Uplus’s bandwidth is no game changer

KT, SK Telecom already ahead, now competing with each other for what’s left

By Yoon Ja-young

Mobile carriers are pondering the best tactics in the bandwidth auction, with SK Telecom, the country’s biggest, and KT, the second biggest, considering each other’s strategy in the bidding.

Meanwhile, LG Uplus, the country’s smallest mobile carrier, has made a breakthrough. Now that it will get 20 megahertz (MHz) of the 2.1 gigahertz (GHz) frequency band available through a government auction, it can now compete with SK Telecom and KT on a more equal footing, armed with the necessary tools to offer as diverse a range of handsets as the other two carriers here.

The Korea Communications Commission determined Wednesday that SK Telecom and KT will be excluded from the auction for the 20 MHz of the 2.1 GHz band. It means the commission de facto allocated the 20 MHz to LG Uplus as it will be the sole bidder.

SK Telecom and KT will be competing for the 20MHz of 1.8 GHz band and 10 MHz of the 800 MHz band.

KT seems to prefer the 1.8 GHz band, saying SK Telecom, which already has some 800 MHz band, will enjoy efficiency if it takes the additional 800 MHz. SK Telecom, however, hasn’t revealed which bandwidth it wants.

Analysts point out that due to the huge price, there could be winner’s curse in the bandwidth auction. The minimum bidding price for the 800 MHz band is set at 261 billion won for 10 years’ use and 445.5 billion won each for the 1.8 GHz and 2.1 GHz,.

As the government allocated 2.1 GHz to LG Uplus, the contest won’t be huge. “The competition for the two other bandwidths is expected to be less fierce,” said Song Jae-kyung, an analyst at KTB Investment & Securities. He expects SK Telecom to focus on the 800 MHz band, while KT will eye the 1.8 GHz.

LG Uplus, scapegoat of CDMA policy

The Korea Communications Commission determined Wednesday that SK Telecom, the country’s biggest mobile carrier, and KT will be excluded from the auction for the 20 MHz of the 2.1 GHz band. It means the commission de facto allocated the 20 MHz to LG Uplus as it will be the sole bidder.

Currently, SK Telecom has 60 MHz of the 2.1 GHz band and KT has 40 MHz, but LG Uplus has zero. SK Telecom and KT also wanted more in the bandwidth due to serious data traffic jams following the explosive growth in the number of smartphone users, but it was a matter of life or death for LG Uplus.

The lack of 2.1 GHz band shackled LG Uplus and it was actually playing a game that it can never win ― it couldn’t supply diverse foreign handsets, including Apple’s iPhones, to subscribers either old or new.

The government deprived LG Uplus of the frequency back in 2000.

When it put the 2.1 GHz band up for auction, it insisted that one of the three mobile carriers should offer CDMA services in the band instead of WCDMA. The government wanted CDMA as the country commercialized the technology for the first time in the world. It wanted to guarantee local manufacturers a market where they have dominance. All three carriers however preferred WCDMA as it is used by most carriers in the global market. LG Uplus lost, and it had no choice but to provide CDMA services in the 2.1 GHz band.

However, global telecommunications device manufacturers were reluctant to develop CDMA phones only for LG Uplus. “We couldn’t offer services even if we wanted. We thus returned the 20 MHz of the 2.1 GHz band in mid 2000s,” a representative for LG Uplus said.

Hence, LG Uplus had no 2.1 GHz band which is needed for 3G services that is focused on data transmission. Consequently, global manufacturers offer diverse smartphones for 2.1 GHz, but LG Uplus couldn’t put them in their lineup. KT, the country’s number two mobile carrier, succeeded in increasing its market share as it was the sole supplier of iPhones here until early this year. Now SK Telecom also offers iPhones. Apple has iPhones for CDMA services, but not for the 1.8 GHz band that LG Uplus uses. Due to lack of a broad handset portfolio, LG Uplus lost a large number of subscribers.

LG Uplus to join iPhone game

The LG Uplus spokesperson said that it will now be able to join the iPhone competition soon, when Apple develops iPhones for 4G. LG Uplus plans to use the 2.1 GHz for 4G long-term evolution (LTE) services, as the government, which forced CDMA on LG Uplus, is allowing the bidders to freely use the frequency this time.

LG will have the right to use the 20 MHz of the 2.1 GHz for 10 years, and the bidding starts at 445.5 billion won.

“The commission showed a will to create a more level playing ground while promoting long-term evolution,” the spokesman for LG Uplus said.

“We limited the scope of bidders to foster conditions for fair competition,” the commission said in an announcement. It added that the competition between the three companies will lead to rate cuts and better services.