Communications Limited, with which is intimately related Cables and Wireless Ltd. The position of this latter concern —according to a London message which it had tho felicity of transmitting to Australia and New Zealand on Sunday last—- “ promises to develop into a City scandal,” and the ‘Economist’ declares that its stockholders ought , to be told the true position, for its “fantastic over-capitalisation ” must be rectified at once. Over-capitalisation, tho besetting sin of promoters whereby many otherwise sound concerns have been crippled or murdered, is being disclosed in the reports of many companies listed on the London Stock Exchange, but in this particular case there should have been no such “ramp,” seeing that the merger of the cable and wireless services of the British Empire had the official blessing of the Governments concerned. It is over four years since the delegates to the Imperial Wireless and Cables Conference assembled in London to examine the situation due to the competition of beam wireless with the cable services. During that conference the cable-wireless merger between the Eastern and Associated Telegraph Companies and Marconi’s Wireless Telegraph Company was announced. The conference, thus relieved of having to negotiate with eight different authorities in tho sphere of communications, some private, some public, and some a mixture of both, approved of the arrangements made, being fortified therein by the recommendations of “ expert Government officials ” after supposed close scrutiny. Tho merger was a complicated affair. The public owns the stock of Cables and Wireless Ltd., which owns tho cable companies and Marconi, which in turn own the operating company,

Imperial and International Communications Ltd. This operating company, none of whoso shares are in the hands of the public, has been showing most disappointing profits of about 1 per cent., this falling short by over £700,000 of the annual amount they were expected to show. The result Is that shareholders in Cables and Wireless Ltd. are going without any return except from tho preference shares, The share issue, preference and two groups of ordinary stock, amounts to over £51,000,000. This company provides the facilities for 'communication, but the operating company, ■ whoso capital is £00,000,000, having cut rates to meet commercial and Government competition, is now approaching the official Advisory' Committee on the matter of increasing the rates, for, its directors urge, “ the communications services of the Empire cannot continue indefinitely to ho conducted at a loss, as on tho basis of present traffic seems to he the probable outcome of the year 1931.” It is quite possible that world trade Stagnation is responsible for disappointing returns. This excuse, however, is not accepted by critics of many postwar issues on the London market. In this case they express condolence with the innocent public who, on the strength of the report of the Imperial and Wireless Conference of 1928, put their money into a concern whose stocks since 1929 have shown a depreciation in market value amounting to over £35,000,000. This fall in itself shows. that Cables and Wireless was grossly over-capitalised. Tho British investing public has suffered many blows in the past four years. There was tho Hatry group, followed by tho lloyal Mail Steam Navigation group, and now the Cable and Wireless affair, not to mention Mr J. T. Lang’s default on behalf of the New South Wales Government. It is small wonder that mammoth sweeps command such support, or that the art union craze and State lotteries are openly advocated in quarters where one would hardly expect it.