Today marks an important milestone for the development of Hong Kong's telecommunications industry, Secretary for Information Technology and Broadcasting, Mrs Carrie Yau, said.
Speaking at a press conference after the completion of the pre-qualification process of the third generation mobile services (3G) auction in Hong Kong today (September 19), Mrs Yau said Hong Kong was well positioned to offer cutting edge 3G services and content.
Four applications for 3G licences in Hong Kong were received and in accordance with the rules set out in the Information Memorandum which provided guidance for the 3G spectrum auctioning. The four bidders have each been provisionally awarded a licence at reserve price, i.e. five per cent royalty subject to a minimum payment of HK$50 million for each of the first five year, and rising minimum payments from year six onwards.
"We welcome the result of this exercise because both the number of licences and the price have been determined by the market," Mrs Yau said.
"Our auction design which aims to ease the financial burden for licensees is quite unprecedented. It is an efficient, fair and transparent way of awarding licences. We have achieved our objectives," Mrs Yau emphasized.
The four provisional successful bidders are:
When asked to comment on the proceeds to Government, Mrs Yau said, "Our primary aim of holding an auction was not to maximize Government revenue. On the total proceeds, if you use a discount rate commonly adopted by market analysts, say 12.5 per cent, the income for Government for issuing four licences is at least HK$1.9 billion, based on the minimum guaranteed payments Government will receive."
The Government's policy objectives in the 3G licensing exercise are to promote the development of the industry in Hong Kong, to protect interests of consumers and to maximize benefits to the economy as a whole.
Taking into account the current market situation worldwide and the characteristics of the Hong Kong market, the Government adopted a hybrid method for the issue of four 3G licences. The innovative licensing approach involved a pre-qualification process followed by spectrum auctioning which was carried out on the basis of royalty percentage, subject to a minimum guaranteed payment.
The Government also spearheaded the introduction of an Open Network Access (ONA) framework in which 3G licensees have to make available up to 30 per cent of the capacity of their networks for use by non-affiliated service providers. This will ensure a vibrant and open 3G applications and service market.
Background
3G is the next generation of mobile telecommunications, which will allow mobile access to personalized multimedia services, anytime, anywhere. It should create enormous opportunities for both network operators and providers of content and service applications. Small innovative enterprises should have great potential in this market.
Pursuant to section 32I of the Telecommunications Ordinance (as amended by the Telecommunications (Amendment) Ordinance 2001) and the Regulation ("the Gazette Notices") by publication in the Gazette, the Secretary for Information Technology and Broadcasting specified the minimum fees (i.e. the reserve prices together with the bidding schedule) and the Telecommunications Authority specified the terms and conditions for 3G auction on July 18, 2001. An Information Memorandum was also issued on the same day to provide guidance for prospective bidders for the 3G spectrum auctioning. Interested parties were invited to submit their applications for 3G licences on September 17 & 18, 2001.
The Government also announced on the same day a reserve price of five per cent of royalty payment based on network turnover, with a flat minimum annual payment of HK$50 million for each of the first five years and rising minimum annual payments from year six until year 15.
Following the completion of the first phase of spectrum auction, the second phase auction will be held if there are material connections among the provisional successful bidders, and these bidders fail to submit an irrevocable undertaking for disconnection.
The third phase auction will be held to decide the allocation of specific spectrum to successful bidders.
It is expected that the three-phase auction would be completed by September or October 2001. The Government aims to issue the four 3G licences by the end of 2001.
End/Wednesday, September 19, 2001
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