Price war looms as PCCW given go ahead to set charges

11 Oct 2004

Hong Kong’s administration is proposing to allow the country’s former monopoly, PCCW-HKT, to set its own charges for its core fixed line business, in a move which could spark off a price war in the Special Administrative Region (SAR). According to the Financial Times, the Office of Telecommunications Authority (Ofta) is suggesting that PCCW be awarded a new type of fixed line licence which would remove the need for it to gain regulatory approval for price changes. Since the SAR’s fixed line market was liberalised in 1995, PCCW has been losing market share to newcomers which can entice users by offering lower tariffs. Although its rivals are free to set their own prices, the incumbent is required first to obtain Ofta’s approval before changing tariffs – a process that can take up to 45 days. The scheme was put in place to let newcomers better compete with the former monopoly, but Ofta claims that PCCW has seen its market share whittled away progressively to 70% today. However, industry watchers fear that giving PCCW the freedom to cut tariffs could trigger a price war.