Most Read Contributor in Hong Kong, September 2016
By David Ellis (partner) and Stephen Bureaux
Originally published in May 2002
The Telecommunications (Amendments) Bill 2002 was gazetted on
3rd May, 2002 and aims to amend the Telecommunications Ordinance to
provide a legislative framework for the regulation of merger and
acquisition activities in the telecommunications sector where such
activities may reduce competition in the market. Its second reading
is due on 15th May 2002.
The Bill, when passed will fundamentally affect the procedure of
acquiring telecom carriers in Hong Kong.
The Hong Kong government's policy is not to have an overall
competition law or authority in Hong Kong, but rather, to make
sector specific provisions where it considers necessary. The
telecommunications carrier market, because of its perceived high
concentration levels, high barriers to entry through large sunk
costs, the scarcity of radio spectrum, and high level of vertical
integration, has been identified by the government as an industry
of particular concern as regards the possible anti-competitive
effect of mergers and acquisitions.
The Bill will apply only to carrier licensees (i.e. local fixed
telecommunications network services operators, external fixed
telecommunications network services operators, mobile operators and
satellite operators) because the government does not consider that
any market factors exist which may cause completion concerns in
respect of non-carrier licensees. The proposed changes are intended
(i) promote fair and effective competition and protect
consumers' interests by providing specific powers for the Hong
Kong Telecommunications Authority ("TA") to intervene
where he has a regulatory concern, i.e. where the TA feels that a
particular merger or acquisition may substantially lessen
(ii) provide a comprehensive and clear regulatory framework on
mergers and acquisitions for the telecommunications business sector
which will assist the industry in making informed decisions
concerning such transactions, and speed up the processes for
Under the new proposals, the TA will have the power, where he
considers that a change in ownership or control over a carrier
licensee has, or is likely to have, the effect of substantially
lessening competition in a telecommunications market, to require
the carrier licensee to take such action as the directs to
eliminate any such anti-competitive effect. Such action may include
the carrier licensee procuring modifications to its ownership or
control. The failure to take any required action will constitute a
breach of the Telecommunications Ordinance, the sanctions for which
may include, financial penalties, and suspension or cancellation of
Alternatively, prior to any change in ownership a carrier
licensee may voluntarily seek the consent of the TA to the proposed
change, thereby avoiding the possibility of subsequent conditions
or sanctions. The TA may in response, give or refuse consent, or
specify any conditions for such consent which may include
modification to the proposed ownership structure.
The proposed anti-competition regulation will therefore be
primarily ex post (i.e. regulatory review takes place after the
merger or acquisition is completed), rather than the ex ante
(licensees must seek approval prior to proceeding with the merger
or acquisition) regime favoured by some jurisdictions such as the
European Union or Singapore. However, there will be a voluntary
system for prior approval in place.
The Bill does not contain any specific guidelines or criteria
that will be taken into account in determining which mergers will
be considered as having anti-competitive effect, however, following
commencement of the Bill but prior to taking any regulatory steps
under the new regime, the TA is required to formulate a set of
criteria on the matters he will consider in this regard and to
issue guidelines in this respect. Those criteria and guidelines
will be subjected to public consultation prior to coming into
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Stokes & Master at the date written first above. All rights
reserved. This publication provides information and comments on
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the subject matter and is not intended to provide legal advice or a
substitute for specific advice concerning individual situations.
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respect to the matters discussed herein. Please also read the JSM
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