19 July 2018
HKT's group managing director Alexander Anthony Arena was explaining the revamp of the company's brands last year. Photo: HKEJ
HKT's group managing director Alexander Anthony Arena was explaining the revamp of the company's brands last year. Photo: HKEJ

HK telecom operators benefit from market consolidation

Hong Kong has long been renowned for its highly competitive mobile market, which is largely due to the open market policy the government has adopted since 1990s.

However, the market has entered a consolidation stage after market leader HKT acquired CSL last year. Since then, market competition has been easing and operators have gradually increased their tariffs and service fees to cover costs.

Industry figures show how market consolidation benefits the shareholders of mobile operators, rather than the mobile phone users.

Take SmarTone as an example. Its net profit for the six months to December last year jumped 50 percent to HK$466 million from the previous interim period. Hutchison Telecommunications Hong Kong Holdings, which provides mobile services under the brand 3 HK, also saw a rebound in net profit for the second half of last year.

Those glowing results could be the result of the HKT-CSL merger, which took effect in May last year.

The acquisition of the biggest mobile player CSL by the smaller player HKT has had an immediate effect on market competition, even though the merged entity has a market share of less than 40 percent, which is the trigger point for antitrust scrutiny.

As a market leader, CSL has the power to increase its pricing. For example, after it increased tunnel and MTR fees from HK$12 to HK$18 last year, its smaller rivals followed suit phase by phase. CSL also cut its low-priced service fees and focused on higher-margin users to boost the average revenue per user (ARPU).

Mobile data subscription plan is a necessity for most Hong Kong people, whether it’s a cheap 3G plan or an expensive 4G package. However, it seems that mobile operators are raising the entry barrier for enjoying mobile data package.

For example, CSL was the frontrunner in offering HK$60 a month for unlimited low-speed 3G data several years ago. But now the company is encouraging users to upgrade to its 4G plan with a monthly fee more than HK$100.

Hutchison Telecom has also launched its own “upgrading” process by canceling all tariff plans priced below HK$100 per month. This resulted in a net reduction of its user number by 600,000 in the second half last year but a sharp rebound in earnings.

From the technology perspective, the new 4G technology should enable mobile operators to provide better user experience in mobile internet as the network capacity has increased to accommodate more users.

Operators can provide cheaper services to users, thus helping bridge the digital gap between the rich and the poor in society. In fact, several local players like 3 HK, China Mobile and CSL are offering the so-called 4G Lite services to tap the lower-income groups; they offer slower 4G service at a cheaper price with limited data usage.

In the case of 3 HK, the company is offering a new 4G service plan that features 42 Mbps transmission speed starting at HK$138 per month for 1GB data usage. By comparison, the standard 4G plan starts with the same monthly fee but offers only 500 MB data usage.

But 3 HK does not mention the transmission speed of the standard 4G offered. Technically, it should be more than 100 Mbps, but in reality data speed should be in the range of 30 to 70 Mbps.

The launch of such slower speed 4G plans seems a new strategy by operators to force low-spending users who are using cheap 3G unlimited data plans to upgrade to 4G packages for higher revenue and profit.

However, many people still opt for the 3G unlimited data plan simply because of the “unlimited” data usage, which offers them hassle-free mobile internet experience.

As operators start to phase out such unlimited packages, users have no choice but to pay more for limited usage. That could be the result of market consolidation and would surely enhance the profitability of operators.

HKT’s executive chairman Richard Li Tzar-kai owns the Hong Kong Economic Journal, parent of EJ Insight 

– Contact us at [email protected]


Earnings of mobile operators such as SmarTone are surging amid the market consolidation. Photo: HKEJ

EJ Insight writer

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