Despite jostling, telecoms sector changes promise exciting future
THE CHIEF EXECUTIVES of Hong Kong's mobile telephone companies had been plagued by the question for almost 10 years; at every new product launch, every press conference and even on company sports days - when will Hong Kong's over-crowded telecommunications sector see consolidation?
Consolidation was widely predicted as the inevitable result of the consumer-friendly but profit-sapping price wars that stemmed from the issuance of six personal communications service licences in 1996 following deregulation of the industry.
Almost a decade later and after millions of dollars had been drained from telecommunications stocks, the prediction came to fruition with the union between CSL and New World Mobility.
But why only this year?
In fact, the CSL-New World merger was only one of four major deals involving operators this year that were all in some way a reaction to the same thing - a sea change that threatens (or promises) to restructure the communications landscape in the next two years.
Hong Kong is playing host to a telecommunications industry that has reached a crossroads.
On the one hand, 3G technology will reach maturity next year with the roll-out of high-speed data packet access (HSDPA) by all four local 3G operators.
Instead of the current download speed of 384 kilobits per second (read grainy video downloads), users will be getting up to two megabits per second (Mbps) next year and up to 14 Mbps as the technology develops.
Operators should then be able to sell more compelling content to consumers eager for their mobile internet to match their experience of home broadband.
Meanwhile, broadband wireless technology - also known as WiMax or WiBro - is also expected to come online in Hong Kong soon after licences are issued late next year.
Faster speeds - perhaps up to 100 Mbps but with an initial trade-off in mobility - have mobile operators fearing the erosion of downloads on their new 3G networks, a fear compounded by the fact licences will most likely be issued at substantially lower costs than 3G licences were in 2001, thanks to the subsequent collapse of the telecommunications boom.
The outlook is further complicated by an emerging trend in the industry known as fixed-mobile convergence.
Operators using a combination of mobile networks, fixed-line and the new broadband wireless technology will compete to offer consumers the entire spectrum of communications services, including fixed and mobile voice calls, fixed and mobile internet, as well as pay-television.
In short, the landscape is changing. No longer will mobile operators have the monopoly on mobile voice calls, or fixed-line operators a monopoly on broadband internet.
Telecommunications companies are already becoming broadcasters and cable operators internet service providers.
More specifically, it means operators looking to survive in the new landscape will need either significant clout both in terms of financial muscle and subscribers, multiple networks to offer the full range of services, or both.
The megadeals announced this year were the beginnings of the jostling for position wrought by these industry changes.
Both the acquisition of Peoples Telephone by China Mobile in October and the CSL-New World merger announced this month fulfilled respective needs for financial and subscriber clout.
Meanwhile, the acquisition of Sunday Communications by fixed-line incumbent PCCW and the privatisation of Hutchison Global Communications by Hutchison Telecom both play to the emerging trend in fixed-mobile convergence.
All of which have so far left SmarTone-Vodafone as Hong Kong's rather attractive Cinderella, with about one million subscribers showing consistent willingness to increase their spending, especially on 3G services.
Cash-rich China Mobile has already been linked as a potential suitor.
In fact, the only sure prediction for next year is that the jostling is far from over. In addition, while consolidation has long been viewed as a boon for investors, industry changes both past and future look best of all for consumers.
Whether it is converged services with Hutchison, mobile television with PCCW or simply faster speeds on 3G, communications technology next year should look more interesting to consumers than for the past many years.
And that is even before we see what broadband wireless can really do.
Jake van der Kamp is on holiday
