HK's 3G auction sees tepid response

By CNN's Kristie Lu Stout

HONG KONG, China (CNN) -- Hong Kong's third generation (3G) mobile auction is generating a lukewarm response from mobile operators.

Industry watchers say only four carriers are likely to bid for the four 3G licenses on the block in Hong Kong, a territory with a mobile penetration of about 80 percent.

"There's not a lot happening now," said Francis Cheung, Merrill Lynch director of telecom research in Hong Kong.

Not interested

Hong Kong's Office of Telecommunications Authority (OFTA) has been inviting bid submissions since Monday.

OFTA said it would not reveal the applications received for the auction.

"We won't make any announcements until the auction process is completed," an OFTA spokesperson told CNN on Tuesday.

"Today (Tuesday) is the deadline -- if we are going to have the auction, it will be held as soon as possible -- as early as tomorrow or the day after."

Analysts say the current depressed investor climate has clipped interest in the auction.

"If you go back six months ago, all operators were going to take part," said Cheung.

"Now, two of the operators are showing that they are not sure if they want to bid or not."

Peoples Telephone appeared to be dropping out of the race because of shareholder disagreements, the South China Morning Post reported.

Another expected dropout was Sunday Communications, which analysts believe is better suited to operate as a mobile virtual network operator given its financial status.

Cheung sees only Hutchison Telecom, CSL (which is 60 percent owned by Australia's Telstra and 40 percent by PCCW), Smartone Telecommunications and New World Mobility as participants in Hong Kong's 3G mobile auction.

No other foreign telecom tie-up or alliance is anticipated to take part.

Exercising restraint

There was already widespread skepticism concerning OFTA's ability to attract more than four bidders.

"Given the current environment, financing for 3G businesses may not be so easy. There could be just four operators and four licenses and no auction. That's the way it looks now," said Cheung.

Assuming a minimum of four bidders, licenses would be granted at a reserve price, the floor price set by the government.

OFTA declined to comment on the likelihood of a four-bidder auction.

Even the mobile-mad market of Hong Kong can't bring back the fervor of last year's auctions of 3G spectrum.

Last year, carriers were seduced by the boundless possibility for 3G and spent a combined $78 billion in two spectrum auctions in the UK and Germany.

Those exorbitant bids helped trigger a sell-off in telecom stocks from which the industry has yet to recover.

With widespread doubt about the revenue-generating potential of the untested technology, analysts applaud Hong Kong's carriers for exercising restraint in the 3G bidding process.

"It's good news for the industry," said Cheung.

"At the end of the day you've got to make money for this. Given the outlook it's best not to spend a whole lot of money on it at this point."