The Notice does not permit a "disconnection stage" in relation to 2G Operators who are part of a 2G Bidding Group. A 2G Operator should ensure that there are no linkages between itself and another 2G Operator which would make it part of a 2G Bidding Group. If it is discovered that a Bidder which has been determined to be a Qualified Bidder under paragraph 3.1.2 of the Notice is part of a 2G Bidding Group, the TA may disqualify that Bidder from the Auction.

The TA may require that each 2G Operator in a 2G Bidding Group amend its 2G Licence(s) to incorporate the domestic Roaming Special Condition. The TA may impose additional conditions on the 2G Operators or the Bidder, as he sees fit, having regard to the potential effect on competition in the mobile market, the likelihood of the creation of a dominant position in the mobile market and any other issues raised by the existence of the relevant 2G Bidding Group. For example, the TA, if he sees fit, may impose additional conditions to ensure that the 2G Operators, despite their cooperation in the rollout and operation of the 3G network, will compete against each other in the market for the provision of 2G and 3G services as separate economic entities and on the basis of arms' length commercial arrangements.

No. Conditions may be imposed on all or any of the relevant 2G Operators comprised in the 2G Bidding Group (see response to a) above).

The timeframe given in Section 5.4.1 of the Information Memorandum is a firm timeframe to which the TA expects all parties, including the TA himself, to adhere. Deviation from this timeframe would be made only in exceptional circumstances, e.g. as contemplated in response to Question 2.

Given the short time available for a Bidder to prepare its application, and the fact that the application would not be treated as full application for a merger or an acquisition, the TA does not expect the application to contain a full competition economics analysis which would be required if it were a full application for a merger or an acquisition. However, the application must contain sufficient details and economics arguments to assure the TA that the level of competition in the 2G and 3G services market would not be significantly reduced from its present or expected levels, and that no dominant player in the relevant markets would emerge as a result of the proposed cooperation in the rollout and operation of the relevant 3G network.

Each consent given will be given in writing. The relevant Bidder, when submitting its Application, will need to provide a copy of such consent with its Application (see paragraph 2.1.2(g) of the Notice).

The application for consent regarding a 2G Bidding Group may be made by the 2G Operator(s), or by the Bidder, or shareholders of a Bidder that has yet to be incorporated. As stated in the response to e) above, the relevant Bidder will need to provide a copy of the consent with its Application. Please note that if a 2G Bidding Group submits an Application for pre-qualification, it must be as a structure approved by the TA in its consent.

The parties who have received consent should still inform the TA of their intention not to submit an Application from a 2G Bidding Group, even if such decision is taken close to or on the Application Dates.

As stated in Section 5.4.1 of the Information memorandum, the TA will retain the discretion to approve just one application, or no application at all. The TA will not consider an application, nor give his consent, with respect to a 2G Bidding Group (the "First 2G Bidding Group") comprising a 2G Operator or a person which has, or in respect of which there exists, a Bidding Interest or 2G Interest in that First 2G Bidding Group if the TA already has under consideration, or has given his consent to, an application with respect to, another 2G Bidding Group (the "Second 2G Bidding Group") comprising the same 2G Operator or the same person which also has, or in respect of which there exists, a Bidding Interest or 2G Interest in that Second 2G Bidding Group. In exceptional circumstances, the TA may, on the request of the relevant 2G Bidding Group:

• allow one application to be substituted for another application;
• provide his consent in relation to a substituted application.

In these circumstances, the TA may deviate from the timeframe for submitting applications set out in the Information Memorandum. The consent given will cease to have effect if the relevant 2G Bidding Group withdraws its application and substitutes it with another application. The TA may impose any conditions to the consent as referred to in paragraph 3.1.3.

As stated in Section 5.4.1 of the Information Memorandum, if consent is given, the relevant 2G Operators must enter the Auction in the configuration to which the TA has consented. It would be open to a person to decide subsequently not to submit an Application under Section 1, Part 2 through a 2G Bidding Group which has obtained the consent of the TA but to submit such an Application in a different format which does not require the prior consent of the TA in accordance with the Notice. The TA must be notified in these circumstances.

The overall spectrum available for allocation in this licensing exercise has been determined for 3G mobile use by the International Telecommunication Union. It was decided that only four licences should be awarded so that each licensee has the scope and flexibility to build a high quality network that can cope with Hong Kong's geography and population density. There are small technical differences between the blocks of spectrum allocated to each licence, arising from their position in the band and the interference characteristics that are specific to those positions. Experience in other auctions has shown that some bidders do have preferences as to which bands they receive, and the Third Phase of the Auction allows bidders to exercise any such preference through an auction mechanism.

The Bonded Sum will be known before the Auction is completed (which will be prior to grant of the Licence) as the final Applicable Royalty Percentage will be determined after completion of the Second Phase (if any). If there are no connections to be resolved in the Second Phase, this percentage will be unchanged from that determined in the First Phase.

The Performance Bond must be provided in accordance with the Conditions. In particular, the Performance Bond shall be in the form determined by the TA substantially in the form set out in Schedule 5 to the Notice.

It is the Bidder's responsibility to demonstrate to the TA that the bank providing the Performance Bond is a Qualifying Bank. This may be done in advance of grant of the licence. The TA will give the successful Bidder at least three Business Days notice of the date of grant of the Licence. The Performance Bond must be in place at the time of grant.

