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South Korea's 5G Auction Raises $3.3B

Iain Morris
6/19/2018

South Korea's big three mobile operators have picked up 5G spectrum in the 3.5GHz and 28GHz bands during a government auction that raised a total of 3.62 trillion Korean won ($3.3 billion).

The spectrum awards give SK Telecom (Nasdaq: SKM), KT Corp. and LG U+ the mid-band and higher-range frequencies they will need to support the next-generation mobile technology when it is launched in early 2019.

Operators spent nearly KRW3 trillion ($2.7 billion) on the 3.5Gz spectrum, a more general-purpose band that should allow operators to provide decent coverage as well as high-speed services.

SK Telecom appears to have stumped up about KRW1.22 tillion ($1.1 billion) for 100MHz of spectrum, with KT paying KRW968 billion ($870 million) for the same amount, according to a statement from South Korea's Ministry of Science and ICT.

LG U+, the smallest of the country's mobile network operators, bought an 80MHz license in this range for about KRW810 billion ($728 million).

In the 28GHz range, which can support the very highest-speed services but offers poor coverage, each operator secured 800MHz, paying between KRW207 billion ($186 million) and KRW208 billion ($187 million) for its license.

The auction makes South Korea the first country in the world to sell mid-band and high-range spectrum at the same time, said the Ministry of Science and ICT in a statement.

Both bands have attracted international attention as "pioneer" bands for the rollout of 5G services.

The 28GHz band is typically associated with fixed wireless access (FWA), or the use of 5G as a substitute for last-mile broadband connections into homes and offices. US telecom giant Verizon Communications Inc. (NYSE: VZ) has been heavily focused on the deployment of 5G as an FWA technology, but Norway's Telenor Group (Nasdaq: TELN) and France's Orange (NYSE: FTE) have also recently talked up their FWA plans. (See The Growing Pains of 5G.)

Telenor plans to shut down its copper network in the next few years and believes 5G could be a broadband alternative for customers that are hard to connect to fiber. Orange, meanwhile, has been carrying out FWA trials in Romania. (See 5G May Replace Fixed Broadband in Parts of Norway, Says Telenor and Orange's 5G Plan: Definitely, Maybe.)


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That operators spent so much more on 3.5GHz spectrum comes as little surprise. Lower frequency bands have historically held greater interest because they can provide wide-area and in-building coverage more economically.

Such mid-band spectrum, which European regulators have also earmarked for use with 5G services, is likely to support the first wave of 5G-based smartphone services in many parts of the world.

Despite reports of complaints about the fees that operators paid for licenses, the total expenditure appears to work out at just $0.02 per MHz per capita, an industry measure used to assess spectrum valuations.

When the higher-frequency spectrum is stripped out, that figure rises to about $0.19, which is more than the $0.15 that UK operators spent during a recent auction of airwaves in the 2.3GHz and 3.4GHz bands. (See UK's £1.4B '5G' Auction Looks Bad for Industry.)

Competition for 3.4GHz spectrum appears to have driven up prices during that sale, with operators spending more on their licenses than analysts had expected.

UK operators spent nearly $4 per MHz per capita during an auction of 3G spectrum at the turn of the century, with the government auction raising a total of £22.5 billion ($29.6 billion, at today's exchange rate) for the UK economy.

— Iain Morris, International Editor, Light Reading

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