Telstra Exits Hong Kong Market

By Gary Kim December 20, 2013

Sometimes the interplay between regulatory decisions and business strategy is subtle; sometimes not.

When antitrust authorities prevented AT&T from buying T-Mobile USA, the impact is rather direct, deflecting  AT&T from a domestic growth strategy and implicitly forcing AT&T to look outside the United States for growth.

In Hong Kong, regulators have chosen to take back significant chunks of 3G spectrum and re-auction them, a move that is expected to have the primary impact of enabling China Mobile to acquire its own spectrum in the Hong Kong market.

At other times, market share issues or changes in the level of competition can prompt service providers to respond indirectly to regulator policies. So it is that Telstra is selling its Hong Kong mobile business to HKT, a move that is at least indirectly due to decisions by Hong Kong regulatory authorities to increase the amount of competition in the Hong Kong market.

Hong Kong Communications Authority regulators are taking back 33 percent of the 3G spectrum held by the four current providers, to auction again.

But even HKT is responding to possible regulatory concerns by pledging not to bid for spectrum in the upcoming auction, a step that limits HKT’s competitive position.

Separately, Telstra earlier had decided to exit the Australian landline communications business, selling its assets to the National Broadband Network, the new government-sponsored wholesale broadband access provider in Australia, after unsuccessfully fighting for years to prevent NBN from coming into being.

By surrendering its fixed network, and keeping its domestic mobile assets, Telstra explicitly made Telstra a mobile provider in Australia, and so far, elsewhere in Asia, where Telstra is seeking revenue growth.

The point is that whether regulatory decisions are direct, such as blocking a proposed acquisition or merger, or indirect, such as encouraging contestants to enter or exit markets, regulatory policy shapes communication markets.

As always, for every public purpose, there is a corresponding private interest. So regulatory policies always create winners and losers.

When the Federal Communications Commission allows Dish Network to use its former mobile satellite spectrum to provide Long Term Evolution services, it created equity value worth perhaps $9 billion, just in spectrum rights.

Telstra is leaving the Hong Kong market as a more or less direct response to changes in regulatory policy.

Edited by Cassandra Tucker

Contributing Editor

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