One legislator sees the partial concession on the change of ownership threshold as a compromise 'in technicalities' only Leading telecommunications operators have won over regulators by forcing a major change in a new law governing industry mergers. In a surprise move, the Commerce, Industry and Technology Bureau (CITB) yesterday relaxed the proposed change of ownership threshold for pre-approving telecommunications share transactions for new investors from 15 per cent to 30 per cent. However, the threshold in the draft law on industry mergers and acquisitions - part of the 2002 Telecommunications (Amendment) Bills - will be kept at 15 per cent for existing operators. The concession from the CITB, a government policy-setting unit, represents a U-turn on its stance of the past 18 months and is seen as a compromise in exchange for industry support for the bills. It followed last-minute lobbying from a consortium of eight operators, led by Hutchison Whampoa's two telecommunications subsidiaries - Hutchison Telecom and Hutchison Global Communications - PCCW and CSL. Representatives of the consortium and government officials reached an agreement at a meeting on Wednesday. Richard Li Tzar-kai's PCCW controls about 80 per cent of the fixed-line market, while Hutchison Telecom - owned by his father Li Ka-shing - and Telstra Corp's CSL own half the mobile market. Legislator Sin Chung-kai, who chaired the bills committee, said the agreement removed unnecessary regulation of the industry. 'Ofta [Office of the Telecommunications Authority] should not regulate players who do not need regulations,' Mr Sin said. By maintaining a 15 per cent threshold for existing players, he said the government had 'compromised in technicalities but not in its principles'. 'If Hutchison sold 20 per cent to [Japan's] NEC, that is OK. But if Hutchison bought out PCCW, we would have a serious look at it.' Ofta deputy director-general Au Man-ho and a CITB spokesman said the government had not retreated from its original position. 'The bills' objective didn't change,' Mr Au said. 'We are more concerned about companies owning multiple licences, which would reduce competition.' Ofta proposed the anti-competition measures last year to regulate mergers and acquisitions between telecommunications players and put them to industry consultation. The leading players, except the Wharf group's Wharf T&T and i-Cable Communications, objected to the restriction, arguing the rule would deter new investments in an already depressed climate. They said the industry in Hong Kong was arguably the world's most competitive, with six mobile and five fixed-line players fighting for market share in a population of only seven million. The leading operators formed a united front against the proposed legislation, demanding only deals involving more than 50 per cent of a company's shares should need pre-approval by Ofta. In recent weeks, they reduced their bargaining threshold to 30 per cent. Yesterday, the eight-member consortium welcomed the concession. 'This is a consensus after several discussions among government and Legco members and us.' John Ure, director of the telecommunications research project at the University of Hong Kong, said: 'It is a reasonable compromise that will give more flexibility and cut the red tape that would be involved in [mergers and acquisitions].' On July 9, the Telecommunications (Amendment) Bills will go to a second reading. Michael Reede, partner of the communications practice at law firm Paul Weiss in Hong Kong, welcomed the change. 'The amendment only aligns the rules more closely with international best practice,' he said. British regulators use a 15 per cent merger threshold, while Singapore is proposing to use a threshold of 12 per cent.