Hobson’s Choice

The South China Morning Post’s Jake van der Kamp warned last week against opening the Hong Kong telecoms market up to a fifth mobile network. In his view, consumers’ interests will be best served by allowing the existing four operators to renew their licences in 2016; that way, the four have a continued incentive to invest in their networks and compete hard on pricing for market share. If a fifth player wants to get in, it can pay the going rate for one of those licences. That’s how other countries do it. Because the 3G radio spectrum is full, the only way to issue a fifth licence is to take bandwidth away from the existing operators – and then one day your bills go up and you can’t get a signal on the MTR.

If this is so, why would the Hong Kong authorities issue a fifth licence? Because, the columnist says, powerful state-owned China Mobile wants a slice of the action here. (It currently has to lease capacity from the other four service providers to provide roaming service to the millions of Mainlanders passing through town on their binge-shopping trips.) In other words, this is Beijing leaning on the Hong Kong government in an area where the latter is supposed to have full autonomy.

There’s another way of looking at it. MarketWatch’s Craig Stephens sees this as an altogether more palatable-sounding ‘eviction of the tycoons’. Three of the mobile licences are held by the Hutchison, Sun Hung Kai and New World empires – all among the top four members of the property cartel – and the fourth is held by Hutchison owner Li Ka-shing’s son Richard. (Their domination of telecoms is something of an aberration; they obviously thought the sector would be a guaranteed cash cow, like their cartelized grips on retailing, housing, transport, electricity, construction materials, the air you breathe, etc. Instead, no doubt to their extreme discomfort, they have ended up having to compete. It is probably one of the few leading segments of the domestic economy where the consumer doesn’t get legally and systematically shafted.)

Seen this way, the issuing of a fifth licence could increase competition, lower prices for consumers and upgrade the network technology. And, as a nice thick helping of icing on the cake, a handful of our most overbearing and exploitative plutocrats get a long-overdue kick in the teeth. What could possibly be wrong with that?

In the background is something far bigger and potentially more sinister. As both the columnists indicate, this is about powerful Mainland state tentacles slithering into the local economy. Jake van der Kamp mentions the displacement a while ago of certain existing chains’ gas stations in Hong Kong by branches of state-run Petrochina and Sinopec. He has also written about the long-term prospects of China Light and Power’s electricity monopoly in Kowloon-NT falling into Beijing-connected hands now it has been pressured into an onerous long-term commitment to buy Mainland (indeed, Petrochina) gas supplies. (CLP was founded and is owned by Iraqi Jews rather than sons of the Celestial Kingdom, we may note.)

One of the conspiracy theories surrounding Communist loyalist Leung Chun-ying’s surprise appointment as Hong Kong’s Chief Executive last year concerns just this sort of economic ‘Mainlandization’. It’s Gotterdammerung for the property tycoons, as well-connected Mainland companies run by princelings and/or the state take over. Starting with the property sector – hence the arrest and forthcoming trial of Sung Hung Kai’s Kwok brothers on corruption charges and plans to build new towns near the border. History repeats itself: recall how old British hongs like Hutchison came into the clutches of Li Ka-shing and other local tycoons back in the 70s and 80s.

Do Mainland conglomerates have a big incentive to muscle into Hong Kong? On the one hand, if the Mainland and the Big Lychee were a unified economy, this city would account for one dollar of GDP for every 29 produced in the rest of the country. Not bad for 7 million out of 1.3 billion people, but hardly a huge gold mine. And overt bullying will only arouse international concerns and make life harder for corporate China as it tries to enter new markets in the rest of the world. On the other hand, it must be pretty crowded up there with Li Peng’s daughter, Zhu Rongji’s son, Wen Jiabao’s nephews and the rest all trying to grab their slice of the pie. And if you’re going to expand overseas, where better to start than an international city where you can help yourself to a niche with a phone call to Comrade CY?

