The real winner in HK’s 3G auction: China Mobile

The real winner in Hong Kong’s 3G auction: China Mobile

10 DEC 2014

NEW BLOG: As expected, just three operators participated in Hong Kong’s auction on Monday for five 9.8-10MHz lots of 1.9-2.2GHz spectrum. Also not unexpected was that the final price per megahertz was just 2.5 per cent above the reserve price.

The Office of the Communications Authority (OFCA) had set a base price at HKD48 million ($6.2 million) per megahertz. The three operators ended up paying a total of HKD2.42 billion ($312 million) for 49.2MHz of paired spectrum, which comes to HKD49.18 million per megahertz.

While the auction wasn’t hotly contested with just three bidders, it did bring in a significant sum for the territory of seven million people. Analysts say OFCA set a fairly competitive reserve price for the 3G spectrum (a SmarTone representative told Mobile World Live the company was happy it didn’t have to pay much above the reserve price).

SmarTone and China Mobile Hong Kong both won two bands of the 3G spectrum, while Hutchison Telecommunications walked away with a single 9.8MHz lot.

China Mobile, which doesn’t have any spectrum in the band, paid HKD970.4 million for two new lots totalling 19.6MHz of spectrum.

SmarTone acquired a total of 19.8MHz of spectrum for HKD980.4 million. Together with the 19.8MHz of spectrum over which it exercised its right of first refusal for, the operator will be re-assigned 39.6MHz of spectrum. The company will have a net gain of 10MHz from its existing spectrum holding in that band, which it plans to refarm to 4G services.

Hutchison paid HKD470.4 million for 9.8MHz of spectrum. Combined with the 19.8MHz of airwaves that it aims to keep, it will be re-assigned 29.6MHz of spectrum. It will maintain the same amount of 3G spectrum.

OFCA called for mobile operators to participate in the auction in September.

Controversially, a year ago OFCA announced it would adopt a “hybrid administratively-assigned cum market-based approach” to re-assign 118.4MHz of paired spectrum in the 1.9-2.2GHz 3G band when the existing licences expire in 2016.

The main reason (unstated) for the ‘re-assigning’ was to allow the entry of the mainland’s 300-pound gorilla, China Mobile, which didn’t have any 3G spectrum holdings in Hong Kong.

Under the approach, the four spectrum holders at the time were offered first right of refusal to be re-assigned two-thirds of their existing holdings. After Hong Kong Telecoms (HKT) acquired CSL in April, it agreed to divest 29.6MHz of its 3G spectrum and not to participate in the new auction. CSL, Hutchison and SmarTone accepted the right of first refusal in August for re-assignment of 69.2MHz of the spectrum. The remaining 49.2MHz of spectrum was made available for auction.

An OFCA representative said that while 29.6MHz out of the 118.4MHz of the spectrum will change hands in October 2016, the incumbents and the new spectrum assignees would have almost two years to prepare for the necessary network reconfiguration and the rollout of their networks.

The spectrum licences will be valid for 15 years starting in October 2016.

Analysts noted that OFCA’s hybrid approach, which avoided creating the uncertainly an open auction for the entire 118.4MHz of expiring 3G spectrum would have, may be a good model for other markets to follow when their long-term spectrum licences expire. These permits may have a set lifespan, but the incumbents generally assume (rightly or wrongly) they will have the right to continue to hold the bands in the future.


Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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