S.Korea plans pre-3G revamp for telecom industry

date: 21st February 2001

South Korea plans to streamline its crowded telecommunications industry ahead of the launch of third generation (3G) mobile services, by reshaping it around three groups offering both wired and wireless services.

Some analysts say the plan, a response in part to losses among smaller companies but lacking in detail, may reflect a desire to push one would-be 3G operator into using the cdma2000 technology embraced by local handset makers.

But the analysts add that the government would be best-advised to let the market take the lead in any restructuring of the industry.

"The government plan looks terrific. But it offers no specifics at all," Stan Chung, a telecom analyst at LG Investment and Securities, said on Tuesday. "It just sounds hollow to me."

The government awarded two 3G licences in mid-December to two consortia each led by SK Telecom and Korea Telecom.

Both said they would use a European-developed W-CDMA technology as it plugs service providers into a wider international user base than the competing cdma2000 technology developed by Qualcomm.

Information and Communication Minister Ahn Byung-yub gave details of the plan to centre the industry around three key companies on Monday.

"Integration of wired and wireless services is a global trend. The domestic telecom industry needs to sharpen its competitiveness," Ahn said, during a briefing to President Kim Dae-jung.

The ministry said the nation's five mobile service companies had spent a combined three trillion won ($2.41 billion) annually to subsidise the purchase of mobile phones by new subscribers until last June, when the practice was banned.

WHICH TECHNOLOGY ?

SK Telecom and Korea Telecom beat out LG Telecom in the 3G auction in mid-December to win licences to operate the next-generation mobile services based on W-CDMA technology, which was developed by European telecom companies.

Both SK Telecom and Korea Telecom chose the W-CDMA platform because it offers a wider user base.

Internet service provider Hanaro Telecom, which bid for a competing cdma2000 licence, was rejected due to lack of experience in mobile services.

Hanaro said it would bid again as the government plans to award one cdma2000 licence by the end of March. But many analysts have doubts about the success of such a venture.

LG and POSCO said they were not interested in the March bidding.

"The government is too heady in pushing for the adoption of cdma2000 technology when the market does not give much credit to its profitability," said Chung at LG Investment and Securities.

The government said it wanted W-CDMA used because service providers will be able to tap into the large W-CDMA international user market, while at the same time insisting on cdma2000 as local handset makers have pioneered the technology.

"Even if a three-way competition takes place with one telecom group doing cdma2000 services, it won't last long," said Chung. "It's time the government gave up its tenacity for cdma2000."

top