SK, KT, LG to invest W 25.7 tril. in 5G network

Chiefs of the country's three major telecom companies and ICT Minister Choi Ki-young pose for a picture during a meeting to enhance cooperation for the establishment of nationwide 5G coverage at the Seoul Government Complex, Wednesday. From left, KT CEO Koo Hyun-mo, ICT Minister Choi Ki-young, SKT CEO Park Jung-ho and LG Uplus Vice Chairman Ha Hyun-hwoi. / Yonhap

By Kim Hyun-bin

A day after President Moon Jae-in announced the Korean New Deal initiative, chiefs of the country's three major carriers agreed to massively invest in the development of fifth-generation (5G) networks.

In a meeting with Science and ICT Minister Choi Ki-young at the Central Government Complex in downtown Seoul, Wednesday, CEOs at SK Telecom, KT and LG Uplus agreed that the carriers would invest up to 25.7 trillion won through 2022 for the early establishment of 5G infrastructure countrywide.

Regarding the specifics of the investment plan, the top executives said they will primarily focus on enhancing 5G quality in the capital and six other metropolitan cities, which includes setting up 5G in 2,000 multi-purpose facilities, on Seoul Metro lines 2 and 9 and along major highways. Next year, the carriers will expand 5G connectivity to an additional 85 districts which includes 4,000 multi-purpose facilities, subways and all train stations, as well as 20 additional highways.

During a nationally televised announcement for the Korean New Deal, President Moon said the Digital New Deal, part of the Korean New Deal, serves as one of the main pillars of the initiative, which aims for digital transformation utilizing 5G infrastructure and helping to create a 21st century industry structure through enhancement of contactless technologies that have evolved amid the pandemic.

“The government and private sector will work together for a possible breakthrough in 5G network infrastructure to overcome the crisis,” ICT Minister Choi said at the start of his meeting with telecom CEOs.

The ministry said 5G will become the core base of the Digital New Deal, as all advanced technologies such as AI will need to utilize the network. The government plans to provide tax support in the form of tax credits and other tax reductions for telecom companies to expand the current 14.3 percent nationwide 5G coverage up to 70 percent by 2025. However, the amount of tax support has not been revealed.

The three telecom chiefs reportedly requested the government provide wider tax cuts to help them invest more in the country's 5G next-generation wireless technology network infrastructure. Telecom officials familiar with the matter said the CEOs requested Minister Choi expand the tax credits to represent the government's willingness to support key technologies.

SK Telecom, KT and LG Uplus are seeking to receive temporary investment tax credits of up to 10 percent for the nationwide 5G investments.

“If they requested 10 percent it might seem high considering telecom companies are currently receiving around 2 percent tax credits for their 5G investments. The figure is set high so they could find a middle ground with the government during negotiations,” an official familiar with the matter said.

Currently, the telecom companies can receive a maximum deduction of 3 percent for their 5G investments, which was given to reduce the burden on domestic telecom companies that were the first in the world to commercialize 5G services in April 2019. The firms currently receive around 2 percent and the remaining 1 percent is given only when there is a 5 percent increase in employment. Also the tax deductions exclude 5G equipment investments, which take up a great deal of 5G-related expenses.