HK Says Mobile Carriers Violated Competition

The Hong Kong government today announced it found that mobile phone operators in the territory violated competition when they simultaneously modified rates earlier this month.

The Office of the Telecommunications Authority (OFTA) said in a report that the way tariff changes were made on Jan. 2 violated competition requirements in their licenses. All six of the territory's mobile carriers announced similar price changes at the same time, with rate hikes of HK$20 (US$2.57) per month on some types of offerings and reductions of HK$50 on others.

One carrier, Cable & Wireless HKT CSL Ltd. (CWHKT), the Hong Kong division of Cable and Wireless plc, raised tariffs only HK$10 per month, OFTA said.

But CWHKT today denied the charges made by OFTA. Not only did the company not rise prices, it in fact lowered them, CWHKT said in a statement.

Meanwhile, OFTA reported today that all the carriers had agreed to rescind the price changes. It did not issue a proposed directive that would have demanded the changes be dropped, but did release a warning to the carriers to make sure they comply with their license obligations in the future.

The fact that the changes were similar and had been announced at the same time had raised suspicion at the agency, OFTA said. A subsequent investigation found evidence that executives had held discussions before the rate changes that "could remove in advance uncertainty as to the behavior of other carriers," the report said.

The revelations of price-fixing caused a sensation in one of the world's hottest mobile communications markets. There were more than 3.6 million mobile handsets for the territory's approximately 6.7 million residents in October 1999, according to OFTA. That reflects nearly 800,000 new handsets since December 1998, the agency reported.

Whereas Hong Kong's fixed-line phone market is still dominated by the incumbent carrier, CWHKT, the mobile market is hotly contested. Competition for fixed-line voice service as well as data services is expected to heat up after six new broadband licensees launch their services in the coming months. (See "Update: HK Grants Broadband Licenses," January 19.) The six licensed operators of mobile-phone networks are CWHKT, Hutchison Telephone Co. Ltd., Mandarin Communications Ltd. (operator of the Sunday service), New World PCS Ltd., Peoples Telephone Co. Ltd., and SmarTone Mobile Communications Ltd.

Cable and Wireless plc, in London, can be contacted at +44-171-315-4000, or at http://www.cwplc.com/. C&W's Kong Hong division, Cable & Wireless HKT, can be reached +852-2883-0828, or at http://www.cwhkt.com. SmarTone, in Hong Kong, can be reached at +852-2880-2688, or at http://www.smartone.com.hk. Hutchison Telephone, in Hong Kong, can be reached at +852-2128-2128. Mandarin Communications, in Hong Kong, can be reached at +852-2113-8000, or at http://www.sunday.com. New World, in Hong Kong, can be reached at +852-2131-1238. Peoples, in Hong Kong, can be reached at +852-2945-8888, or at http://www.peoples.com.hk. OFTA can be reached at http://www.ofta.gov.hk.

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