South Korea to choose 3G mobile phone licence winners

date: 14th December 2000

South Korea will decide Friday the fortunes of its leading mobile phone companies when it announces the winners of a four-cornered battle for three licenses for potentially lucrative next-generation wireless services.

The Information Communication Ministry will issue licenses for third generation (3G) wireless phone services, known in South Korea as the IMT-2000 project, officials said.

The stakes are huge for the country's mobile phone operators.

"If you miss the license, you will eventually be driven out of the wireless market," said a spokesman of the largest mobile operator SK Telecom Co.

SK Telecom is leading a consortium which is tipped to win one of the two licenses to use the wideband code division multiple access (W-CDMA) system.

Two other consortiums, including one led by Korea Telecom Freetel Co. and another led by LG Telecom Co., are vying for the other license to use the W-CDMA system.

The fourth bidder, a consortium headed by Hanaro Telecom Inc., hopes to get into the wireless business with CDMA technology.

A government committee will choose the winners under a so-called "beauty contest" system based on submitted offers.

Many European nations have held lucrative auctions for the licenses. Britain raised more than 35 billion dollars and Germany almost 50 billion dollars. In Japan licences were awarded according to the qualifications of the competing bids, but no money was involved.

Because South Korea is using the beauty contest system, it will not reap the huge windfalls seen in Britain and Germany. The three successful bidders will pay 1.3 trillion won (1.1 billion dollars) each for their licenses.

The successful South Korean bidders will be chosen on the basis of the services they promise to provide and the government's judgment on their ability to deliver.

"We have a good track record in this business, which dates back to 1984. We also have operating knowhow, technology and solid financial backing," the SK spokesman said.

He noted SK Telecom, which controls more than 50 percent of the South Korean mobile phone market, is one of the few South Korean companies listed on the New York Stock Exchange.

The 3G wireless telecoms services will enable users to exchange phone calls, video images and Internet data at a high speed.

South Korea plans to test-launch the 3G wireless services in time for the football World Cup finals to be co-hosted by South Korea and Japan in June, 2002.

According to the state-financed Electronics and Telecommunications Research Institute (ETRI), the equipment market alone in South Korea is expected to hit two trillion won (1.7 billion dollars) in 2005.

Industry analysts said the number of IMT-2000 users would reach 10 million by that time.

South Korea is considered one of the most lucrative markets in the region, with 26 million out of its 43 million people owning a mobile phone.

The impact of the 3G technology on related industries including providers of Internet content, parts and components and mobile phone services, will be enormous, analysts said.

The impending announcement is drawing keen foreign interest because the winners of licenses are likely to require foreign capital to pay the license fee to the government by March next year.

SK Telecom, in which foreign companies hold a 30-percent stake, said it plans to increase its equity capital through a rights issue, corporate bonds or foreign debt if it is selected.

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