PCCW Throws Spanner in Spectrum Works

It's another tangled tale from the fractious Hong Kong wireless market.

This time it is heavyweight PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) suing the regulator over its scheme to take back 3G spectrum -- despite having already promised to surrender its own 3G frequencies.

The back story is that, against the wishes of the operators concerned, regulator Ofca ruled in December that it would claw back a third of all 3G spectrum when the licenses expire in October 2016.

PCCW, the dominant player in fixed-line but one of the smaller mobile operators, had been one of the most vocal critics of the plan. Just before Christmas, it moved on the city's second-largest cellco, CSL, sealing a deal to buy it for $2.43 billion. (See Spectrum Strife in Hong Kong and CSL Sale Sparks Hong Kong Speculation.)

As a sweetener, PPCW offered to hand back all of its 3G frequencies if the deal were approved.

But rivals think that is nowhere near enough. They point out that the combined PCCW-CSL outfit will own 49% of the city's 4G spectrum and 34% of the 3G airwaves, leaving an average 16.5% for each of the rest.

Executives from two operators told Light Reading they saw the PCCW suit as an attempt to pressure Ofca into hurrying its decision.

In Ofca's consultation on the CSL deal, one operator, SmarTone Telecommunications Holdings Ltd. (Hong Kong: 0315), argued that the regulator should rule PCCW as holding significant market power. The merged company would be dominant in every major segment -- fixed-line voice, broadband, pay TV, and mobile.

PCCW said in a statement that it had filed the case "in order to protect the interests" of its shareholders.

— Robert Clark, contributing editor, special to Light Reading