According to the Conditions, the Licensee shall at all times during the validity period of the Licence maintain in full force the Performance Bond for an aggregate amount equivalent to the next five years' Minimum Annual Fees or the Minimum Annual Fees for the remaining years of the Licence period (if less than five years). The Licensee must therefore provide the TA with a revised Performance Bond on each anniversary of the date of grant of the Licence. This requirement does not relate to any milestones in relation to the network roll-out. As long as a Performance Bond or Performance Bonds in the required amount are maintained at all times, the Licensee may change the issuer of the Performance Bond, subject to satisfying the TA in advance that the new issuer of the Performance Bond is a Qualifying Bank.

Yes, the requirement will apply to both uplink and downlink capability.

Special Condition 1.1 of the Licence states that "all base stations to be installed shall be configured so as to be capable of supporting services operating at a minimum of 144 kbits per second for an individual customer, being the speed at which the information is transferred across the air interface from the base station to the customers' apparatus connected to the network of the licensee and vice versa". In verifying whether this licence condition has been met, the TA will check whether the Network is capable of transferring data at the rate of at least 144 kilobits per second in the areas which the Licensee claims have been covered by the Network. Once this capability is provided, whether circuit-switching or packet-switching is used in the delivery of the data is not a concern under the licence condition. In the 3G environment, the TA expects the data to be delivered using the packet-switching mode. Thus once the minimum data rate of 144 kilobits per second has been met for the packet-switching mode, it is not necessary for the TA to check whether that minimum data rate is met for the circuit-switching mode.

The Licensee must comply with the Conditions of the Licence.

Please see Special Condition 22 of the Licence (the conditions of the Licence are attached at Schedule 2 of the Notice) for the conditions governing a 3G Licensee's ownership (the Notice is attached at Appendix H of the Information Memorandum). The Notice also contains the detailed ownership rules, the details of which are summarised at Appendix A of the Memorandum. The disclosures to be made in an Application are set out in the instructions section of the Application Form (please see Appendix 1 of the Notice).

There are currently no MVNOs in Hong Kong of the type, and having the rights, described in the IM and the Conditions.

Please refer to Section 1.1 and 2.2.1 of the Information Memorandum for the policy background on Open Network Access. The detailed industry consultation paper and responses received from the industry and the public are posted on the OFTA web site, in the 'Industry Consultation Papers' section of the '3G Licensing' page.

Please refer to Section 3.3 of the Information Memorandum for information on the licensing of MVNOs. The application process is described in Section 3.3.2.

• provide its own mobile switching and gateway infrastructure;
• manage its own interconnection and international roaming arrangements;
• maintain its own customer care and subscriber management systems; and
• issue its own SIM cards.

Please refer to Section 2.2.4.1 of the Information Memorandum for the detailed explanation of the minimum requirements for MVNOs to have the benefit of access under the Open Network Access policy. An MVNO must meet all the minimum requirements stated.

Fees and payment terms between MVNOs and MNOs should be determined by commercial negotiation. The TA may intervene under section 36A of the Ordinance in the event that an MVNO (which is not affiliated to the relevant licensee) and that licensee cannot agree with each other on the terms of interconnection and either of them calls upon the TA to intervene in the dispute. Please refer to Section 2.2.6.1 of the Information Memorandum.

The TA has the power to intervene and determine certain aspects of disputes between MVNOs and MNOs. Please refer to Section 2.2.6.1 of the Information Memorandum, section 36A of the Ordinance and Special Condition 12 of the Licence for details.

The terms and conditions of the Notice including those relating to Confidential Information apply to a Bidder from the time its Application is received by the TA. If information is exchanged in the circumstances set out in paragraph 6.5.6(ii) and (iii), there will not be a breach of the Notice. It follows that, possession of that information after the later of the Applications Dates will not be a breach of the Notice. However, the transfer of that information after the later of the Application Dates would be a breach of the Notice. The exceptions in paragraph 6.5.6(ii) and (iii) are to prevent a person specified in that paragraph from becoming an Insider to a Bidder in respect of which, despite having exchanged information, it does not ultimately participate in the Auction.

The 144 kbps requirement refers to the capability which must be met by both the uplink and the downlink. This is specified in the Special Condition 1.1 (b) of the Mobile Carrier Licence given in Schedule 2 to the Notice at Appendix H of the Information Memorandum. Special Condition 1.1 (a) specifies the coverage requirements. Section 3.2.4.2 on "Compliance" explains how the Licensee will be required to demonstrate the compliance with the coverage requirement. Where the coverage plots for the uplink and downlink are different, the smaller plot will be taken as the coverage area of the Service. This is because within the smaller plot, the requirement for the 144 kbps capability is met for both the uplink and downlink directions. This is not necessarily so within the larger plot.

Either method may be used. It is expected that coverage calculations will be made using appropriate and recognised propagation models. Where necessary, actual measurements will be conducted for verification of the coverage based on calculations.

Yes. Where the Information Memorandum provides such information, it can be treated as having been "specified by the Authority". However, please note that changes to such information may in exceptional circumstances need to be made. These will be published on the OFTA website.

The TA cannot disclose the random method that will be used, or whether it will be electronic or mechanical. Tied Bidders will not be invited to witness the tie breaking event, but ICAC observers will be present to ensure fairness in choosing and implementing the random method. The TA intends to use a single round determination process.

