Hong Kong telco HKT (06823.HK) stands to become the city’s largest telecom operator — if only it can gobble up rival CSL New World Mobility Limited (CSLNW).
HKT, a subsidiary of PCCW Ltd. (00008.HK), announced Friday its US$2.4 billion plan to buy back CSLNW from Australia’s Telstra and New World Development (00017.HK) more than a decade after it sold the company.
CSLNW includes 1010, one2free and New World Mobility and its acquisition by HKT is expected to give the companies a combined 31 percent market share in Hong Kong, according to a HKT statement. The group contends that the deal will not raise any major competition concerns, but is this really the case?
HKT said that after the deal is done it will return two 3G spectrum licenses when they expire in 2016 on top of the two the government aims to reclaim from HKT and CSLNW to encourage competition. The offer suggests that HKT is leaving the 3G market behind to focus on 4G, where it is set to be one of two dominant players.
The CSLNW takeover would give HKT 60 MHz of the 4G spectrum while China Mobile (00941.HK) will have 40 MHz. Hutchison Telecommunications (00215.HK) and SmarTone (00315.HK), owned by Sun Hung Kai Properties (00016.HK), will have just 20 MHz of the 4G spectrum each.
China Mobile is well-placed for the next telecommunications generation. It is building its own network at MTR stations so users can have faster 4G services from Hong Kong to Kowloon stations starting mid-February.
It is too soon to tell whether HKT’s deal will lead to further consolidation in the industry, but that hasn’t stopped investors from wondering. SmarTone rose over 20 percent Friday morning and Hutchison Telecommunications was up 12.5 percent. HKT and PCCW, meanwhile, rose a little more than 5 percent for the session.
The government aims to broaden competition in the sector by reshuffling the 3G spectrum held by the four operators. But the HKT deal will make the market even more concentrated, and consumer choice will remain limited.
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