Looks like we maybe losing Samsung's backing.
Dec.16.2000
Cell Firms Mull Next Step
by Suh Ik-jae
Future Looks Bleak for U.S.-Style Phone Service
LG's telecommunication business has reached a crossroads after the firm failed Friday to get a license for the next-generation mobile phone services using W-CDMA, the European standard. Industry observers suggest that the future for a U.S. standard third-generation service in Korea are bleak because the two telecommunications powerhouses in Korea both won European-standard licenses.
"We will reexamine our telecommunication business in general," LG said after the Ministry of Information and Communications announced that SK Telecom and Korea Telecom won licenses for the new services.
LG had planned to concentrate on the wireless telecommunications business. As a part of its plan, the conglomerate intended to separate its telecommunications business from LG Electronics and form a new company combining LG's other related affiliates such as LG Glocom, LG Telecom and DACOM. But the plan now must be changed, business experts say.
Some market observers expect that LG will continue with its plan to divide LG Electronics into hardware and communication services firms, after which LG would withdraw from service businesses and focus on equipment development. In that case, observers say, LG would have to sell off its stakes in LG Telecom, DACOM and Hanaro Telecom and abandon its ambitions to become a global wireless leader with both hardware and services businesses.
Some financial analysts raise the possibility that the LG Group might abandon communications entirely and focus on digital home appliances and chemicals. The company quickly squelched such thinking. "We will not give up the equipment business even if we give up services arms," an LG spokesman said.
If LG competes for the third license, for the U.S. standard CDMA2000, it is uncertain that the firm could be profitable. LG holds a smaller share in the current mobile phone services market than SK Telecom or Korea Telecom. The firm would have to compete with the two phone heavyweights who use the European standard.
U.S.-standard equipment manufacturers also are affected by LG's failure in the bidding. They hoped that either SK or Korea Telecom would lose Friday and convert to the U.S.-technology-based service. "The results are the worst case for us," one company official said.
Minister of Information and Communication Ahn Byung-yub said, "The government will make efforts so that both the European and U.S.standards can prosper and compete with each other." As a part of its efforts, the ministry will speed the selection of the winner of the the sole CDMA 2000 license, originally planned in March 2001. The minister added, "It is not correct that the CDMA2000 technology is inferior to W-CDMA."
Samsung Electronics, the largest CDMA2000 equipment maker, is especially nervous. If LG does win a U.S.-style license, it could make its own equipment; if the Hanaro consortium, judged too weak by the government to be licensed, wins a ticket, its long-term prospects would be even bleaker than LG's. "Therefore, we will have to change our projects concentrating on U.S. standards," a Samsung official said. |