The TA will not hold a First Phase auction if there are four or less than four Qualified Bidders and in such event the Applicable Royalty Percentage will be the First Phase Reserve Price.

The TA intends to endorse and return the relevant 2G Licence as soon as practicable and without unreasonable delay. If possible, the TA intends to endorse and return the 2G Licence on the same day as the Licence is granted to the relevant Third Phase Bidder.

The TA will provide the prospective Licensee with details of the account to which such payments should be made when notifying the prospective Licensee of the date on which he intends to grant the Licence.

6.4.1(a) allows the sale of some or all of a Bidding Interest in a Bidder to the other parties disclosed on the Application Form as having a Bidding Interest in the Bidder, or the sale of some or all of a Bidding Interest to other parties, provided that the sale does not create a Bidding Interest in the hands of a new party.

Resignation of a director and the appointment of a new director under normal circumstances is unlikely to result in the TA exercising his discretion under paragraph 6.1.1 provided that the relevant Bidder has demonstrated to the reasonable satisfaction of the TA that none of the purposes of that activity is related to the Auction. In addition, the Bidder must notify the TA in accordance with clause 6.4.2. Clause 6.4.1 refers to all parts of the Application Form.

Yes.

The obligations under paragraph 6.5.7 apply before the disclosure of information on the Application Form. It is the Bidder's responsibility to ensure it and its Insiders' compliance with 6.5.7.

A Bidder which is successful in the Auction must comply with the terms and conditions of the Notice until it is granted a Licence. On the grant of the Licence, the licensee must comply with the Conditions and all other applicable legislation.

A Bidder and all other relevant persons must comply with the terms of each Irrevocable Undertaking given pursuant to paragraph 4.6.11 even after the Licences are granted.

Please see the last paragraph of Section 5.4 of the Information Memorandum.

The guidelines referred to in Special Condition 1.3 of the Licence will be issued from time to time by the TA. The first set of guidelines is expected to be issued within three months of licensing so that the successful Bidders can be consulted before issuing these guidelines. As indicated in the TA's briefing to the industry, it is intended that the first set of guidelines will permit the type of sharing which is already widely practised for the 2G networks.

The TA considers that the first part of the question is not relevant.

Upon enactment of the necessary legislation for the regulation of ownership or control of the Licensee, the TA may pursuant to Special Condition 22.2 of the Licence generally or specifically in relation to a particular statement or representation referred to in Special Condition 22.1 by notice to the licensee waive the requirement for the licensee to comply with the said statement or representation.

This requirement is intended to identify, where possible, the existence of any Connected Bidders in advance of the Second Phase, and thus to simplify the due diligence that must be undertaken to determine whether any Provisional Successful Bidders are Connected Bidders in relation to each other.

If an Applicant has declared that it is not a Connected Bidder in relation to any other Applicant but this subsequently turns out to be wrong, then it is the responsibility of each of the relevant Applicants to demonstrate, to the reasonable satisfaction of the TA, that it made the declaration to the best of its knowledge, information and belief having made all due enquiries before making the declaration. Any such case will need to be considered individually on its own merits, and the process cannot be determined in advance.

No. The TA will not publish information on requests by 2G Operators to bid jointly. However, any such 2G Operators may publish the fact that they have sought consent to bid jointly. The TA intends to publicise whether any applications were received or the identity of the applicant after the successful Bidders are selected.

The TA intends to make a decision within three weeks of receipt of any request to co-operate in the Auction, i.e. by 28 August. The TA will not at that time announce any decisions.

The TA intends to publicise the identities of all qualified and disqualified Bidders after the successful Bidders are selected.

The TA has in the past given consent to such arrangement on the express condition that, in the event of enforcement of the security, any transfer or assignment of the licence, or any permission, right or benefit under it, must be subject to prior written consent of the TA, and that the TA's consent to the security arrangement does not prejudice his future decision regarding the transfer or assignment of licence, or any permission, right or benefit under it.

Depending on the terms of the financing arrangements, the arrangement may fall within the regulation on the ownership and control of Licensees as described in Section 3.2.6 of the Information Memorandum. This will include a situation where there is a change in the legal ownership of the shares in the Licensee as a result of the enforcement of the security.

The MVNO in the context of Section 2.2.4.1 may use any mechanism to "provide its own" infrastructure equipment by owning or leasing the infrastructure provided that it is not using the infrastructure of the Licensee with which interconnection is sought. By "leasing", a long-term "financial lease" is required, but not a short-term "operating lease". An MVNO which does not meet this requirement may seek access to, or interconnection with, the Network of a Licensee on a commercial basis.

After issue of the 3G Network Licences, OFTA will invite the Licensees to participate in the industry working group to work out the technical and operational arrangements for the implementation of the MNP required under the Licences. The TA therefore expects that all operators involved would be ready to support the MNP functionalities of the Licensees when they launch their 3G Network Services. However, in the event that the other operators are not ready due to the circumstances to which General Condition 17 of the Licence applies, the Licensee would not be regarded as being in breach of the Special Condition requiring the MNP, and it would not be precluded from launching its services, so long as it has already implemented the functionalities required to meet the MNP obligation under the licence (e.g. it has achieved the capability to perform database dipping and associated call routing functionality for the MNP under the licence).