To the extent that the conspiracy theorists are correct, there is nothing we can do about it. In theory, the Legislative Council will decide on the telecoms licence, and it will be interesting to see who votes which way in a tycoons vs Mainland fight (here’s the consultation paper, China Mobile’s case and Hutchison’s case). Ultimately, the Communist Party has tanks, and we don’t. So perhaps it’s best to look on the bright side either way. If Hong Kong resists Mainland incursion into commanding sectors of the local economy, that’s one up for ‘One Country, Two Systems’; if it doesn’t, we see our favourite tycoons crushed, and it couldn’t happen to a nicer bunch of people – indeed, the devil in me wonders if it wouldn’t be worth it.


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10 Responses to Hobson’s Choice

  1. PCC says:

    On the last point, it might be amusing as well as instructive to give the mainland interlopers the benefit of the kind of public vilification our local tycoons have had to learn to live with on their way to the bank.

  2. As far as I know, China Mobile is already here. I use one of their SIM cards. They used to offer unlimited GPRS for 88 dollars a month and it was quite reliable.

    I do know that here on Hong Kong Island one cannot turn on a light, jump on a bus or lift a phone without something trickling into the Lis’ pockets. Point taken.

    But where would we be if we stopped being part of the Third World and all the public utilities were not in the hands of private families and grandees? All the charm would be gone.

  3. Stephen says:

    Interesting Mainlandization or The Tycoons ?

    Like most when I see those odious octogenarians, (Uncles 1 to 4) with their obscene wealth, wholly or partly “earned” by having a subservient Government hand them out sectors of our economy, I go with the former. They have distorted this economy to such an extent it’s time for a change, any change. Any firm who, up to now, has challenged them is driven out of town. China’s retail market, in the major cities, is now a damn sight more open, in practice, than Hong Kong. The Tycoons are wholly undeserving of any more Hong Kong Government sweetener’s and favours and here’s hoping they live long enough to see their empires crumble.

  4. maugrim says:

    Can’t disagree with the analysis, though it will be interesting to see how many people ‘distrsust’ using a Mainland based communications firm.

    In today’s Standard, we also have a line that is pure HK “She was a person with a good heart,” Hung said. “Who thinks of their employees when they are about to commit suicide?”

  5. Big Al says:

    Mainlandization or The Tycoons? How About Neither?

    Personally, I think China should categorise Hong Kong as “ungovernable” and hand the whole lot back to the British who, as we all know, have an unblemished record of colonial rule (as in ruling from the colon). Except for Elgin, who seems to have been somewhat of a bad apple (http://www.guo-du.blogspot.hk/2013/02/elgin-street-and-old-summer-palace.html).

  6. Property Developer says:

    And I thought you were bound to cover H Tang’s wine-cellar, inevitably numbered “000000000000000001” for a 2nd cru.

    If our communications go via China, doesn’t that mean gremlins will be lurking in the cables?

  7. David Webb says:

    Jake says that “the government evicted existing operators of filling stations and turned them over to PetroChina and Sinopec”. Not true. When leases expire, the sites are put up for tender on 21-year leases and awarded to the highest bidder. The existing operators are allowed to bid, of course. The same should be done for mobile, for the whole spectrum. This should be done well in advance of expiry, so that customers have time to move if their operator is unsuccessful in the auction and chooses not to lease spectrum from a winner as a “MVNO” (Mobile Virtual Network Operator)

  8. Adrian says:

    Living in self-imposed exile (from HK) in Canada, Lord Elgin is not forgotten here. This town had a road, park and school named for the former Governor-General, as there are in many other towns & cities in Ontario. He’s less fondly remembered in Quebec, where he was assaulted (by English Orange-order folks, instead of French) and the then Parliament buildings were burnt down after a riot (non-hockey related).

  9. Given PCCW’s crap service (read the Hongkietown blog lately?) it may be doing local consumers a favour if China Mobile replaces them.

  10. Incredulous says:

    I used China Mobile (Peoples) for years until I needed 3G and their customer service was excellent. When I left them because they couldn’t offer 3G, they were extremely apologetic and gave me an option to come back anytime – nice people to do business with.

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