SEOUL Aug 26 South Korea's top two wireless
carriers are locked in pricey spectrum bidding expected to run
at nearly 1 trillion Korean won ($919.5 million) on Friday as
they race for a bigger piece of the burgeoning smartphone
The spectrum auction is running for an eighth day on Friday,
and the price for the coveted 1.8 GHz spectrum band has passed
900 billion won, nearly double the initial bid price of 445.5
billion won, a government official said.
"The bidding price is expected to be near 1 trillion won
today," the official at the Korea Communications Commission
Concerns are growing that extremely high spectrum prices
would further weigh on earnings of the country's mobile carriers
that are already grappling with mobile tariff cuts and high
"I expected the price for the 1.8 GHz band at around 800
billion won, but the current price has exceeded expectations.
This will have a negative impact on the earnings and shares (of
the carrier that wins the auction)," said Park Jong-soo, an
analyst at Hanhwa Securities.
"Mobile carriers need more spectrum, but they are spending
too much on that," he said, raising concerns about "a winner's
SK Telecom , South Korea's top mobile operator,
and second-ranked KT Corp are battling to secure the
1.8 GHz band to use it for the fourth-generation, Long-Term
Evolution (LTE) services. SK Telecom launched LTE services in
Seoul in July and KT plans to follow suit in November to provide
faster services on smartphones, tablet PCs and other mobile
Of the other two spectrum bands up for sale, LG Uplus
won the licence for the 2.1 GHz band for 445.5
billion won, while no carrier has yet to bid for the remaining
800 MHz band.
Shares in SK Telecom were down 0.98 percent and KT shares
declined 1.63 percent in a flat wider market as of 0310
South Korean mobile carriers are grappling with an explosion
in mobile data traffic, as the country's smartphone penetration
is expected to jump to 42 percent this year from just 2 percent
two years ago with the popularity of Apple Inc's iPhone
and Samsung Electronics Galaxy S.
While surging data traffic threatens to increase costs on
networks and spectrum, it has not translated into meaningful
sales growth for mobile operators.
SK Telecom and KT also announced sizable mobile tariff cuts,
as they were under pressure from the government that is trying
to tame inflation in Asia's fourth-biggest economy, while
smallest LG Uplus is likely to follow suit.
Investors are worried that further tariff cuts may be ahead
as the country braces for presidential and general elections
($1 = 1087.550 Korean Won)
(Reporting by Hyunjoo Jin; Editing by Ken Wills)