Yes. Please see Section 2.1.2.2 of the Information Memorandum.

Please see Section 2.4.1 of the Information Memorandum and the Code of Practice for the Protection of Workers and Members of the Public Against Non-ionising Radiation Hazards from Radio Transmitting Equipment issued in May 2000 which is available on the OFTA Website. Provided that the limits in the Code of Practice are complied with, there is no limit for the number of base stations per area.

As stated in Section 3.2.4.1 of the Information Memorandum, in order to "promote competition in the market in terms of network coverage and quality" Licensees are not permitted to share networks without the TA's prior consent. The TA will issue guidelines on forms of sharing of network elements that will not require further consents. Please refer to the response to Question 20.

The term "radio station shelters" is used generally to represent the accommodation necessary for the housing of radio base stations.

Given that the design and location of each individual radio base station is different, the sequence for submitting applications and the lead time for obtaining the approvals is likely to be different for each application. Like other telecommunications operators, 3G operators should comply with all relevant procedures valid at the time of application in obtaining the necessary approvals.

As mentioned in Section 2.7.2 of the Information Memorandum, in order to facilitate the approval process, OFTA may assist the Licensees in keeping track of the application by liaising with various government departments

So far there is no plan to classify mobile services as a public utility.

We were referring to amounts collected from customers on behalf of content providers, applications and service providers, and other service providers by a Licensee who will then pay the corresponding amounts back to that respective party. These amounts will not be counted as Network Turnover and so would be deducted from any gross turnover figures provided to the extent they include these items.

It will not be a mandatory or licensing requirement for the MVNO to own their "Gateway Number Database" or "Administration Database" for Mobile Number Portability.

It is open to MNO and MVNO to agree on the duration of the contract based on commercial negotiation. The same arrangement will not apply to CSPs for which there is a separate regime based on published tariffs.

The TA will examine whether the population coverage obligation of a Licensee as been fulfilled based on inter alia (a) the coverage plot provided by the Licensee; and (b) the distribution of population provided by the Hong Kong Census and Statistics Department from time to time. The TA may require the Licensee to provide coverage plots in any form which the TA considers appropriate.

Yes, a Bidder can nominate more than eight representatives in the Application Form but only eight of them are allowed to enter the bidding room.

No, the Applicant is required to confirm in the Application Form (section 5 - checklist) that the Deposit has either been provided together with the Application Form in the form of a Letter of Credit or in cash (clear funds) with a certified true copy of the relevant document provided together with the Application Form.

There is no specific procedure set out mechanism is made available in the Notice for Bidders to appeal to the Auctioneer during the bidding process and individual complaints will be dealt with by the Auctioneer on a case by case basis.

The objective of setting 144 kbps as the minimum requirement for the 3G network is to ensure that the Licensee will comply with the coverage obligation using 3G radio base stations rather than using a 2.5G network. As regards the data rate requirement for measuring the roll-out obligation in other countries, the enquirer is requested to carry out his own research.

The Licensee is obliged under Special Condition 1.1 of the Mobile Carrier Licence to cover, by not later than end of 2006, an area where at least 50% of the Hong Kong population live from time to time with base stations capable of supporting services operating at a minimum of 144 kbps. Base stations which are capable of supporting services up to only 128 kbps are not in compliance with this requirement.

The methodology should be submitted upon request by the TA and in any case must be submitted to substantiate any claim by the Licensee that it has met the ONA obligations.

The TA's concern is that the Licensee's network is open to NSPs and that the methodology will measure the degree of openness, whether to non-affiliated MVNOs or non-affiliated CSPs. The Licensee is free to develop its own methodology, which may differ for the two types of NSP, subject to the TA being satisfied with the methodology as a whole. If in doubt, Licensees are advised to consult with the TA on these matters when developing their measurement methodologies.

The Licensee must publish wholesale tariffs to be available to CSPs at the same time when such pricing information is made available to its internal service provision arm or affiliated service providers in order to satisfy the non-discriminatory requirement or 3 months before the launch of its 3G service, whichever is the earlier. These tariffs will need to be based on service and bearer characteristics for which the network is configured. The Licensee is able to vary such wholesale tariffs from time to time, provided that they are non-discriminatory in relation to use of the network by non-affiliated CSPs and the Licensee's group, internal or affiliated CSPs.

The reference MVNO contract must be published at the same time when such pricing information is made available to its internal service provision arm or affiliated service providers in order to satisfy the non-discriminatory requirement or 3 months before the launch of the Licensee's 3G services, whichever is the earlier. The TA expects that the terms of such reference contract would change from time to time as the market develops.

In considering regulatory intervention in relation to interconnection/access requirements from a CSP, the TA will consider, among other factors, whether the Licensee is meeting the continuing 30% openness criterion under the "Open Network Access" obligations.

Please see response to d. above.

OFTA intends to issue the guidelines within three months from issue of the 3G Licences.

As the Information Memorandum states, OFTA will make such a draft available in due course. The PNETS licence will be applicable to MVNOs using any mobile spectrum frequencies in Hong Kong, so will be dealt with separately from the 3G auction process.

Revenue for calls that use the spectrum allocated to the Licensee under its Licence is included in Network Turnover, regardless of the source of that revenue or the application which is provided over the spectrum. Please see item 3 of Table 4.2 in relation to the treatment of IDD calls.

