Hong Kong spectrum auctions: a review

Hong Kong spectrum auctions: a review

Javier Escribano
Maravedis
Although much attention has been focused on the 800 MHz band in Europe, the 3G auction that recently took place in Hong Kong is also of significance.
 
At the end of 2010, the Office of Telecommunication Authority in HK announced a new auction would be held in February 2011 to release more 3G and 4G spectrum in the 850 MHz, 900 MHz and 2 GHz bands. In particular, new blocks were to be auctioned with a minimum price per 30 MHz block of HK$30 million ($3.9 million) for paired 850 and 900 MHz bands and a HK$15 million ($1.95 million) minimum for 2 GHz bands.
 
The winning bidders were to be granted 15-year licenses and required to provide coverage to at least 50% of the population (near 8 million people) within five years.
 
The auction, which was held on an Internet-based software platform, eventually concluded earlier this month after a total of forty-one bidding rounds over four days.
 
While five mobile and one fixed network operator participated, just two won licenses. The total combined amount paid by the successful bidders was HK$1.9 billion ($243 million) for 20 MHz of spectrum. SmarTone committed HK$0.87 billion ($ 111.5 million) and was awarded 10 MHz (832.5 - 837.5 MHz paired with 877.5 - 882.5 MHz) while the other winner, Hutchison Telephone, paid HK$1.077 billion ($138.1 million) and was also awarded 10 MHz (885 - 890 MHz paired with 930 - 935 MHz).
 
The bidders who failed to obtain licenses were China Mobile, CLS (Telstra's Hong Kong mobile network subsidiary), Hong Kong Telecommunications (HKT) and fixed network operator Hong Kong Broadband Network. According to SmarTone, the new 850 MHz band spectrum acquired will enable the operator to expand its network at lower cost at this frequency band.
 
Of particular relevance is the fact that this auction has set new benchmarks for spectrum auctions in the future. If we compare the prices paid per MHz with the previous BWA auction in HK (in January 90 MHz of the 2.3 GHz, 2.5 GHz bands were sold for HK$1535 million [$ 197 million]), operators are now paying approximately six times higher on average.
 

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