SEOUL, South Korea-South Korea is confronting a row over awarding a third license for third-generation (3G) mobile services, as the government has called for consolidation in the telecom market as a precondition for re-starting the long-delayed spectrum auction.
The confusion was sparked in mid-June, when Ministry of Information and Communication (MIC) Minister Yang Seung-taik said the government would not rush to select the third and last 3G service operator.
The government awarded two licenses in mid-December 2000 to consortia led by state-run Korea Telecom and SK Telecom, the largest mobile carrier. Both companies opted to use the wideband-CDMA (W-CDMA) platform, touted by handset manufacturers such as Nokia and Ericsson as having a wider future worldwide user base.
Korea is seeking a provider willing to use cdma2000, a competing technology that was developed by U.S.-based Qualcomm. The country, which first commercialized cdmaOne, the second-generation (2G) version of cdma2000, has the largest number of cdmaOne mobile phone users in the world.
The government had tried to award the cdma2000 license by mid-March this year, but failed to do so as LG Telecom balked at submitting its bid. But things began to change in April when Yang was appointed MIC minister.
Analysts expected Yang to speed up the 3G auction bidding, but the latest development-the minister’s pledge not to rush the process-put the country’s cdma2000 license bidding back on the drawing board.
Yang’s comment suggesting an indefinite delay for the cdma2000 license dealt a blow to LG Telecom’s bid. The mobile carrier has been in talks with Telesystem International Wireless (TIW) of Canada to seek a partnership, and around 900 local companies have submitted applications for participating in LG Telecom’s 3G consortium.
“What’s important is the consolidation of the telecom market, not selecting an operator for the remaining 3G license,” Yang said.
The minister said he would re-start the auction process only when LG Telecom proposes a three-way telecom market by merging with Hanaro Telecom, Dacom and Powercomm.
Under the three-way competition scenario, an LG Telecom-led consortium, or a new entity resulting from a sweeping merger, would obtain the country’s third and final 3G license and compete head-on with Korea Telecom and SK Telecom.
Minister Yang’s penchant for “voluntary” restructuring in the telecom industry, however, raises the questions of the practicality and logic of the government intervening in the market in the name of initiating consolidation.
Analysts said the government’s proposal for a grand consortium, or consolidation, with LG Telecom taking the central role is unrealistic, because the parties involved have been entangled in a web of conflicts with one another, and the ministry’s policy is confusing.
“The government’s idea of consolidation is far fetched from reality. Investors are already shunning Hanaro for its weak financial status, and it’s unlikely that the new merged firm will find a fresh injection of funds on the market,” said Suh Yong-won, a senior analyst at Hyundai Securities based in Seoul.
Further, the government’s frequent change of policy for 3G has spawned more speculation and uncertainty, he said.
LG Telecom said it needs a 3G license first before drawing up a plan to form the third-largest all-in-one telecom provider after Korea Telecom and SK Telecom.
According to the latest government data, LG Telecom accounted for 15-percent market share with 3.89 million subscribers as of the end of April. SK Telecom and its sister firm SK Shinsegi carved out a combined market share of 52 percent with 13.91 million users, while KTF, a mobile unit of Korea Telecom, claimed 33-percent market share or 8.87 million users, also as of end-April.
LG Telecom suffered another blow in early June when U.S.-based Qualcomm said it was not in talks with LG Telecom about a possible joint bid for a 3G license.
Qualcomm’s interest in a consortium for a cdma2000 license was a response to the Korean government’s wish 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 CDMA market share.
The systems both promise to offer faster data and high-quality video and voice transfer over mobile phones.
