ITEM: PCCW is fighting back against regulator plans to sell off some of its 3G spectrum.
As you’ll recall, Hong Kong’s Office of the Communications Authority announced plans late last year to take a third of 2.1 GHz spectrum from the city’s four 3G licensees and auction it off to a new licensee (which would most probably be China Mobile) when the existing licenses expire in 2016.
All four 3G licensees – PCCW, CSL, SmarTone and 3 HK – objected strenuously to the plan, claiming the move would impact service quality and hurt consumers.
Last Friday, according to the South China Morning Post, PCCW mounted a legal challenge to the ruling, filing an application for judicial review to force the government to reconsider the decision:
The company claims the authority made an "elementary error" when it decided that an auction was necessary.
The company also contends that there was a "legitimate expectation" that its licence would be renewed.
"From the outset of modern regulation of mobile telephony, there has been a practice of renewing fixed-period spectrum licences upon expiry so long as efficient use is being made of the spectrum in question," it says.
"By forcing HKT to surrender part of its 3G spectrum holdings rather than renewing HKT's licence in full … the authority has frustrated HKT's and PCCW's substantive legitimate expectation of licence renewal," the application says.
I am not a lawyer (to coin a phrase), but it's hard to imagine the court ruling in PCCW's favor – not if its argument is that OFCA should renew its license simply because that’s how it’s always been done in the past.
There are other factors as well – such as PCCW’s claims that cellcos were excluded from the original study that led to OFCA’s initial proposal. But even so, that’s not a strong argument for reconsideration. Even if PCCW wins and forces OFCA to reconsider the policy decision, the regulator was so unimpressed with the industry’s commissioned studies arguing against it that it's unlikely to reach a different conclusion.
If nothing else, it’s hard for PCCW to make a case that OFCA is robbing it of badly needed spectrum when the telco has already announced a deal to buy rival CSL, which owns more mobile spectrum (for 2G, 3G and 4G) than any other cellco in Hong Kong. If the deal is cleared, it will give PCCW control of almost half of the city’s 4G spectrum alone.
In fact, PCCW has already offered several concessions to help the deal pass regulatory scrutiny – including a promise to surrender an additional chunk of 3G spectrum from both HKT and a CSL, and to stay out of the subsequent reauction.
Interestingly, some sources are reportedly alleging that PCCW’s true motivation for filing the lawsuit is to pressure OFCA to greenlight the CSL deal, according to another SCMP report on Monday:
"The other operators were surprised by PCCW's application for judicial review in light of the concessions agreed to by HKT to get its merger with CSL New World Mobility approved," one industry source familiar with the case said.
"This puts more pressure on the regulator to approve that deal, without adding any more concessions," a senior market participant pointed out.