Korea telecom firms say licence demand too costly
telecomclick.com
07/05/00 12:07:41 PM Central Daylight Time
SEOUL, July 5 (Reuters) - South Korea said on
Wednesday it would charge mobile phone companies
upwards of $900 million each for licences to offer
next-generation services, which analysts said could wipe
out the firms' profits for years.
The Ministry of Information and Communication set a bid
ceiling at 1.3 trillion won ($1.17 billion) and floor of one
trillion won to avert a bidding war.
``We are concerned bidding costs by contestants might be
passed on to service users later,'' the ministry said.
But analysts said telecom firms would suffer if they have to
pay such a high price, especially if they have the added
burden of infrastructure costs.
The next generation of services, called IMT-2000, will
include third-generation mobile communications services
for global roaming, high-speed Internet access, multimedia
and real-time video-conferencing.
IMT-2000 would begin commercial operation by early 2002
under 15 year licences. Half the fees are due up front, with
the rest over 10 years, the ministry said.
The attraction for telecommunications companies is an
estimated 10 million IMT-2000 subscribers by 2005 and 20
million by 2009.
Analysts expect the ministry to appoint just three service
providers.
``At over one trillion won, operators are likely to see their
break even point delayed by a year or two,'' Brian Yang, a
telecom analyst at Shinhan Securities, said.
FEES DWARF EXPECTED REVENUE
He said the fees dwarf estimates for initial annual revenues
expected from the services -- which the state-run Korea
Information Society Development Institute has estimated
at a combined 328.3 billion won in 2002 and 422.4 billion
won by 2004.
Revenues are expected to hit 1.4 trillion won by 2010.
``I think the fees for the IMT-2000 service are extremely
high,'' said Yoo Jae-young, a spokesman for Korea Telecom
(30200.KS), which is expected to bid for a licence.
``When the government awarded PCS (personal
communications service) licences to three candidates in
1997, the licence fee was around 110 billion won.''
SK Telecom (17670.KS), another Korean heavyweight, was
also expected to bid. Foreign investors own more than 30
percent of each company.
Hanaro Telecom Inc (33630.KQ), a telephone and Internet
service provider but relative newcomer to the mobile
market, said the bidding favoured companies with existing
infrastructure.
``The government is opting for three licences, favouring
existing mobile carriers, while depriving new entrants of
any chance,'' said Doo Won-soo, chief spokesman for
Hanaro, which is leading a consortium to bid for a licence.
Korea Telecom shares fell 1,000 won to 92,000 on
Wednesday and SK Telecom dropped 6,500 won to 364,500.
Hanaro fell 170 won to 7,900.
The price for the licences however may seen small
compared to some other countries.
Britain awarded five licences for its next-generation
UMTS (Universal Mobile Telecommunications System) in
late April, with Vodafone (VOD.L) spending almost 6
billion pounds sterling ($9.09 billion).
($1-1115.2 won)
($1-.6602 pound)
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