The Telecommunications Authority (TA) announces today (11 October 2002) the arrangement to waive the submission of performance bonds due in October 2002 from the four licensees for third generation (3G) mobile services. The bonds are in respect of the sixth licence year.

"We have decided to give the 3G licensees a one-year waiver on the submission of performance bonds to assist the industry in response to changing market conditions. Our decision is taken after careful consideration of needs of the industry and the steps other Governments have taken to help their 3G licensees," said a spokesperson of the Office of the Telecommunications Authority (OFTA).

The 3G licensees have, on the grant of the licences in October 2001, either submitted performance bonds to guarantee the payment of the spectrum utilization fee (SUF) for the first five years, or paid upfront the SUF for the first five years. Therefore, the waiver of the performance bonds due this year means that the Government has in hand guarantee for the payment of the SUF or payment thereof for the next four years, rather than for the next five years.

"The waiver does not affect Government revenue as the licensees are still required to pay the SUF for all years within the 15-year licence period," continued the OFTA spokesperson.

By accepting the waiver, the four licensees would not be required to submit on 22 October 2002 a performance bond to guarantee payment of the SUF of HK$60.124 million for the sixth licence year to be called in the event of serious default. However, those who have not done so already would still be required to pay HK$50 million for the SUF of the first licence year by 22 October 2002.

Background

On 22 October 2001, the TA awarded four 3G licences to Hong Kong CSL Limited, Hutchison 3G HK Limited, SmarTone 3G Limited and SUNDAY 3G (Hong Kong) Limited.

2. Under the present licence conditions, the four 3G licensees must:

1. pay a SUF for each year - for the first five years, the annual SUF is HK$50 million. From the sixth year onwards, each will pay the higher of a rising minimum guaranteed SUF, or 5% of their network turnover for the relevant year; and
2. submit a five-year rolling guarantee by way of a performance bond by a qualifying bank for each of the annual minimum SUF - before the licensees took up their licences on 22 October 2001, they submitted a HK$250 million bond, which is equivalent to the SUF payment of the first five years.^Note On 22 October 2002, each licensee must submit a performance bond for the additional bonded sum for the sixth year, which is HK$60.124 million. The Government should hold, as from 22 October 2002, a five-year rolling guarantee covering the second to the sixth years.

3. By accepting the waiver, the four licensees would not be required to submit a performance bond of HK$60.124 million each on 22 October 2002. Their licence conditions will be amended by mutual consent.

4. The decision to waive the submission of performance bonds for one year is taken after considering very carefully a request from the industry. The Government extends the same waiver to all four licensees in order to maintain a level playing field.

Office of the Telecommunications Authority
11 October 2002

Note: Instead of offering a performance bond, SUNDAY 3G offered an upfront payment of HK$250 million to the Government to cover the SUF for the first five years. The Government accepted this upfront payment and announced in a press release issued on 22 October 2001 (see press release in ITBB's website https://www.info.gov.hk/gia/general/200110/22/1022241.htm).