Telecoms giant's next move may impact Hong Kong smartphone market

Losing its appeal against Apple for alleged anti-competitive practices now somewhat moot for HKT following approval of CSL acquisition

PUBLISHED : Wednesday, 07 May, 2014, 1:08am
UPDATED : Wednesday, 07 May, 2014, 2:01am

PCCW chairman Richard Li Tzar-kai is back as Hong Kong's telecommunications kingpin, but he has more work to do.

HKT, the tycoon's PCCW-controlled wireless and fixed-line network operator, is still smarting from a recent legal setback, despite winning regulatory consent last week for its US$2.43 billion takeover of rival CSL New World Mobility.

The government's Telecommunications Appeal Board on competition provisions has rejected HKT's case against Apple for alleged "anti-competitive" practices, marked by "locking" the subscriber identity module (SIM) card for the iPhone 5.

It ruled last month that Apple Asia, the US firm's regional unit named in the case, neither imposed a SIM-lock "as that term is currently defined in the current [government] policy statement on SIM-locking" nor engaged in "anti-competitive practices prohibited by Section 7K (3)" of the city's Telecommunications Ordinance.

The HKT case was referred back to regulator the Communications Authority, which was ordered to make its decision by July 1 this year.

A HKT spokesman said the company was "disappointed" because "the Appeal Board did not make an interim direction itself", but appreciated the "firm deadline set for the regulator to consider and decide the competition issues raised in this case". He said the Appeal Board also called on the Office of the Communications Authority, the regulator's executive arm, to issue an updated SIM-lock statement.

"This is an important consumer protection and competition issue, and we support the initiation of a consultation with the industry and related parties as soon as possible," the HKT spokesman said.

HKT initiated the judicial review early last year against regulator the Communications Authority for not acting on the complaint it filed in 2012 against Apple Asia.

The operator alleged that the SIM-lock has kept the iPhone 5 - including the iPhone 5s and iPhone 5c models released late last year - from being connected to its 4G network. Its subscribers can only connect those devices to its 2G and 3G networks.

A telecommunications industry source described the Apple SIM-lock issue as "probably moot" because of HKT's merger with CSL, a local carrier-partner for the iPhone, and Li's return to the top of the city's HK$63 billion telecommunications market.

The source said the more relevant development to watch out for is the larger HKT's action when Apple launches its next iPhone later this year.

Technology research firm IDC said the iPhone was Hong Kong's top-selling smartphone last year. Market researcher GfK said 5.5 million total smartphones were sold in the city during that year.

HKT, which has publicised its legal actions against the regulator's 3G spectrum reassignment plan and its SIM-lock case, had recently been quiet about those topics before the CSL deal's approval.

The HKT spokesman said no publicity was needed for its withdrawn 3G spectrum case.

"We decided not to expend our resources for the benefit of the industry as a whole when the other [3G spectrum] licensees appeared unprepared to do so."