Hong Kong Telecommunications Report Q2 2008

Significant revisions to our mobile forecasts have been made this quarter, as Hong Kong put in another impressive performance this year. The number of subscribers rose by 12.1% during 2007, to achieve a total of 10.589mn (a penetration rate of 147.1%), higher than the 10.5% increase recorded in 2006, according to the Office of Telecommunications Authority (OFTA) figures. BMI estimates that growth will continue to remain robust, with around 10% increase felt in 2008 as customers subscribe to both prepaid and postpaid, through the continued migration from 2G to 3G tariffs. At the end of 2007, there were a little over 2mn 3G subscribers, a figure we expect to double by year-end 2008, and more than triple by 2012 to 6.85mn.

PCCW Mobile is the only operator that provided customer figures for the year ended 2007. The operator announced a 16% year-on-year (y-o-y) increase in its subscriber base to surpass the 1mn mark at 1.071mn. However, its 3G customer base put in a more impressive result, almost quadrupling during 2007, from 55,000 to 206,000, and leading to a 7% y-o-y increase in average revenue per user (ARPU) to HKD216 in H207. The operator will also be able to attract larger roaming revenues, once it launches its services over its acquired CDMA2000 licence. The only operator to retain CDMA and GSM network, PCCW is in a unique position. It can take advantage of international travellers and make the most of its base as the region's economic stronghold.

Broadband figures were equally robust, with 1.88mn subscribers reported at the end of 2007, revealing an increase of 7.8% (2006 rose by 1.6% y-o-y), and placing the country as the third most mature market in the region behind South Korea and Australia. Broadband content demand has put pressure on operators to raise bandwidth, with PCCW announcing that it planned to invest HKD3bn (US$385mn) in 2008 on upgrading its entire fixed-line network to fibre-optic broadband in response to customer demand.

With the growing popularity of broadband services, demand for internet is expected to slowdown. BMI expects growth over this year to rise by 17.3% ending on 2.55mn, with a penetration rate of 34.9% -- a figure that should rise to 42% by the end of our forecast period in 2012.