A ripple of surprise ran through Hong Kong's mobile-phone carriers on Monday after they received a letter from the Office of the Communications Authority (Ofca).
The letter noted that after the publication of the second consultation document at the end of last year on the proposed new arrangements for 3G spectrum, there had been a certain amount of comment.
It will be recalled that the government's preferred option appears to involve taking back one-third of each operator's 3G mobile spectrum and auctioning it off to promote competition. Unsurprisingly, this has resulted in howls from the industry.
The government concedes that this will lead to a degradation of the service for a three-year period and will cost the industry about HK$8 billion to HK$10 billion. A number of operators have been speculating in public that this might mean anywhere between HK$20 and HK$40 a month more per customer for various services.
In its letter, the Ofca says that while it favours free speech, it says some remarks "go beyond the normal operation of the market" and appear to breach the competition guidelines of the Telecommunications Ordinance.
In other words, the authority seems to be suggesting that in criticising the government's proposals, the operators were behaving uncompetitively, i.e. price-fixing.
The letter has mystified operators, who are calling it the "gag letter". One said: "It's a reaction by the government, which knows it's put a bad proposal forward and it has been widely criticised in public. It's an attempt to stymie the criticism." In doing so, the operators say, the issue has moved from being purely a telecommunications issue to one about free speech.
The importance of independence
Andrew Strachan, counsel for Hospital Authority chairman Anthony Wu Ting-yuk, kicked off day two of the disciplinary hearing brought against Wu by the Hong Kong Institute of Certified Public Accountants by arguing that the proceedings should be stayed on the grounds that a considerable amount of time had passed since 1995-97, when the events at issue occurred.
The hearing centres on professional misconduct and conflict of interest by the respondents in respect of events surrounding the collapse of New China Hong Kong Group (NCHK). In addition to Wu, who was a former chairman of Ernst & Young in 2000, the other respondents include Ernst & Young and another senior figure at the firm, Catherine Yen Ka-shun.
Strachan stated that in the intervening years both the chairman and deputy chairman of NCHK had died, which meant it was difficult to corroborate the role of Wu, who was a member of the NCHK executive committee.
When it was put to Strachan that there must be others who could corroborate Wu's activities, Strachan said he had no information on that. He further argued at length that although Ernst & Young audited NCHK's accounts, Wu himself was not doing the auditing and therefore the standards of objectivity and independence expected of the auditor did not apply to him. Strachan agreed, though, that Wu was considerably more senior than the Ernst & Young employee auditing NCHK's books.
The market knows best
Hong Kong's IPO drought is easing, with two big mainland companies set to list shortly. China Galaxy Securities is looking to raise US$1.36 billion and Sinopec Engineering is after US$2.24 billion.
Indeed, these two issues are setting records - but not those of the kind that will excite investment banks. Galaxy is setting a record for the highest number of banks involved with an IPO, with 21 so far, beating the previous record set by PICC in December with 17. The more banks on a deal, the less each bank earns. Sinopec Engineering is setting an equally dismal record, by paying the lowest fees for a Hong Kong IPO for many years. It is paying a base underwriting fee of 1 per cent to the arrangers, according to International Financing Review and an incentive fee of up to 0.8 per cent.
Compare this to the 1.96 per cent underwriting fee paid on the Hong Kong tranche of the Agricultural Bank of China's US$22 billion float - the world's largest. But as they like to say in that industry, "the market knows best."