(SKM) Spectrum on Auction in South Korea

The South Korean telecom regulator will hold an auction for radio spectrum in early August. The Korea Communications Commission (KCC) will raise roughly KRW 1.5 trillion ($1.1 billion) by providing several frequency bands to Korean mobile operators, thereby changing their competitive positions.

The demand for smartphones is currently on the rise, leading to a growing requirement for wireless data services. Given the surge in data traffic demand, we believe Korean operators will try to make the most of this opportunity and participate in the auction process. Winning frequencies will aid operators to deploy advanced mobile network services known as Long Term Evolution (LTE).

The South Korean telecom giant SK Telecom Corp Ltd (SKM) plans to launch its LTE networks in July while the other two major mobile operators KT Corp. (KT) and LG Uplus Corp. are contemplating deployment.

The regulator will auction three blocks of radio bands –– 800 megahertz (MHz), 1800 MHz and 2.1 gigahertz (GHz). The 800 MHz band will be available for a minimum of KRW 261 billion, while 1800 MHz and 2.1 GHz will be priced at KRW 445.5 billion each.

Notably, the two major mobile operators SK Telecom and KT Corp, are excluded from bidding for the 2.1 GHz bands to ensure fair competition. We believe this will benefit the smaller mobile operator LG Uplus Corp as it will be the sole bidder for the higher frequency band. LG Uplus Corp. is struggling to win market share from its larger competitors. Obtaining the 2.1 GHz band will provide LG Uplus Corp a chance to provide advanced wireless services and help it to invest in LTE networks ahead.

Upon completion of the auction process, the operators can immediately utilize 1800 MHz and 2.1 GHz bands to deploy its wireless services. However, the 800 MHz band will be available from July 2012.

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