U.S. Poised to Block HKT from U.S. Networks

U.S. regulators are intensifying scrutiny of Hong Kong-based telecommunications firm HKT Trust and HKT Ltd, citing persistent national security concerns amid escalating geopolitical tensions with China. The Federal Communications Commission (FCC) initiated proceedings Wednesday that could effectively block HKT and its subsidiaries from interconnecting with American networks, a move that underscores Washington’s heightened vigilance over potential foreign influence within its critical infrastructure.

The FCC has formally requested HKT, a subsidiary of information and communication technology conglomerate PCCW, to demonstrate why its existing authorizations permitting direct exchange of calls and data with U.S. carriers should not be revoked. This action follows similar measures taken in 2022 against China Unicom, which holds approximately 18.4% ownership in PCCW, further illustrating the breadth of U.S. concerns.

“The FCC’s action on HKT today is an appropriate step towards ensuring the safety and integrity of our communications networks,” stated FCC Chairman Brendan Carr. “The FCC will continue to safeguard America’s networks against penetration from foreign adversaries, like China.” The move signals a hardening stance against companies perceived to have close ties to the Chinese government.

Market reaction to the news was swift, with HKT’s Hong Kong-listed shares experiencing a decline of over 5%, while PCCW shares dipped by 3.6% in Thursday trading, reflecting investor apprehension about the potential impact on their U.S. operations and wider business prospects.

According to their 2024 annual reports, HKT and PCCW derived approximately 13% of their 2024 revenues from regions outside greater China and Singapore, though specific country-level data remains undisclosed. HKT alone accounted for roughly 90% of the group’s overall revenue. A detailed breakdown of their U.S. revenue stream is not publicly available, but industry analysts suggest that the potential revocation could affect HKT’s enterprise solutions and international carrier services.

Neither PCCW nor HKT immediately responded to requests for comment.

Under Chairman Carr’s leadership, the FCC has aggressively pursued a strategy of excluding entities with perceived links to the Chinese state from the U.S. market. This policy has already led to the expulsion of China Telecom, Pacific Networks, and ComNet.

Adding to the pressure, the FCC recently announced that major U.S. online retail platforms had removed millions of listings for banned Chinese electronics, further tightening the regulatory environment for Chinese companies operating in the U.S.

The situation is further complicated by the fact that PCCW is majority-owned by Hong Kong tycoon Richard Li, son of billionaire Li Ka-shing. This connection places the company squarely within the ongoing U.S.-China trade tensions, as Washington seeks to limit Beijing’s influence on Hong Kong businesses and limit China’s access to advanced technology and infrastructure.

Other ventures owned by Li’s Pacific Century Group, such as FWD Group, have also encountered setbacks in their expansion efforts into mainland China, facing increasing scrutiny from Chinese regulators. This broader pattern suggests a challenging operating environment for Hong Kong-based businesses with significant exposure to both the U.S. and Chinese markets.

Furthermore, reports indicate that Beijing has previously instructed state-owned enterprises to suspend new deals with companies linked to Li Ka-shing and his family following CK Hutchison’s agreement to transfer stakes in a portfolio of global ports to a consortium led by BlackRock. The deal, which included ports in Panama, stalled due to objections from Beijing about the exclusion of Chinese investors.

The FCC’s latest move against HKT coincides with a broader escalation of trade tensions between the U.S. and China, signaling the likelihood of continued regulatory hurdles and increased uncertainty for companies operating at the intersection of these two major economies. The FCC’s scrutiny extends beyond mere regulatory compliance, reflecting a deep-seated concern about the integrity and security of U.S. communications infrastructure in an era of intensifying geopolitical rivalry.