SEOUL, South Korea-South Korea’s major telecommunications operators are scrambling to reshape their businesses to secure a position ahead of the competition this year for the much-coveted third-generation (3G) licenses.
However, the Ministry of Information and Communication (MIC), which will handle the licensing process, is far from ready to determine the specifics of the licenses. The MIC has said the number of licensees and method of screening will be determined by the end of June and that the screening process will be wrapped up by the end of the year.
The IMT-2000 licensing will be the biggest in scale since the country’s scandal-laden PCS licensing in 1996. After PCS license screening was finalized, the service providers-KT Freetel, Hansol PCS and LG TeleCom-and government officials who handled the licensing were charged with excessive lobbying. Some officials were brought to a parliamentary inspection for their involvement in the process. Therefore, the MIC remains cautious about disclosing 3G licensing details, and only unconfirmed rumors have been cited in the press.
The total frequency allocation reserve for IMT-2000 is 60 megahertz, meaning three operators would get 20 megahertz each or four operators would get 15 megahertz each.
With less than 15 megahertz, it is feared operators would fail to turn a profit for years because the spectrum amount is insufficient to remain competitive nationally. Therefore, an option for five operators is least likely.
Meanwhile, the major telecom carriers are speeding their preparations for 3G and voicing their own positions concerning the IMT-2000 licensing method. The carriers desperately want to obtain the 3G spectrum, with the consensus being that failing to do so could put a carrier out of business.
SK Telecom, the nation’s largest mobile carrier, set aside a staggering 123.3 billion won (US$110 million) to develop a commercial IMT-2000 system. The company has said it plans to develop a 2 Megabits-per-second class asynchronous version by February 2002, sending an alarm to its competitors.
In late December, SK Telecom acquired 51.19 percent of Shinsegi Telecom from Pohang Iron and Steel for about $961.2 million. Posco will hold 6.5 percent of SK Telecom shares. The deal gives SK Telecom about 60 percent of the country’s wireless market and makes it the world’s fifth-largest cellular provider with 13 million subscribers.
“The deal will have a positive impact on the IMT-2000 licensing prospects of SK Telecom,” the company said in a statement.
Korea Telecom, the state-run telecom giant, and mobile subsidiary KT Freetel are jointly pushing to develop a synchronous IMT-2000 system. KT Freetel formed a strategic alliance with Microsoft, Qualcomm and Canada’s Capital Communications CDPQ in November in a bid to carve out its share in the upcoming multimedia-oriented mobile communications market. The partnership gives Microsoft potential for Windows CE in the 3G arena.
LG TeleCom, a mobile subsidiary of the LG Group, a family-owned conglomerate or chaebol, is pushing ahead with the development of a synchronous IMT-2000 system as well. Notably, the LG Group has acquired Dacom, a fixed-line operator that is pursuing an IMT-2000 license on its own. The two companies, if they join forces, are expected to emerge as a powerful bidder.
Hanaro Telecom Inc., a newly established local wireline provider, and 14 small telecom firms recently formed a consortium for IMT-2000 in November 1999, thus making its initial move to jockey for position in the 3G license race.
Hansol PCS also is joining the license competition, establishing a specialized division for the IMT-2000 bidding project.
The intensifying competition is already translating into a profound consolidation of Korea’s mobile market overall similar to the Japanese market. Japan’s DDI Corp., IDO Corp. and KDD Corp. have joined forces to provide 3G services.
“Most carriers see the IMT-2000 as the most crucial issue of their businesses, but the conflict of interest among carriers may make it difficult to form a partnership for the bidding,” said a ranking official of KT Freetel, requesting anonymity.
Since the government is unlikely to give IMT-2000 licenses to more than three bidders, losers may be pushed out of business almost immediately. The make-or-break race is, understandably, spawning disputes over the bidding process as well as a courtship binge for survival.
“Considering … Korea’s market situation, if a company loses the bidding, it will definitely go belly-up right immediately,” said Shinsegi Telecomm President Chung Tae-ki.
The cash power and technology level of IMT-2000 candidates differ from company to company, rendering the dispute about the number of licensees trickier than ever.
