SEOUL, South Korea-As South Korea postponed plans to select a third and final third-generation (3G) mobile service operator, the government’s enthusiasm for a viable bidder is greater than ever. But potential bidders seem unimpressed, putting the 3G license itself into doubt.
The Ministry of Information and Communication (MIC), which handles the 3G license, said last month it would delay the selection of a third 3G carrier until a consortium takes concrete shape.
Government sources said the ministry expected a consortium with enough cash, power and reliable foreign partnerships would emerge to apply for the license by the first half of 2001, but analysts said the government’s failure to attract major bidders has created too much uncertainty.
The deadline was originally set for end-February, with a view to selecting one cdma2000 operator by mid-March.
The government awarded two licenses in mid-December to consortia led by state-run Korea Telecom and SK Telecom, the country’s largest mobile carrier.
Both companies opted to use the wideband-CDMA (W-CDMA) platform, with a wider worldwide user base than cdma2000 and touted by manufacturers such as Nokia and Ericsson.
The government is seeking a provider willing to use cdma2000, a competing technology advocated by U.S.-based Qualcomm. Korea, which first commercialized cdma2000, has the largest number of mobile-phone users based on the protocol in the world.
Internet service provider Hanaro Telecom offered to provide cdma2000 in December’s auction, but was rejected due to its lack of experience in mobile service and concerns it might not be able to raise sufficient funds.
After its first botched attempt, Hanaro Telecom tried to form a better consortium by joining hands with major cdma2000 technology supporters, such as Samsung Electronics, but failed to convince the government because its partnership with major players was deemed weaker than expected.
Hanaro Telecom has complained big names were reluctant to join in its consortium, citing the 1.15 trillion won (US$922.9 million) license fees are too high.
“We believe 220 billion won (US$175.6 million) would be reasonable for a frequency band of 20 megahertz for 3G services given that mobile carriers paid 110 billion won (US$87.8 million) for 10 megahertz for their current 2G services,” Hanaro spokesman Doo Won-soo said.
But Information Minister Ahn Byung-yub said the ministry would not accept the demand, as it would be unfair when SK Telecom and Korea Telecom agreed to pay 1.3 trillion won (US$1 billion) each in license fees.
Instead, the ministry said it could give the one cdma2000 operator a right to choose preferred frequency spectrum for 3G services and soft loans for the rollout of 3G networks in the countryside.
The ministry hoped LG Telecom would be the key candidate for the cdma2000 carrier. LG Telecom is a unit of the LG Group, one of the country’s largest family-owned chaebols. LG Group has related subsidiaries, such as electronics maker LG Electronics and fixed-line carrier Dacom.
“The government is desperate to have one cdma2000 operator in Korea, and the delay this time is designed to lure the LG Group or POSCO (Pohang Iron and Steel Company) with better financial standing into the Hanaro-led consortium,” said Brian Yang, an analyst at Shinhan Securities based in Seoul.
But LG Group lost a WCDMA bid in December and repeatedly said it is not interested in undertaking a cdma2000 business, which many industry professionals believe has a dim market position considering the dominant positions of Korea Telecom and SK Telecom.
Since the group’s failure to win its W-CDMA bid, LG has seriously mulled the future of its telecom service businesses. Rumors once mushroomed that LG Group planned to sell LG Telecom to state-run Korea Telecom, but it turned out Korea Telecom showed little interest in acquiring LG Telecom.
Park Un-so, newly appointed chief executive officer (CEO) of Dacom, a unit of LG Group, said even if the government offers significant financial incentives to LG to turn it as the third bidder, commercial viability for cdma2000 in South Korea’s mobile market is shaky.
“LG would not seek a cdma2000 license, and we don’t see any merit, even if the government offers some incentives,” Park told a press conference on 27 February.
Park said LG Telecom would focus on the so-called transition technology standard known as IS-95C and would consider investing only a small amount of money in a consortium, if any at all, for a cdma2000 license.
Asked whether the LG Group will sell LG Telecom, Park said if POSCO takes the lead in the consortium for cdma2000, it will consider selling its wireless unit to POSCO, but expressed skepticism about such a possibility.
POSCO, the world’s largest steel maker, which already has a 12-percent stake in the 3G group led by SK Telecom, said it is not interested in either taking the lead in the consortium or buying LG Telecom.
The government is keen to have both technologies, because service operators will be able to tap into the large W-CDMA global user market, while allowing local handset makers to maintain their cdma2000 markets.
The systems each promise to offer faster data and high-quality video and voice transfer over mobile phones than currently available networks.
