Oct. 16 (Bloomberg) -- PCCW Ltd., controlled by billionaire Richard Li, and I-Cable Communications Ltd. won initial approval to compete in Hong Kong’s free-to-air television market after new permits were given for the first time in almost 40 years.
I-Cable shares more than doubled to a record in Hong Kong as of the city’s midday break, while PCCW jumped 8.9 percent. Hong Kong Television Network Ltd., which said today it will cut 320 jobs after its permit application was rejected, plunged 31 percent following a 28 percent jump yesterday.
PCCW and I-Cable join Television Broadcasts Ltd. and Asia Television Ltd., the only broadcast television providers in Hong Kong since 1978. Advertisers spent an estimated HK$13 billion ($1.7 billion) in Hong Kong in 2012, with television accounting for about a third of that, Bank of America Corp.’s Merrill Lynch unit said in a February report, citing Magna Global.
“We estimate new operators could launch the free-to-air TV services within 6-12 months and new competition could start as early as 2014,” Mandy Chan, an analyst at Merrill Lynch, wrote in a report. “We expect TVB to face challenges in keeping its near monopolistic hold of the Hong Kong free-to-air TV market.”
Shares of I-Cable surged 164 percent to HK$1.24, the highest level since its trading debut in November 1999. PCCW advanced to HK$3.79, while Hong Kong Television Network plunged 31 percent to HK$2.13. Television Broadcasts added 0.1 percent to HK$48.70.
The awards to I-Cable’s Fantastic Television Ltd. and PCCW’s HK Television Entertainment Co. will double the number of free-to-air TV operators and bring in more investment, Commerce Secretary Gregory So said yesterday.
“This will not only provide more program choices for the audience, but also create more job opportunities in the creative industries,” So said at yesterday’s briefing.
Television Broadcasts’ flagship channel has a 93 percent audience share during prime time on weekdays, according to the company’s 2012 interim report.
I-Cable, a unit of Wharf Holdings Ltd., will invest more than HK$1 billion in the first six years of its proposed television service and PCCW will spend more than HK$600 million in the initial three years of operation, So said.
PCCW will next discuss the proposed license conditions with the government and the Communications Authority, according to a Hong Kong stock exchange filing yesterday. I-Cable, in an exchange statement, said its application had received the government’s approval in principle.
The companies plan to operate one channel each within 12 months, with a second channel within 24 months, according to the proposals submitted to the government.
The granting of the two licenses needs final approval, and the government doesn’t preclude handing out more permits in the future, So said. Hong Kong last granted a new license in 1975 to Commercial Television Ltd., which ceased operations after three years.
Asia Television opposes the government’s decision on granting the new television licenses, the broadcaster said in an e-mailed statement yesterday. It doesn’t rule out “further actions,” the company said, without being more specific.
Hong Kong Television had invested more than HK$900 million before yesterday’s decision, Chairman Ricky Wong told reporters today. The company didn’t understand why its application was rejected and it’s seeking legal advice, Wong said.
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