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SCMP Reporter

The mainland's China Unicom has won the right to operate a mobile-phone service in Hong Kong.

The company is licensed to offer MVNO (mobile virtual network operation) when third-generation services are launched next year, according to Anthony Wong Sik-kei, director-general of the Office of the Telecommunications Authority (Ofta). It also is allowed to operate a mobile service under the existing second-generation standard.

The licence has been granted to China Unicom International, a unit of the parent of Hong Kong-listed China Unicom.

China Unicom, the mainland's second-largest mobile-phone operator, is the third company to receive an MVNO licence. Hong Kong-based Trident Telecom Ventures and China Motion Telecom are the other two.

The licence gives China Unicom the right to lease spectrum from the four SAR mobile operators who won licences in Hong Kong's 3G auction.

China Unicom's move reflects the growing strength of China's telecoms companies and their determination to break into markets outside the mainland, and poses a challenge to Hong Kong's leading operators.

'After China's entry to the World Trade Organisation, communication between China and Hong Kong, as well as overseas, will certainly become more frequent,' a China Unicom spokesman said.

China Unicom said the reason it obtained the MVNO licence was to help its clients in China and Hong Kong.

ABN Amro telecoms analyst Joe Locke said: 'It will be bad news for Hong Kong operators if China Unicom gets aggressive in getting business in Hong Kong.'

He said Pacific Century CyberWorks and Hutchison Whampoa, which had the biggest share of Hong Kong's mobile services, and most of the high-end users, would suffer if China Unicom became aggressive.

However, China Unicom tried to ease concerns by saying: 'Currently, Hong Kong already has six 2G mobile operators and four 3G licensees. The competition here is already very keen.

'The reason China Unicom International applied for the [MVNO] licence is not to compete [in the local market], but to provide better roaming services between Hong Kong and China.'

However, even if China Unicom did intend to capture only those roaming services, it would still be a threat to SAR operators, according to analysts.

Mr Locke estimated traffic between Hong Kong and China accounted for more than 10 per cent of Hong Kong operators' revenues.

DBS Vickers Securities analyst Wallace Cheung said that with its MVNO licence, its local IDD gateway licence and cable-based external fixed telecommunications network services, China Unicom could provide a smooth roaming service in Hong Kong largely unaided.

'China Unicom does not need to rely on domestic carriers such as PCCW to provide backhaul capacity, what it needs to do is lease its point-to-point service from a local mobile carrier, which is rather inexpensive,' he said.

He said revenue from roaming was insignificant to China Unicom's revenue.

Analysts believed the MVNO licence would enhance China Unicom's competitiveness against rival China Mobile, especially in Guangdong province where cross-border telecommunication was busiest.

'With the MVNO licence, China and Hong Kong will form a single network. This will not only allow China Unicom to capture high-end users in China by offering distinctive services, but also allow us to provide cross-border services,' China Unicom said.

Meanwhile, Ofta said it would not require telecoms companies to seek prior approval for mergers and acquisition after meeting strong opposition to the proposal from operators. Mr Wong said operators believed it would hinder their business plans.

Ofta is expecting to finish drafting its merger and acquisition regulations by May.



Unicom wins HK licence