China Mobile Probes Loss-Making Exit From Hong Kong TV

China Mobile Communications Corp., the parent of the world’s largest phone company, is probing a decision by its Hong Kong unit to exit the territory’s television market at a loss one year after introducing service.

China Mobile is investigating whether the transaction meets its internal guidelines as well as regulations of China’s State-owned Assets Supervision and Administration Commission, the company said in an e-mail today. The sale involved a unit that owned spectrum to broadcast mobile television service in Hong Kong, the company said, without identifying the buyer.

China Mobile beat two bidders in an auction for the spectrum in June 2010, paying HK$175 million ($22.6 million) for rights to airwaves for mobile TV service. The service, a mix of free and paid programs that required a plug-in adapter to receive broadcasts on a smartphone, was introduced in Hong Kong in December 2012.

Hong Kong Television Network Ltd. (1137) said last month it paid about HK$157.4 million for the China Mobile unit that owned the spectrum, including options. That amount is HK$17.6 million less than China Mobile paid for the spectrum and related licenses.

“The Hong Kong market is very competitive as there are many providers of video content,” Ricky Lai, a Hong Kong-based analyst at Guotai Junan International Holdings Ltd., said by phone today. “The China Mobile service is quite inconvenient for users because they need an external adapter.”

Sale Completed

Hong Kong Television won’t comment on the internal affairs of China Mobile, and it doesn’t anticipate any change to the transaction that was completed Dec. 20, the company said in a statement today.

Hong Kong Television shares fell 3.9 percent to close at HK$3.46 in Hong Kong trading, the largest decline since Dec. 24. China Mobile Ltd. (941) dropped 0.6 percent to HK$78.15.

Hong Kong Television bought the unit after it failed to get its own free-to-air license in October. The Hong Kong government’s denial of the license to Hong Kong Television triggered protests by tens of thousands of people.

The demonstrations reflected concerns that Hong Kong’s policies favor big business, lack accountability and may undermine freedom of speech in the semi-autonomous Chinese city. Licenses were given to PCCW Ltd. and I-Cable Communications Ltd., both controlled by billionaires.

Hong Kong Television Network’s founder and chairman Ricky Wong said the government’s denial of the license was “unreasonable, unfair and lacks transparency.” In November, Hong Kong lawmakers voted down a motion to probe the decision.

Hong Kong Television Network today said it will seek a judicial review of the government’s decision to reject its license application.

To contact Bloomberg News staff for this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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