China Motion to add local connectivity to its Hong Kong portfolio

9 Dec 2003

Hong Kong-based telco China Motion Telecom has said that it will launch local voice telephony services within six months to add to its current range of international direct dial (IDD) and mobile virtual network operator (MVNO) offerings. The company’s chief operating officer Li Bin revealed last week that his company was considering the adoption of wireless in the local loop (WiLL) technology to gain access to the ‘last mile’, although he admitted that China Motion would also need to forge network leasing deals with several of Hong Kong’s established fixed line operators in order to provide a reliable service.

China Motion is hoping its planned foray into Hong Kong’s local telephony market will help boost a balance sheet hit hard by the increasingly competitive operating environment on the island colony. Despite reporting a 9% growth in turnover to HKD387 million for the half year to 30 September 2003, the effects of the recent SARS epidemic coupled with high start-up costs at its MVNO venture saw the company record a net loss of HKD27.4 million for the period. China Motion launched its IDD offering under the banner ChinaOne in February 2003 and the service has become the staple of its portfolio, accounting for 64% of turnover in the first half of the year. The company said it handled an average of 179 billion minutes of IDD voice traffic over the six months, but that intense competition had forced it to periodically reduce its tariffs, leading to an operating loss of HKD9.7 million from its retail IDD operations, and a loss of HKD1.7 million from its wholesale IDD service offering. China Motion’s MVNO service has suffered a similar fate, with tariffs falling by 60% since the start of the year, leading to an operating loss of HKD16.3 million. The company claimed 70,000 contract and pre-paid mobile customers at the end of September 2003.

The fixed line telecoms network in Hong Kong is among the most developed in the world. The market for the provision of basic telephony services was fully liberalised on 1 January 2003, marking the end of the country’s seven-year process of opening up the sector to competition. At the end of September 2003 the colony was served by no fewer than 33 fixed telecommunications network service (FTNS) licensees, including former monopoly services provider PCCW-HKT. According to official statistics released by Ofta, the overall market contracted by 2% in 2002 to 3.84 million lines in service, a figure which had fallen to 3.814 million by the end of September 2003. Of this figure, PCCW has a market share of around 82%, and more specifically an 84% share of the residential and 79% share of the business segments respectively. Alternative operators have made significant gains; Wharf T&T (formerly Wharf New T&T) reported that it had bucked the overall downward trend in 2002, adding 100,000 local telephony subscribers to end the year with 340,000, a market share of 9% – and 15% of the business sector. Meanwhile, New World Telecom (NWT) said it had signed up 124,000 customers and Hong Kong Broadband Network (HKBN) reported that in the six months to the end of February 2003 it had increased its fixed line base from 64,000 to 232,000, of which 151,000 were broadband users, up from 130,000, and 73,000 local telephony subscribers; corporate customers stood at 8,000, from 6,000 the previous September.

PriMetrica's Global Comms Database; Ofta