Gov’t seeks to partially open telecom market before franchise ends

Friday, March 27, 2009
Issue 653, Page 3
Word count: 726
Published in: Macau Daily Times

By Poyi (Natalie) Leung

The SAR government is seeking to liberalise leased line and transit services in the fourth quarter of this year before CTM’s public telecom franchise expires on December 31, 2011.

Secretary for Transport and Public Works Lau Si Io and Telecommunications Regulation Bureau (DSRT) director Tou Veng Keong introduced the interim review of the Macau Public Telecom Services Concession Contract to the Legislative Assembly yesterday.

According to Lau, a complete opening of the local telecom market prior to the end of the concession will cost the government a “redemption fee” of no less than 1.6 billion patacas to CTM.

In contrast, a partial liberalisation of several telecom services before the end of 2011 will not involve any redemption fee or compensation, the secretary told the lawmakers.

If the proposal is being approved, Lau said the government will initially introduce one more telecom operator to the industry through staging an open tender.

It has already been announced that the government will cease the monopolistic operation mode and fully open the public telecom market after the current concession comes to an end on December 31, 2011.

However, the secretary said a prior and partial liberalisation will not only save the government the massive redemption fee, but also push forward enhancement in telecom network and service quality, as well as allow residents to benefit from price reductions earlier as a result of a competitive business environment.

The concession contract was granted to CTM in 1981 and renewed once which extended the franchise only in the area of fixed local and international telecom services until the end of 2011.

Since 2000, mobile telecom and the Internet services markets have been liberalised, and currently there are altogether four mobile phone network operators and 19 Internet service providers in Macau.

Meanwhile, CTM has been retaining its monopoly in local and international leased lines (also called private circuits), fixed telephone, fixed data transmission, telegram and fixed telex, and also transit services.

The local and international leased line and transit services are the ones the SAR government wishes to open to one more operator in the last quarter of this year.

Lau said CTM could continue to provide those fixed telecom services and manage the relevant facilities as long as it meets the conditions of the law.

At the same time, CTM will be exempted from paying the special fee for using the fixed telecom facilities for a period of five years, the secretary added.

As for the other new telecom operators, they may share the existing network’s underground pipeline subject to government approval and only if there is no possibility to build a second pipeline, and they are willing to invest resources into strengthening the present facility and pay a fee for using it.

However, DSRT director Tou Veng Keong said new operators will first be encouraged to build a new telecom pipeline by using fiber-optic technology in a bid to offer more options to the market.

Tou also said that in order to ensure a fair business environment, the fee charged for using CTM’s pipeline will need to be approved by the government.

Meanwhile, the DSRT chief stressed that the fixed-line network is a public asset and should be returned to the government at no cost after December 31, 2011.

However, Lau told lawmakers that the government has already decided not to take back the telecom network in 2012, adding they are inclined to let CTM continue the management so as to ensure “stability and continuity of the services”.

According to the formula of “2.5 times the average annual profit before taxes resulting of the activities developed on an exclusive basis” set in the contract, Tou said compensation of no less than 1.6 billion patacas will be required to redeem the telecom services concession.

Hong Kong and Singapore, which both chose to terminate their telecom franchises ahead of the expiry dates, had to pay the affected operators respectively HK$6.7 billion and HK$7.5 billion, Tou added.

Lawmaker Lee Chong Cheng and Iong Weng Ian inquired the officials into why a profit-making company, namely CTM, will compromise to open part of its telecom services without getting any compensation.

The transport and public works secretary said the government will not be aware of the reason as it is a “commercial decision”, but affirmed that “no other alternative forms of compensation” will be involved in the deal.

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