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4G/3G/WiFi

WiBro Operators on Borrowed Time

Senior government officials in South Korea say the country's mobile WiMax licenses should be revoked and other sanctions imposed since service providers have failed to invest enough in their WiBro networks, according to an ET News report.

In 2005, KT Corp. , Hanaro Telecom Inc. , and SK Telecom (Nasdaq: SKM) received licenses for WiBro (Korea's name for mobile WiMax), although Hanaro returned its license in the same year. According to the terms of those licenses, the companies agreed to invest $1 billion on infrastructure, and the government set a target of 1.4 million subscribers by 2009.

To date, KT and SKT still have $200 million to $300 million in capex left to invest in the technology, according to Tae-Hyung Kim, Asia/Pacific analyst at Pyramid Research. It is this shortfall, combined with the slow rollout and takeup of services, that has overstretched the government's patience.

As of the end of June, KT had 218,454 WiBro subscribers, according to the company's figures. SKT does not publish its WiBro subscriber numbers separately, but Kim believes the number stood at just 20,000 in April this year, although the company has a target of 100,000 by the end of the year.

KT has experienced improved takeup over recent months. It also reported a 29 percent rise in revenues quarter-on-quarter and a year-on-year rise of 57 percent, to reach 35.3 billion Korean won ($28.4 million) for the second quarter. (See KT Reaps Mobile Bonus.)

According to the company's CFO, Yeon-Hak Kim, KT is expects the growth trend to continue in the second half of the year when notebooks embedded with both WiBro and WiFi technology are introduced.

Despite such improvements, WiBro is very much the bridesmaid to HSPA's bride. As of the end of June, Korea had just shy of 22 million HSPA subscribers, according to Wireless Intelligence , that's 47 percent of the total mobile subscriber base.

A key factor in the difference in takeup is coverage. WiBro coverage is limited to Seoul and its surrounding areas, whereas HSPA is nationwide and Pyramid's Kim explains that even if the operators complete their promised investments, nationwide coverage is out of the question.

In fact, WiBro is a headache that the operators could do without, according to Kim. "Depending on the amount of the fine, I personally think operators would prefer to have WiBro licenses revoked just to get done with the issue, he suggests."

KT could not be reached and SKT was unable to respond at the time of publication to comment on their preferences.

Kim does say though, that the issue is more complicated and that the operators would not only lose the considerable value of their investments to date, they could also harm valuable relationships with the government.

"The two operators would probably have to face less than friendly policies going forward and with spectrum refarming coming up, they definitely do not want to be on bad terms with the government," he says. "I expect the operators to continue expanding their networks, but probably not beyond the pledged amount unless market conditions change radically."

He also believes the government will not follow through on its threat to rescind the licenses: "After spending a huge sum in paying royalties to Qualcomm for [CDMA] 2G networks, the government tried to develop a home-grown technology -- WiBro -- that vendors could export, rather than import. The government created a WiBro hype that pushed a lot of local SMEs into investing in it, so it can’t back off WiBro now as this would ruin the credibility of the government, even if it knows that WiBro doesn’t make much business sense at this point."

The decision on government action will rest with the Korea Communications Committee, and it's not clear when it will make a ruling on the issue.

— Catherine Haslam, Asia Editor, Light Reading

jayja 12/5/2012 | 3:58:45 PM
re: WiBro Operators on Borrowed Time

... on the fallacies of government selecting and promoting a technology instead of letting the market determine.  I hope they're watching.

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