Hyundai Group seeks to be mobile carrier
Hyundai Group, one of the country’s top 20 conglomerates, plans to enter the telecommunication business, participating in a consortium to become the country’s fourth mobile carrier. According to local media, the group will invest 180 billion won in the Internet Space Time (IST) consortium, led by the Korea Federation of Small- and Medium-sized Businesses. Hyundai will become the second biggest shareholder.
According to the report, Hyundai U&I, a system integration business unit, will invest 40 billion won, while the group will seek an additional 140 billion won through a private equity fund.
“It is true that we decided to participate in the consortium. However, we haven’t concluded the exact investment amount,” a representative for Hyundai Group said.
The government has long desired the launch of a fourth mobile carrier based on Wireless broadband (WiBro) technology in which local businesses hold patents. Based on WiBro, the carrier can offer high speed services at about half the rate of current service providers.
“The plan, however, had been sluggish due to lobbying by mobile carriers and ongoing power struggles. It’s finally about to be realized,” an industry analyst said.
He said the government regards a WiBro carrier as a kind of benefit for small and medium sized businesses (SMEs) and venture companies. “While it took around 1 trillion won for SK Telecom to get the 1.8 Gigahertz bandwidth from the government, it is likely to provide WiBro at around 100 billion won for SMEs.”
However, SMEs have been somewhat sluggish in participating due to the bad economy. Two consortiums were eventually set, each with a chaebol group participating. The IST consortium with Hyundai Group will be competing with Korea Mobile Internet (KMI), fronted by Dongbu Group. The KMI consortium applied to become the fourth carrier in August.
“Funding by chaebol will convince other small businesses to participate in the consortium, as they weren’t sure about the sustainability of the project,” the analyst explained.
Hyundai Group expects to diversify its portfolio by participating in the telecommunications business. Its major businesses _ Hyundai Merchant Marine, Hyundai Securities and Hyundai Elevator _ are easily influenced by the economy. In contrast, the telecommunication business can be an attractive and stable income source for the group. It also has been seeking a new growth engine after failing to take over Hyundai Engineering & Construction.
As the market is already saturated, he pointed out that the future of the fourth mobile carrier may not be all that bright. “It is not the kind of market where consumers are being created. The three existing carriers are competing for consumers among themselves. It is up to the new carrier to overcome the competition.”
The IST consortium will hand in its application to the Korea Communications Commission around the middle of this month.