LG Telecom, Hanaro may get perks for cdma2000 bids

date: 21st December 2000

Two South Korean telecom firms passed over in a recent auction for licences to provide 3G mobile service may be offered incentives to rebid, the Ministry of Information and Communication said on Wednesday.

The catch is that they must submit bids using the cdma2000 standard for the service, not the W-CDMA format that Korea Telecom and SK Telecom have been selected to use.

``The government will consider providing incentives to encourage them to rebid for the cdma2000 standard,'' a ministry spokesman told the press, referring to LG Telecom and Hanaro Telecom .

``We are not interested in submitting a bid for cdma2000 license next year, because we are not sure of its profitability,'' Sue Kim, spokeswoman for LG Group [LUGG.UL], told the press.

The LG Group said earlier this week it was considering legal action against the government after its telecoms unit lost in the W-CDMA auction where it said it offered the strongest technology.

Its shares closed down 470 won at 4,180 on Wednesday, off almost 39 percent from their close of 6,800 on the eve of last Friday's W-CDMA auction.

Hanaro, which was rejected for a cdma2000 licence last week, has said it will re-bid.

Its shares closed at 2,560 on Wednesday, off 10.8 percent on the day and down 35 percent since its close prior to the auction.

The ministry spokesman would not elaborate on what incentives the government might provide, but analysts said it could include lowering fees for the licences, which he said would be awarded next February.

SK and Korea Telecom, awarded coveted next-generation mobile service licences last Friday, will pay 1.3 trillion won ($1.08 billion) each in licence fees and experts predict they will need a combined 6.5 trillion won for facilities investment over the next five years.

``It's a big loss for LG Group, because it has invested a lot in developing W-CDMA standards,'' said B.T. Yang, analyst at Shinhan Securities.

``LG is unlikely to rebid for cdma2000 next year, unless the government provides huge incentives,'' he said. ``LG is now in a dilemma, because its ability in other areas is limited.''

He said two options open to the firm are to focus on W-CDMA equipment based on its technological expertise or reinvent itself as an Internet service provider.

The government wants Korea, which pioneered commercial use of the CDMA format developed by Qualcomm Inc, to use both standards.

W-CDMA taps service providers into a wider international user base, while Korean companies such as Samsung Electronics are leading manufacturers of handsets to be used for cdma2000.

Both next-generation mobile formats will offer users wider bandwidth to handle video and high-speed data and enhances global roaming services.

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