PCCW's legal challenge may be tactic to help CSL acquisition, say industry sources

PUBLISHED : Monday, 17 February, 2014, 4:47am
UPDATED : Monday, 17 February, 2014, 5:26am

PCCW's legal action against the government's 3G spectrum clawback plan could be a tactic designed to aid the company's HKT subsidiary in hastening regulatory approval for its planned HK$18.8 billion acquisition of CSL New World Mobility.

That appeared to be the hidden agenda behind the case for a judicial review filed on Friday by PCCW, the media and telecommunications giant controlled by tycoon Richard Li Tzar-kai, industry sources said yesterday.

PCCW spokesman Chan Chi-keung said the suit was "necessary to protect the interests of HKT and its unit holders and customers". The spokesman said the company would not comment further.

"The other operators were surprised by PCCW's application for judicial review in light of the concessions agreed to by HKT to get its merger with CSL New World Mobility approved," one industry source familiar with the case said.

"This puts more pressure on the regulator to approve that deal, without adding any more concessions," a senior market participant pointed out.

The Communications Authority (CA), the industry regulator, announced in November that in the fourth quarter the government would take back and auction off a third of the 3G spectrum now held by four 3G mobile network operators. Their licences expire in October 2016.

SmarTone Telecommunications, HKT, Hutchison Telecommunications Hong Kong and CSL expected automatic licence renewal.

HKT announced in December it would buy CSL New World Mobility and applied for approval. The deal would make HKT, already the biggest fixed-line network operator in Hong Kong, its largest wireless network operator and the biggest holder of the bandwidth needed to provide mobile services.

Post-CSL merger, HKT would also control 49 per cent of the frequency band primed for use in advanced 4G mobile phone services.

HKT has promised to maintain the wholesale services provided by HKT and CSL to resellers and mobile virtual network operators, as well as other network-sharing arrangements.

HKT also offered to return an additional block of 3G spectrum and pledged not to take part in this year's auction of the spectrum the government takes back.

The CA last week completed its public consultation of HKT's purchase of CSL New World Mobility. It received, in general, no objection because industry consolidation is a worldwide trend.