Please refer to the response to Question 28.

Interconnection charges payable to other telecommunications operators are costs to the 3G Licensee in providing the telecommunications service which generates the revenue. In other words, the revenue received for the provision of the telecommunications service is treated as the Network Turnover, and the interconnection charges paid (being a cost) are not deducted from the revenue for the calculation of Network Turnover. The charge commonly called the "PNETS charge" is a type of interconnection charges and will therefore be treated accordingly. See Table 4.2 on page 41 of the Information Memorandum for further details of how different revenue and cost items are intended to be treated.

Yes, the Performance Bond provided on the preceding anniversary will be released upon the TA's receipt of the new Performance Bond.

No. The performance bond must be provided in the form (including in the correct maturity) set out in the Notice.

The TA is expected to conduct a consultation with the licensees within six months after the issue of the licences.

The TA intends to issue the licences as soon as practicable after the Third Phase auction. The final steps to be completed at the Grant Stage are set out in Part 5 of the Notice issued by the TA at Appendix H of the Information Memorandum. The TA does not currently otherwise intend to synchronize the grant of the 3G licences with any specific date.

It is possible that First Phase Tied Bidders could re-tie at the same Final Offer that was made by another (originally higher) Bidder (this higher Bidder's Final Offer being the maximum Revised Final Offer that may be made by the First Phase Tied Bidders in the Tied Bidding Round). However, only the original First Phase Tied Bidders would be subject to random selection.

For instance, assume that Bidder A has made a Final Offer of 5.90%, Bidders B and C have made Final Offers that tie at 5.20% and it is necessary to resolve the tie to determine the Provisional Successful Bidders. Bidders B and C would be given a further chance (the Tied Bidding Round) to increase their Final Offers (i.e. make Revised Final Offers), but are limited to a maximum Revised Final Offer of 5.90%. If B and C both then made Revised Final Offers of 5.90%, they would be subject to random selection to determine which would be Provisional Successful Bidder. Bidder A would not be subject to random selection, having already been determined as a Provisional Successful Bidder.

Yes, this applies to services offered from time to time by the licensee.

Yes. The Licensee's obligation is to maintain in full force and effect a Performance Bond, in the appropriate amount, provided by a Qualifying Bank. In the event that the bank ceases to be a Qualifying Bank, the Licensee would be in breach of its obligations under Special Condition 3 of its Licence if it does not provide in time a new Performance Bond by another Qualifying Bank.

There are no specific instructions as to how the envelope should be sealed. The key purpose of sealing the envelope is to ensure that no persons other than the Auctioneer will have access to the documents inside the envelope. The Applicant is advised to consider this when deciding on the appropriate sealing method.

Yes, the employer should be the company with which the Applicant's Representative has a legally binding employment contract. The Applicant's representative should state what its relationship is with the Bidder if that person is not employed by it.

Yes, the Memorandum and Articles of Association can be certified by a director or the company secretary of the Applicant or by a solicitor.

Yes, the Roaming Consent Letter must be signed by a director of the 2G Licensee.

The TA will only accept a Letter of Credit for a term of 364 days from the day of issue. The Letter of Credit must be provided in the form as specified in Appendix 7 of the Notice issued by the TA at Appendix H of the Information Memorandum.

The question describes a default situation which is a very serious breach of the terms and conditions of the auction. It will lead to immediate forfeiture of the whole of the Deposit.

Spectrum utilization fees paid by the Licensee during the entire validity period of the licence will count towards the Licensee's costs for the calculation of wholesale prices.

Bidders' Representatives should be prepared for the First Phase of the Auction to begin at any time on or after 19th September. Please refer to Section 5.7.2 of the Information Memorandum. The First Phase may take place outside normal working hours during the weekend or on a public holiday.

It has been pointed out in page 4 of the Information Memorandum that there is no definite date for phasing out cordless telephones conforming to PHS standards. The status remains unchanged.

OFTA has not finalized its position with regard to the use of the bands 1980 - 2010 MHz and 2170 - 2200 MHz. This will be subject to further consultation with the Radio Spectrum Advisory Committee or the industry as appropriate.

The two types of approval outlined in (i) and (ii) above are examples of the types of shareholder approval which are "required by law". However, the approval must be such that it is not capable of being reasonably obtained prior to the date of submission of the Application by the Bidder in order to satisfy the latter part of the definition of "Approval". Assuming that (i) refers to arrangements such as a consortium agreement, such approval should be obtained in advance of submission of an Application. The types of approval required under the Memorandum of Association or Articles of Association of a Bidder are likely to vary widely, and the TA cannot give guidance on these without further information. Generally, all approvals from major shareholders, particularly those that are actively involved in a bid, must be obtained in advance of submitting an Application. Please also see 47(b) below regarding shareholders' approval for a company which is part of a listed group.

The TA would regard this as one of the limited circumstances under which the required approval is "not capable of being reasonably obtained" prior to the date on which the Application by that Bidder is submitted. However, in such cases, where law and regulation permit, approvals from major shareholders should nonetheless be obtained in advance of submission of Applications.

