Holders of the nine incumbent GSM and PCS licences providing second-generation mobile services will be given new Mobile Carrier Licences for 15 years to continue their mobile telecommunication services.

No new licence will be granted to the existing two licensees operating the CDMA and TDMA networks because the assigned spectrum has not been used efficiently. The licensees, however, may continue to operate the services for three more years, with one-third of the originally assigned spectrum, to facilitate customers' migration.

Director General of Telecommunications Au Man-ho said radio spectrum is a scarce and valuable public resource and the Government has the responsibility to ensure its efficient use. 

Technologies of CDMA, TDMA become obsolete

"For the GSM and PCS licensees, the Government considers that they have made efficient use of the radio spectrum assigned to them in the past years and provided satisfactory service with continuous investments and improvements."

The number of subscribers for CDMA and TDMA networks has declined substantially over the past few years, to 25,687 and 30,590 subscribers, compared to about 1 million subscribers for a typical PCS network. 

"It is evident that these two networks have not been making efficient use of the assigned spectrum. In addition, the technologies being deployed by both networks are becoming obsolete," Mr Au said. 

Spectrum policy review to be launched

The Government will launch a spectrum policy review in 2005. Before the review and the subsequent legislative and administrative arrangements are completed, the spectrum vacated by the CDMA licence will not be released for any new mobile licence.

Permanent Secretary for Commerce, Industry & Technology Francis Ho said the review's objective is to formulate a responsive, transparent and market-led spectrum policy to enable the community to reap the maximum benefit from the deployment of this scarce public resource as technology advances.

"After the completion of the review and the consequential legislative and regulatory arrangements, the Government may, taking into account the outcome of the review, initiate the necessary arrangements for allocating the spectrum vacated by the CDMA system in 800 MHz band for new licences," Mr Ho said.

Spectrum utilisation fee

The GSM and PCS licensees will be required to pay spectrum utilisation fee for the new licences, which is set in broad consistency with that for the 3G licensees. For the first five years of the new licence, they will be charged an annual fee of $145,000 per MHz of spectrum.

From the sixth licence year onwards, the fee will be set at a 5% royalty over the annual network turnover of the licensee, subject to an annual minimum fee of $1.45 million per MHz of spectrum.