Cheap License Fee May be Good for HK

date: September 20, 2001

DBS Securities says lower 3G license fee may be positive to HK mobile operators, but does not in itself alter industry environment. DBS says risks overshadowing sector include bearish outlook on HK economy, untested 3G business models, keen competition in 2G market, and potential new competition in a few years' time either new 3G licenses and/or alternative technology.

Although 4 HK mobile operators got 3G licenses rather cheaply, their eventual market still depends on how many other operators enter 3G market as "mobile virtual network operators". DBS Securities estimates each MVNO needs to spend about HK$250 million each over 4 years to develop switching and billing systems, and that this CAPEX requirement could limit total number of 3G MVNOs to below 10. Licensees SmarTone plans to spend HK$2 billion on network development, Sunday plans HK$1.5 billion.

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