Players in the crowded Hong Kong market may finally get a little elbow room, as Hong Kong Telecommunications Ltd. announced its wholly owned subsidiary, Hongkong Telecom CSL, plans to acquire full ownership of Pacific Link Communications Ltd.
Hongkong Telecom signed a non-binding Memorandum of Understanding with First Pacific Co. Ltd. The MoU lists a cash payment of about $371 million to First Pacific for Pacific Link, Hong Kong’s fourth-largest mobile phone operator. Hongkong Telecom is Hong Kong’s largest mobile phone carrier.
The consolidation is considered long overdue, say analysts who feel the Hong Kong market has been supporting too many players for its size for far too long.
Eight cellular operators and 11 networks currently operate on several different standards in the relatively tiny playing field. Global System for Mobile communications network operators include Hongkong Telecom, Hutchison Telecommunications Ltd. and Smartone Mobile Communications Ltd. Pacific Link operates a Digital Advanced Mobile Phone Service. Hutchison also operates a personal communications services Code Division Multiple Access-based network. Other PCS providers include Mandarin Communications, People’s Telephone, New World PCS and P-Plus Communications.
The acquisition would add Pacific Link’s 270,000 subscribers to Hongkong Telecom’s current customer base, bringing its total customers to more than 800,000. The addition of Pacific Link’s networks also would make Hongkong Telecom the first operator of offer fully global roaming, as the company would then own three digital networks: GSM 800 MHz and 1900 MHz networks, as well as a D-AMPS network. The company provides GSM automatic roaming to 51 countries and recently expanded roaming coverage to Japan.
“This is an important acquisition, which will enable us to strengthen and grow our mobile business and to offer our customers enhanced quality and increased range of services,” said Linus Cheung, chief executive officer of Hongkong Telecom.
Manuel Pangilinan, managing director of First Pacific, said “We have taken the view that the interests of shareholders, staff and customers are best served by consolidating our operations with those of Hongkong Telecom.”
This is but the first casualty expected in the war for market share in Hong Kong. As the other PCS providers prepare their commercial service launches, price wars for hardware and monthly rates are expected to escalate. In fact, the first shots already have been fired, as prices have begun to dip below cost. The long-term view is that the Hong Kong market will ultimately consolidate to only a few surviving operators.
The MoU transactions in received approval by the Hong Kong Office of the Telecommunications Authority, but the deal remains conditional.
