Communications Authority move on Richard Li telecoms purchase likely to delay approval

Appointment of consultant likely to delay approval for Richard Li to buy CSL New World Mobility amid fears over market dominance

PUBLISHED : Thursday, 02 January, 2014, 12:24am
UPDATED : Thursday, 02 January, 2014, 1:44am

The Communications Authority has ramped up its review of a HK$19 billion telecoms takeover deal by Richard Li Tzar-kai in a move that will delay completion of the planned acquisition of CSL New World Mobility by his PCCW-controlled HKT unit.

A government source told the South China Morning Post that a consultant had been hired by the regulator, which has the power to block the deal on competition grounds, to investigate concerns that the transaction would give Li too much power in the city's HK$63 billion telecommunications market.

Due to the complexity of the deal and the time needed to assess comments from the consultant, it is likely that the government review will take more than three months, the source said. HKT had hoped to complete the deal by March.

The Communications Authority is also expecting comments from other telecom operators during a one-month public consultation that began last week.

The combined market share of HKT and CSL - which own the brands PCCW-HKT, 1010 and One2Free - in the local mobile market would be 31 per cent in terms of subscribers and 38.3 per cent of spectrum, the broadcasting frequencies over which mobile phone services are provided.

"In the local guidelines or laws, it isn't stated how big a percentage [of market share] would be deemed acceptable," the source said.

When contacted by the Post, a PCCW official said the company had no comment beyond that made at a news conference last month to announce the deal.

Alex Arena, the HKT group managing director, insisted then that Hong Kong would remain "a very competitive market by global standards" after the merger.

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.

Local precedents supported the merger, the government source said, as regulators have approved transactions giving market share of more than 40 per cent to combined entities.

Industry experts estimate the Li family will control more than 50 per cent of the mobile market and almost 70 per cent of fixed-line phone services if the transaction goes ahead.

Consumers are growing concerned about a lack of choice and the risk that prices will rise.

Consumer Council member Thomas Cheng said the competition law would not consider the family links. "Competition law counts on an undertaking basis, not on a family basis. HKT is technically a different company from Hutchinson Whampoa. So they will be counted separately," said Cheng.