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South Korea's big three squeezed for more 5G investment

The CEOs of South Korea's three biggest operators may well have wondered what hit them after switching off their screens in a recent videoconferencing call with the country's Ministry of Science and ICT.

Before the meeting, KT Corp, SK Telecom (SKT) and LG Uplus had collectively pledged to invest the not inconsiderable sum of 2.7 trillion Korean won (US$2.3 billion) in 5G infrastructure during the first six months of 2020. By the end of the call, the three CEOs had apparently agreed to stump up a much heftier KRW4 trillion ($3.4 billion) on the next-gen tech over the exact same period.

It's hard not to conclude that some serious arm-twisting went on, either before the call or during it.

True, South Korea's Ministry of Science and ICT may have offered some financial incentives, perhaps in the way of tax credits or some other benefits associated with the government's 5G+ Strategy – which promotes public-private partnerships – but these measures, if implemented, are unlikely to cover the steep investment hike from KRW2.7 trillion to KRW4 trillion.

Won for the money...
The three operators, already hurting badly from heavy capital outlays on 5G – and without seeing any clear financial upside to date – won't relish the prospect of a huge capex splurge. (See South Korean Telcos Still Waiting for 5G Benefits.)

Light Reading is not clear how the KRW4 trillion commitment will be divvied up among KT, SKT and LG Uplus, but capex for each, by mid-2020, is now in danger of eclipsing the total amount they spent on both wireless and wireline operations during the whole of 2019.

SKT's capex was KRW2.9 trillion ($2.4 billion) during 2019, up 37% from 2018, largely because of 5G coverage expansion. It pinned much of the blame for a 7.6% year-on-year dip in operating income on rising 5G costs.

Capex likewise rocketed at KT, up 65% over the same period, to about KRW3.3 trillion ($2.8 billion). Smaller player LG Uplus saw the biggest year-on-year capex increase of them all – up a whopping 87%, to KRW2.6 trillion ($2.2 billion).

...two for the show
South Korea seems hell-bent on securing 5G bragging rights on coverage, just as it was able to boast a world first in April 2019 when commercial services were launched.

As of January 2020, around 92,000 5G base stations were reportedly installed nationwide, but that's just 10% of the number of LTE base stations. The shortfall perhaps helps explain why South Korea's ICT-minded government is so keen on a 5G investment uptick. It wants the additional investment squeezed out from operators to go on establishing 5G infrastructure in subways, railroads, department stores and universities.

The Ministry of Science and ICT put the number of 5G subscribers in excess of 4.5 million as of December 14, 2019. By the end of the year, according to their respective websites, SKT had a shade over two million 5G subscribers, followed by KT (1.4 million) and LG Uplus (1.2 million).

— Ken Wieland, contributing editor, special to Light Reading

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