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  • Apr 20, 2014
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Hong Kong telecoms giant mulls response to government's spectrum shake-up

HKT chief Alex Arena expects industry players to review hundreds of pages of documents after government moves to reshuffle bandwidth

PUBLISHED : Thursday, 28 November, 2013, 4:17am
UPDATED : Thursday, 28 November, 2013, 9:16pm

HKT, operator of the largest fixed-line telecommunications network in Hong Kong, expects the industry to draw up a thorough response to the government following its decision to reassign existing 3G mobile spectrum allocations.

"I don't want to start shaking spears at the moment, but I think the industry has to study what it is that the government and its consultant have put forward," group managing director Alex Arena told the South China Morning Post.

Asked about the prospects of a legal challenge being filed against the spectrum reassignment, Arena said HKT and the other incumbent 3G network operators still needed to review about "several hundred pages" of documents from the government.

"The industry as a whole is probably going to take a view on it, and where that leads I don't know yet," he said. "This is not an instant thing. Our 3G spectrum licence does not expire until [October] 2016. We're not forced to do something by some drop-dead date … we need to work out properly, thoughtfully how we take that forward."

The Communications Authority announced on November 15 that the government would take back and auction off a third of the 3G spectrum held by each of the city's four incumbent 3G mobile network operators in the fourth quarter of next year.

The government, however, will grant the operators - SmarTone Telecommunications, CSL, Hutchison Telecommunications' Three Hong Kong and PCCW's HKT - the right of first refusal to be reassigned two-thirds of the spectrum in the 1.9-2.2 gigahertz band they now hold.

Arena, who served as director-general of the former Office of the Telecommunications Authority from 1993 to 1997, reiterated the industry's position that the government's "hybrid" approach to 3G spectrum renewal would cause serious disruption of mobile services and burden consumers with high prices.

Based on HKT's calculations, he said the price increase would be "HK$8 to HK$25 or more" for each customer every month. That would be on top of the estimated HK$20.90 in monthly charges related to spectrum, numbering, SIM card, base stations, licences and compliance costs, as well as MTR and tunnel operators' fees that each mobile subscriber already pays.

"The higher those auction prices go, then the more it will have to be passed on to consumers," Arena said.

In a report, Barclays said the price of HKT Trust and HKT's share stapled units had fallen in the past few weeks - "primarily driven by uncertainty over 3G spectrum renewals … and the impact on yield".

But Arena said 3G spectrum fees to be paid by HKT would be treated as investment and "won't affect the calculation of adjusted funds flow", the measure on which the cash distribution to a business trust's share stapled unit holders is based. Its adjusted funds flow in the first half of this year reached HK$1.48 billion.

"HKT will likely finance the spectrum payments through debt," the Barclays report said.

HKT's unit price fell 0.15 per cent to end at HK$6.55 yesterday.

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