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Hong Kong Government Merciful To 3G License-Holders

by Mary Swire, for LawAndTax-News.com, Hong Kong

02 September 2003


Hong Kong's Telecommunications Authority announced over the weekend that it would waive the submission of performance bonds due in October 2003 from the four licensees for third generation (3G) mobile services.

"We have decided to give the 3G licensees another one-year waiver on the submission of performance bonds to assist the industry in response to changing market conditions. Our decision is taken after careful consideration of needs of the industry and the steps other Governments have taken to help their 3G licensees," said an OFTA spokesperson.

"The extension of waiver for one more year is an exceptional treatment unlikely to be offered next year in respect of the performance bond due in October 2004," continued the spokesperson.

When the licences were granted in October 2001, the 3G licensees either submitted performance bonds to guarantee the payment of the spectrum utilization fee (SUF) for the first five years, or paid upfront the SUF for the first five years. In October 2002, the TA granted the 3G licensees a one-year waiver on the submission of further performance bonds. Therefore, the extension of waiver of performance bonds due this year means that the Government has in hand guarantees for the payment of the SUF or payment thereof for the next three years.

"The waiver does not affect Government revenue as the licensees are still required to pay the SUF for all years within the 15-year licence period," continued the OFTA spokesperson.

By accepting the waiver, the four licensees would not be required to submit on 22 October 2003 a performance bond to guarantee payment of the SUF of $60.124 million for the sixth licence year and $70.249 million for the seventh licence year to be called in the event of serious default. However, those who have not done so already would still be required to pay HK$50 million for the SUF of the second licence year by 22 October 2003.

The licensees are: Hong Kong CSL Limited, Hutchison 3G HK Limited, SmarTone 3G Limited and SUNDAY 3G (Hong Kong) Limited. Instead of offering a performance bond, SUNDAY 3G offered an upfront payment of HK$250 million to the Government to cover the SUF for the first five years, which the government accepted.

Hong Kong's economy shrank 3.7 per cent in the second quarter as the city's jobless rate climbed to an all-time high in July, weakness which is expected to dent take-up of the 3G service. Hutchison Whampoa, which has bravely gone ahead with the launch of its European 3G services, has pushed back the start of its 3G service in Hong Kong by about two months, to October. Other licensees have also yet to launch services in the SAR.


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