The Bidder is advised to consult The Stock Exchange of Hong Kong Limited ("HK Stock Exchange") in respect of the timing for obtaining such approval or to seek a waiver from the HK Stock Exchange from complying with any shareholders' approval requirement under the Rules governing the listing of securities on The Stock Exchange of Hong Kong Limited, where possible. According to paragraph 5.1.6 of the Notice, the TA may extend the deadline for obtaining an Approval for up to a period of six months after the date of the Third Phase Notice if the Bidder can demonstrate to the satisfaction of the TA that it has used its best endeavours to obtain a waiver of that Approval within the time period specified in the Notice.

The TA's right to forfeit (all or part of) the Deposit is without prejudice to the provisions of any law or ordinance which may be applicable. Further, a Bidder who does not obtain an Approval by the Approval Date shall not be entitled to the grant of a Licence.

In the above example, the MNO has not met its licence obligation to open up at least 30% of its Network Capacity to NSPs and should do so upon request by NSPs. The TA does not agree that there would be an absolute limit beyond which the Network Capacity could not be expanded. The TA considers that Network Capacity could always be expanded by additional investment, e.g. by increasing the number of base stations.

Yes. The business plan, insofar as it contains information relating to the Auction (including the valuation of a Licence), constitutes Confidential Information in relation to that Bidder.

The terms and conditions of the Notice including those relating to Confidential Information and Insiders apply to the Bidder in question once it has submitted an Application. Therefore, if the business plan was disclosed in advance of submission of an Application, the recipient would not at that time be an Insider. If the potential Bidder subsequently submitted an Application, then the recipient would, from the time of that submission, be considered an Insider to that Bidder.

The possession of Confidential Information by an Insider does not of itself constitute a breach of the Notice. Under the terms and conditions of the Notice, the Bidder is responsible for ensuring that an Insider complies with the rules regarding Confidential Information.

Disclosure of Confidential Information by an Insider of a Bidder after submission of the Application by that Bidder requires the consent of the Authority under paragraph 6.5.1 of the Notice.

Yes.

Who is also an employee or director of other bodies corporate (e.g. a director of a holding company of the first mentioned body corporate), under what circumstances will such Confidential Information be regarded as having been disclosed to such other bodies corporate?<//h4>

These other bodies corporate will also be Insiders for the purposes of the Notice.

If a Bidder discloses Confidential Information to a holding company of the Bidder, will all companies in the group (i.e. all holding companies of the Bidder and all subsidiaries of each of those holding companies) become Insiders as a result of the application of paragraph (a) of the definition? If so, a long list of body corporate Insiders will have to be included in Section 3 of the Application Form while in fact such bodies corporate may not have received any Confidential Information. Please clarify if this interpretation of paragraph (a) of the definition reflects the intention of the TA.

Yes.

For the purposes of completing section 3 of the Application Form only, the Bidder only needs to set out (a) those persons to whom the Bidder knows Confidential Information has been given and (b) in the case of a body corporate, any person who controls the Bidder. In the case of (a) those individuals to whom Confidential Information has been provided should be given as well as the name of the organisation of which they are an employee, director, officer, trustee or partner if they were given that Confidential Information in such capacity. If an individual has been given information in his capacity as a director of only one company, X, but he is also the director of ten other companies, then he only needs to provide details of company X on the application. A worked example has been placed on the TA's website on 10 September 2001.

The treatment by the TA of Insiders for the purposes of completing the Application Form has no effect on the terms and conditions of the Notice. All those persons falling within the definition of "Insiders" contained in the Notice will be treated as such for the purpose of the Notice notwithstanding that their details have not been included in a Bidder's Application Form.

Where Confidential Information is disclosed to a partner, all other partners (i.e. co-partners) within the same partnership will be Insiders for the purposes of the Notice.

Who are "co-partners"? What is the difference between "co-partners" and "partners"?

The term "co-partners" is used in the context of the Partnership Ordinance (Cap. 38) to distinguish a partner from his fellow partners.

Will each partner or co-partner need to be named in Section 3 of the Application Form? Further, will the Bidder be required to submit a revised Application Form and a Bidder Compliance Certificate in accordance with paragraph 6.4.2 of the Notice each time a new partner or co-partner joins the partnership?

For the purposes of completing section 3 of the Application Form only, only the names of those partners who have actually received Confidential Information need to be included together with the name of the partnership to which they belong. The Bidder is not required to submit a revised Application Form or a Bidder Compliance Certificate each time a new partner joins the partnership unless that partner has actually received Confidential Information.

For the purposes of completing section 3 of the Application Form, if the Insider is a body corporate, it is sufficient to state the name of the company or the partnership. In the column headed "role", the relationship of the relevant body corporate such as "holding company" should be stated. It will be sufficient for a Bidder to insert "N/A" in the other columns.

No, unless that body corporate falls within paragraph 4i), ii) or iii) of the Application Form Instructions in Appendix 1 of the Notice.

The order referred to paragraph 4.6.8(b) of the Notice (i.e. the order in which a Bidder is considered to be a Connected Bidder as against the Highest Connected Bidder) is not the order to be determined in accordance with paragraph 4.6.10 of the Notice. For the purposes of paragraph 4.6.8(b), the TA will employ a random selection method.

