Lawmakers have given initial support to the unique way third-generation (3G) mobile licences will be awarded. But the Government was warned to be extremely cautious as members confessed they could not fully understand the complexities. The Government has suggested a merit test for potential operators followed by public auction. The winning bidders will pay a flat annual fee for the first five years followed by a percentage of their 3G network turnover as royalty. The four operators that offered the highest percentage of royalties to the Government will win the licence. The Secretary for Information Technology and Broadcasting, Carrie Yau Tsang Ka-lai, told the Legco information technology panel that Hong Kong would probably be the first to adopt such an approach. 'We are, so to speak, the pioneer as far as the framework design is concerned,' he said. It is hoped the licences will be awarded in the middle of the year after subsidiary legislation governing auction details is passed by lawmakers in April. Deputy Secretary for Information Technology and Broadcasting Eva Cheng said some potential operators had been considering which part of Asia to invest in. She said they had indicated that Hong Kong's hybrid method was attractive. Emily Lau Wai-hing of The Frontier said the option was acceptable given lacklustre market conditions. 'But this is such a new thing and the whole world will be watching. You must be very cautious or else it will turn into a mess.' Non-affiliated member Eric Li Ka-cheung, who declared himself a non-executive director of SmarTone Telecommunications, said he expected it would be difficult for interested parties to make their bids. 'One may not be able to predict accurately the turnover in future,' he said. Director-General of Telecommunications Anthony Wong Sik-kei said there would be clear guidelines to prevent licensees from evading royalties. He said details like whether existing operators would be allowed to form another company to bid for a licence would be spelled out later.