Hong Kong Television Surges on Mobile Services: Hong Kong Mover

Dec 22, 2013 11:59 pm ET

Dec. 23 (Bloomberg) -- Hong Kong Television Network Ltd., the broadcaster that failed to get a new free-to-air license, was headed for a record gain after agreeing to buy spectrum from a unit of China Mobile Ltd. to offer mobile TV services.

The broadcaster surged 81 percent, poised for the biggest increase since 1997, to HK$4.20 at the noon trading break in Hong Kong. That compares with a 0.7 percent advance in the city’s benchmark Hang Seng Index. The company, founded by Ricky Wong, will pay about HK$142.2 million ($18.3 million) for spectrum owned by a China Mobile unit, it said on Dec. 20.

“HKTV’s announcement of its new television initiatives suggests it will continue to operate in the Hong Kong television market,” Barclays Plc analysts led by Joyce Zhou wrote in a research report today. “This action might have an impact on the overall competitive landscape of the television market.”

Tens of thousands of people took the streets of Hong Kong in October in protest against the decision by Chief Executive Leung Chun-ying and his cabinet to reject H.K. TV Network’s application for a new free TV license. The permits were granted only to PCCW Ltd. and i-Cable Communications Ltd., while the communications authority said all three bids met requirements.

H.K. TV Network will resume content production and plans to begin content distribution through mobile channels including smartphones, tablet computers and handheld devices, it said in the Dec. 20 statement.

The broadcaster plans to operate three to five channels, including an integrated Cantonese channel and another offering news, according to the statement. It also plans to rehire about 320 workers who were fired earlier.

Local Channel

The outcry over the free television licenses, the first granted in almost four decades, highlighted the demand for choice in a market dominated by Television Broadcasts Ltd., commonly known as TVB, and public concerns that Hong Kong’s policies lack accountability.

Television Broadcasts’ local channel has a 93 percent audience share during prime time on weekdays, according to its 2012 interim report. Asia Television Ltd. is the city’s other free-to-air broadcaster.

The government said last month that a consultant’s report showed Hong Kong’s free television market is unable to support five operators. Applicants were assessed based on their financial soundness, investment plans, and technical and program content, it said.

As viewers will need to buy extra devices to receive the channels provided by H.K. TV Network, the adoption of its offerings would be slower compared with the other two upcoming free-TV players, according to Zhou at Barclays. The immediate impact on Television Broadcasts would be higher staff cost because of the competition for talent, she added.

Shares of Television Broadcasts fell 0.5 percent to HK$49.85, widening its decline this year to 14 percent.

--Editors: Stanley James, Subramaniam Sharma