The definition of "Connected Bidder" refers to Bidders which are closely connected to another. For the purposes of the definition of "Connected Bidder", where Bidder A holds a Bidding Interest in Bidder B and is a "Connected Bidder" in relation to Bidder B, Bidder B is also a Connected Bidder in relation to Bidder A. This applies equally to subparagraphs (b) and (c). The TA has today (in a Modification Notice) modified the Notice by amending the definition of "Connected Bidder" contained in paragraph 1.2.1 of the Notice by adding "and Bidder B is a Connected Bidder in relation to Bidder A" after "(Bidder B)" and deleting "it" in subparagraph (a) and substituting "Bidder A". This is to put it beyond doubt that if one Bidder has a Bidding Interest in another Bidder, they are connected to one another and are, accordingly, "Connected Bidders" in relation to each other.

"Relevant Bidding Interest " in paragraph 4.6.11(a) of the Notice refers to the Bidding Interest which has caused a Bidder to be a Connected Bidder.

Bidder A can satisfy paragraph 4.6.11(a) by having the relevant party/parties provide the required Irrevocable Undertakings specified in that paragraph.

Yes. The reference to "any person or persons whose consent or agreement is required to enable the first mentioned person to perform all of its obligations under the Irrevocable Undertaking" in paragraph 4.6.11(a) will include shareholders, financiers, The Stock Exchange of Hong Kong Limited and OFTA if their consent is required.

OFTA will consider extending the deadline for the submission of an Irrevocable Undertaking in exceptional circumstances but would expect all relevant enquiries in relation to Connected Bidders, and if required, all consents or agreements relating to any Connected Bidder to be made well in advance of submitting the Application particularly given the requirement for the Bidder to provide a statutory declaration as set out in Appendix 3 of the Notice.

The correct cross-reference should be to paragraph 5.1.1. The TA proposes to modify the Notice to effect this change.

The qualification applies to all the entities set out in paragraph 6.5.4(b).

If a Bidder discloses Confidential Information to one or more of the entities set out in paragraph 6.5.4(b), that entity would strictly be an Insider in relation to that Bidder. However, it is not anticipated that the information which is required to be submitted to the entities specified in paragraph 6.5.4(b) in the course of their regulatory or statutory functions would be Confidential Information.

The Bidder may not know who in such entity have received the Confidential Information. As a result, it may not be able to list these recipients (the "Recipients") in Section 3 of the Application Form. In that case, is it sufficient to state the name of the entity to which Confidential Information is disclosed but not the Recipients?
If such entity is regarded as an Insider and is a body corporate (e.g. The Stock Exchange of Hong Kong Limited), would the companies in the group to which such entity belongs also be regarded as Insiders pursuant to the definition of "Insider" under paragraph 1.2.1 and therefore required to be listed in Section 3 of the Application Form? What should the Bidder do if it does not know the identity of those companies?

A Bidder is not required to list any of the entities in paragraph 6.5.4(b) in the Application Form.

If such entity discloses the Confidential Information to other persons, would such other persons be regarded as Insiders pursuant to the definition of "Insider" under paragraph 1.2.1 and therefore be required to be listed in Section 3 of the Application Form? If such other persons in turn disclose the Confidential Information to other persons ("Further Recipients"), would the Further Recipients be regarded as Insiders as well? What should the Bidder do if it does not know the identity of those persons (as the foregoing may occur beyond the Bidder's control and without its knowledge)?

Further Recipients will also be regarded as "Insiders" although the Bidder is not required to list these persons under section 3 of the Application Form. The Bidder should ensure that Confidential Information is only disclosed in accordance with paragraphs 6.5.2 and 6.5.4 of the Notice.

A Bidder is required to make a number of declarations in the Bidder Compliance Certificate with respect to its Insiders. Where such Insider is an entity set out in paragraph 6.5.4(b), a company in the group to which that entity belongs or a person to whom that entity discloses the Confidential Information, the Bidder will not be able to make those declarations unless the entity, the company or the person mentioned aforesaid confirms the correctness of the declarations to the Bidder. As such entity, company or person may not be under an obligation to make such confirmations and the Bidder has no control over any of them, it or he may refuse to do so. Would the TA provide some guidance as to what the Bidder should do in that situation?

The TA acknowledges that the Bidder may have difficulty in obtaining the relevant confirmations of correctness from the Hong Kong Stock Exchange and other entities set out in paragraph 6.5.4(b) of the Notice. The Bidder is, however, required to take all steps to obtain such confirmations well in advance and, in the event that it is not practicably possible to obtain such confirmations, the Bidder should notify the TA by annotating the Application Form.

If a bank receives Confidential Information from a Bidder in the course of arranging the payment of that Bidder's Deposit, whether cash or Letter of Credit, it will also be considered as an Insider of the Bidder.

Yes, those subsidiaries are required to be shown in the ownership structure. An example of this is provided in the worked example of an Application to be posted on the TA's website on 8th September.

Yes, the details of those subsidiaries are required to be shown.

Yes, only the names of the entities have to be provided in relation to the soft copy. A copy of the precise form of Excel sheet into which these should be inserted will shortly be placed on the TA's website for Bidders to download and complete.

Yes. The TA proposes to modify the Notice to effect this change.

In an industry presentation sometime ago, the TA stated that the Applicable Royalty Percentage and the Provisional Successful Bidders will be announced by the TA after the completion of the Final Bidding Round, at which point, this will no longer be regarded as "Confidential Information". In addition, at the sole discretion of the TA, the TA may disclose such details about the identity of these Provisional Successful Bidders and their respective Final Offers as he considers necessary after the completion of the Final Bidding Round. He may also publicise relevant details regarding the corporate structures of, and shareholdings in, the Provisional Successful Bidders at the same time he announces their identities, so as to better assist the public in understanding the identities of those Provisional Successful Bidders.

