Richard Li Tzar-Kai
Richard Li Tzar Kai is the younger son of Li Ka-shing, a rags-to-riches tycoon known as “Superman” in Hong Kong, his adoptive home. Li Ka-shing in 2012 anointed his elder son, Victor Li, to follow him at the helm of flagship property developer Cheung Kong (Holdings) Ltd, and Hutchison Whampoa Ltd, a conglomerate whose activities span ports, telecoms retailing, energy and infrastructure. But he also vowed to support the business ventures of Richard Li, who is the chairman of phone, pay-television and Internet company PCCW Ltd, formerly Hongkong Telecom.
Consumer worries over Li family's telecoms grip in Hong Kong after CSL deal
Consumers express concerns about fair competition after Richard Li announces HK$19b purchase of CSL New World Mobility
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Li Ka-shing's family will tighten its grip on the city's HK$63 billion telecommunications market with a takeover in mobile phone services announced by Richard Li Tzar-kai that has raised consumer concerns about fair competition, even though industry players have insisted the deal could help cap costs for users.
Industry experts estimate the Li family will control more than 50 per cent of the mobile market and conservatively more than 60 per cent of fixed-line phone services.
"The Communications Authority has the power to block the merger on competition grounds. They should use it," said one comment posted on the South China Morning Post website in response to the news that Richard Li's PCCW-controlled HKT would buy CSL New World Mobility for HK$19 billion.
The purchase, subject to shareholder and regulatory approval and expected to close in March next year, would give HKT a dominant 31 per cent share of Hong Kong's mobile services market through its own "PCCW Mobile" brand and CSL's premium "1010" and mainstream "One2Free" offerings.
With HKT's already preeminent position in fixed line telecoms in the city, consumers are growing concerned about a lack of choice and the risk that prices will rise without significant competitive counterweights to Li family operations that also include Li senior's Hutchison Telecom.
Analysts at Barclays estimate the combined HKT and CSL mobile business in Hong Kong will have a wireless services revenue market share of 39.1 per cent, while Hutchison Telecom will have a 29.6 per cent share.
But industry sources outside the Li-controlled groups say the concentration of ownership for mobile spectrum - the broadcasting frequencies over which mobile services are provided - could turn out to be beneficial for consumers.
Fewer firms competing for mobile spectrum offered for auction by the government should work to keep the value of bids down. Any rise in the cost of purchasing spectrum would likely be passed on to consumers.
The Post's analysis of data from the Office of the Communications Authority (Ofca), the executive arm of the industry regulator, shows the completed CSL deal would give HKT a 41 per cent share of the total allocation of radio spectrum for mobile services, while Hutchison Telecommunications Hong Kong would have 23 per cent.
A report released last month by Ofca consultant Network Strategies estimated that CSL currently holds 24 per cent of the total assigned mobile spectrum in the city. SmarTone has 19 per cent, while China Mobile Hong Kong and HKT have 17 per cent each.
Hutchison Telecom, which operates the second-largest fixed-line network in Hong Kong, said it did not comment on other operators' strategies.
Alex Arena, the HKT group managing director, insisted that the Hong Kong mobile industry would remain "a very competitive market by global standards" after the merger.
"There is zero cause for concern about the Li family holdings in these different [telecommunications] assets," Arena said.
Arena pointed out that CSL's acquisition of New World PCS in 2006 brought the combined entity a market share of about 33 per cent.
He described PCCW, the parent of HKT Trust and its operating arm HKT, as mindful about concerns that Hong Kong consumers might have about the scope of the Li family's telecommunications interests. Since 2000, PCCW has run a regulatory compliance committee, led by independent and non-executive directors, which reviews all its transactions with the Hutchison and Cheung Kong groups.
In its application to the Communications Authority, HKT has offered certain pro-competition measures. These include a commitment to maintain the wholesale services provided by HKT and CSL to resellers, as well as mobile virtual network operators and network-sharing arrangements.
HKT has also offered to return to the government an additional block of 3G spectrum and a commitment not to participate in next year's auction of the 3G spectrum that the government aims to take back.
The Communications Authority announced last month that the government will take back and auction off a third of the 3G spectrum currently held by the city's four existing 3G network operators in the fourth quarter of next year.
China Mobile, which has expressed an interest in bidding for the freed up 3G spectrum blocks, currently leases 3G network capacity in Hong Kong from both HKT and CSL.
In a research note, Barclays said: "We believe market consolidation should drive lower competition and is a material positive catalyst for all wireless operators in the market."