Korean carriers Facing Too Many Hurdles for Providing World's First 5G Services

With competition for the early commercialization of 5G mobile telecommunication services intensifying worldwide, the Korean mobile industry is faced with formidable challenges.

Among other things, the 5G frequency auction set for June will cost mobile carriers at least three trillion won.

Furthermore there is mounting pressure on them to disclose their prime cost and introduce a universal plan that would charge customers a mere 20,000 won (US$18) per month.

This is why concern is growing that Korea may not be the world's first country to offer 5G services and lose the lead in the ICT convergence industry to competitors such as China and the US.

According to the CTIA and related industries on April 22, the top 5G countries in the world were China, Korea, the United States, Japan, Britain and Germany and Britain and Germany shared fifth place. Korea launched the world's first 5G pilot services through the 2018 PyeongChang Winter Olympics but CTIA analysts believe that China's mobile industry ranked first with the Chinese government's strong support. Although Korea was ranked second, recently Korea suffered from various negative factors, raising concerns.
 

The major three Korea mobile carriers such as SKT, KT and LGU+ about to commercialize 5G next year have many hurdles to clear. First, the lowest reserve price (starting price at the auction) of the ten-year use of 280 ㎒ of 3.50 ㎓ bandwidth was set at 2.654 trillion won(US$2.38 billion) and that of the five-year use of 2400 ㎒ of 28 ㎓ bandwidth at 621.6 billion won (US$559 million), reaching the highest-ever point. Moreover, the telecom rate cut pressure is also growing steadily. The three Korea mobile carriers are already paying 1.3 trillion won (US$1.1 billion) to the government every year for the allocation of 4G Long Term Evolution (LTE) frequencies. Some experts even predict that 5G frequencies will be sold for up to five trillion won (US$4.5 billion).

In particular, civic groups including the People’s Solidarity for Participatory Democracy (PSPA) additionally requested the disclosure of production cost data of LTE-specialized plans after the Ministry of Science and ICT sent 2G and 3G production cost data to the PSPA in accordance with the final judgment of the Supreme Court on April 20. Also, on April 27, the Regulatory Reform Committee will review the introduction of the universal plan system charging 20,000 won (US$18) per month. It was pointed out that not could only ICT convergence industry infrastructure, which is the core of the 4th industrial revolution be damaged but the competitiveness of the three mobile telecom carriers, could be decreased in this process.

Early 5G commercialization, connected cars for autonomous driving, smart factories, and smart cities among others require large-scale facility investment and research and development (R&D) by the telecommunications industry.

However, the three mobile carriers are troubled with an increase in negative factors that can cut down on their sales.

In fact, earnings forecasts for the three companies are gloomy. According to the securities industry, including financial information company FN Guide, annual sales of the three companies are expected to arrive at 53.356 trillion won (US$48.0 billion), up 0.3% from the previous year, and their operating profit at 3.910 trillion won (US$3.5 billion), up 4.6%. A majority forecast is that their main business (wireless telecommunication) will decline 1.5% year on year due to the discount rate of 25% for selective contract users.

In the case of KT, chairman Hwang Chang-kyu announced, "The world's first 5G will be commercialized in 2019," at the Mobile World Congress (MWC) 2017, the world's largest mobile trade show in February of last year and provided 5G demonstration services at the Pyeongchang Winter Olympics. But a recent police investigation of chairman Hwang may bring about CEO risk. The police are investigating whether or not chairman Hwang ordered current and former KT employees to illegally support about 90 lawmakers of the ruling and opposition parties with corporation funds from 2014 to 2017 or whether or not he received a report about that. Arrest warrant application will be decided this week.