Hongkong Telecom dealt new blow in mobile war

Hongkong Telecom, the telecommunications utility, which makes the biggest contribution to Cable & Wireless earnings, has suffered yet another setback in the British colony where it failed to win one of six franchises awarded to operate the new generation of mobile telephones.

The mobile telephone service has been one of the most lucrative and fast growing of HKT 's operations. Last year the company's mobile telephone customer base grew by 70 per cent. At present there are five mobile telephone networks in Hong Kong, with the largest market share and the most expensive service being operated by HKT.

Its failure to obtain a licence to operate the new generation of PCS or Personal Communication Service mobile phones will severely cut its market share and force HKT to cut prices if it is to remain a serious contender.

Dismayed by its failure to win a license, HKT yesterday announced it would be holding discussions with the colony's regulator to appeal against the decision. However, its chances of success are slim as the political contention surrounding the issue has already delayed the franchise announcement by a year. Government sources last night indicated they had no intention of reopening the debate to give HKT a share of the market.

Most analysts believe that the biggest winner in the license battle was Hutchison Telecommunications, controlled by tycoon Li Ka-shing. Hutchison also controls Britain's Orange mobile service. It is poised to become the market leader from increased capacity through its base stations and can add the new generation of mobile phones to its existing customer base.

As for HKT, news of the failure to win the mobile phone license came just a month after the danger of losing its domestic network telephone monopoly became apparent.

The monopoly deal was supposed to expire in 2006 but political uncertainty may see its stronghold ended much sooner. Meanwhile, HKT's previously highly profitable international network service has lost considerable business after last year's termination of its international monopoly and the threatening launch of three rival networks.

Now that it is facing the chill blasts of competition from every direction HKT may be losing its lustre as the jewel in the C&W crown.