If the Connected Bidder Statutory Declaration turns out not to be true and accurate in circumstances where it was declared on behalf of the Bidder to the best of the knowledge, information and belief of the relevant person and that person made all due enquiries of the other persons set out in the Statutory Declaration, that Bidder will be a Connected Bidder and the Second Phase of the Auction will apply to it.

If a Bidder who is part of a 2G Bidding Group does not obtain consent from the TA under paragraph 3.1.3 of the Notice, that Bidder will not be a Qualified Bidder.

If two Provisional Successful Bidders are Connected Bidders in relation to each other, and they are unable to provide (or procure the provision of) an Irrevocable Undertaking to the TA as required under paragraph 4.6.11, the relevant Bidders will be required to participate in a Sub-Auction.

Either format would be acceptable. It is the confirmation to the TA that the funds have been received in its account that is the most critical element. The TA may investigate if he does not receive such confirmation even if he has got the evidence submitted by the Bidder.

(i) Yes
(ii) Yes

Mobile data communications services employing the re-use of radio frequencies such as Mobitex do not come within the category of services for which the Government would not issue additional licences before 2005.

Please see the response to Question 8.

Please refer to Section 5.4 of the Information Memorandum which states that in order to pre-qualify, the Bidder must not have "entered … into any MVNO arrangement with any other Bidder". The Bidder is required to provide an MVNO Statutory Declaration as set out in Appendix 4 of the Notice with its Application. This, however, does not rule out any MVNO arrangement between a Bidder and other parties not participating in the Auction before or after the Application Date.

This interpretation is correct.

Please see the response to Question 8.

Yes. The TA has considered the matter further and the response to Question 11 is now superseded by this response.

The TA does not propose to disclose the random method that will be used, or whether it will be electronic or mechanical. However, Tied Bidders will be asked to witness and participate in the tie breaking event, and ICAC observers will be present to ensure fairness in choosing and implementing the random method.

A Bidder should obtain all approvals under contractual arrangements and its memorandum and articles of association before the date on which it submits its Application. The TA will not accept that these kinds of approval are "not capable of being reasonably obtained prior to the date on which the Application is submitted" as provided in the definition of "Approval" in the Notice. The following responses should therefore be read in this light.

The reference to "major shareholders", as envisaged in the responses to the particular questions and circumstances drawn up in Questions 47(a) and (b), is a reference to the body of shareholders of a Bidder which collectively is in a position to give a binding and irrevocable approval in relation to the submission of the Application by the Bidder. All approvals should be in writing.

The TA, as has been the precedent with other authorities issuing 3G licences worldwide, is unlikely to accept the requirement to obtain shareholders approval under a shareholders agreement or under its memorandum or articles of association as grounds for a Provisional Successful Bidder delaying the grant of a Licence to it under Part 5 of the Notice.

It is not for the TA to interpret the provisions of the Listing Agreement or the Listing Rules for Bidders in relation to specific circumstances affecting Bidders. However, it does not appear to the TA that a Bidder is precluded in all circumstances from divulging information to its shareholders for the purposes of securing advanced approval (See Note 2.1 of the Listing Agreement in fact contemplates disclosure in strict confidence in certain examples). Potential Bidders which are listed (or part of a listed group) should consult their legal advisers to ensure compliance with the Rules governing the listing of securities on the Stock Exchange. Responses to both Question 47(b) and (c) are relevant.

The Hong Kong Monetary Authority ("HKMA") maintains a list of all banks holding a full banking licence in Hong Kong. To ensure that the bank that your company is using is "Qualified", please check with the HKMA or consult with your bank representatives. Please also note that Qualifying Bank must also have a credit rating which is the same or higher than those set out in the Notice. The credit rating which the TA is using is the issuer rating of each bank with a full banking licence in Hong Kong. However, if there is no issuer rating or if the bank's long term deposits rating is higher than the issuer rating then the bank's long term deposits rating will be used. Depending upon where that bank is incorporated, either the local or the foreign long term bank deposits rating will be used.

First you must distinguish between a branch and a subsidiary of the US bank. A branch is legally indivisible from the US bank and will have the same credit rating as the US bank. A subsidiary of the US bank is a separate legal entity and its own credit rating will be considered when evaluating whether it is a Qualified Bank. In the example above, the subsidiary would not be considered as a Qualifying Bank if it had to rely on its US parent bank's credit rating. If, however, the US bank had a branch in Hong Kong which had a full banking licence, then a Letter of Credit issued by that branch would be treated as one issued by a Qualifying Bank.

Please refer to the definition in the Notice. The list below consists of institutions which, as at 11th September 2001, to the Authority's knowledge, hold a full banking licence under the Banking Ordinance and whose long term debt rating is, or is higher than at least one of Moody's A2, Standard & Poor's A, Duff & Phelps A or Fitch-IBCA's A. This list is not exhaustive, may change from time to time and may not include all banks which are Qualifying Banks for the purpose of the Notice. It remains the responsibility of Bidders to check whether any bank is a Qualifying Bank within the definition in the Notice.