C&W setback in Hong Kong

Cable & Wireless has suffered a severe setback following the failure of its 58 per cent-owned Hongkong Telecom subsidiary to win a new mobile phone licence in the colony.

It has been specifically excluded from the list of six operators granted licences to run a new generation of mobile phone systems agreed yesterday by the Sino-British Joint Liaison Group.

But there was good news for Vodafone, which has been granted a licence through its involvement in Pacific Link Commun- ications, its venture with local giant First Pacific.

The mobile phone business has been a pillar of HK Telecom's success, and its exclusion from the next stage of development of this lucrative and fast-growing market is the latest blow to its operations in the colony.

Its local phone monopoly ended in July last year and it has agreed to negotiate an early end to its exclusive license to handle international calls until 2006.

The company said yesterday it "deeply regrets'' the decision because its bid was competitive. It will seek a meeting with the telecoms authorities to find out why it was not granted a licence.

The licenses are for personal communications systems (PCS), a new wireless- telephone technology that uses higher frequencies than cellular phones. This relieves frequency congestion and, in theory, allows for lower prices and smaller handsets.

Hong Kong now has 1 million mobile phone users. The PCS network will have the capacity to attract 1.2 million new users before 1998.

The awards may prompt merg- ers and acquisitions. HK Telecom could try to buy a stake in one of the PCS license holders. It is in danger of running out of radio frequency on its digital mobile phone network once it reaches 500,000 subscribers, against the 270,000 it has now.