Zacks_Analysts' Blog : SK Telecom Wins Spectrum Auction - Analyst Blog

South Korean telecom giant SK Telecom Corp. Ltd. (SKM) won 1.8 gigahertz (GHz) licenses for KRW 995 million ($920 million) in a spectrum auction conducted in South Korea.

The Korea Communications Commission (KCC) conducted a radio spectrum auction that provides several frequency bands to Korean mobile operators, thereby kindling competition. Winning frequencies aid operators to deploy advanced mobile network services known as Long Term Evolution (LTE).

The regulator auctioned three blocks of radio bands –– 800 megahertz (MHz), 1.8 GHz and 2.1 GHz. The initial price for the 800 MHz band was KRW 261 billion, while 1.8 GHz and 2.1 GHz were priced at KRW 445.5 billion each.

The two largest mobile operators, SK Telecom and KT Corp. (KT), were in the fray, bidding to seize the higher of the 800 MHz and 1.8 GHz shares of the spectrum. However, SK Telecom’s bidding price was double the initial auction price. The soaring cost has kept the second biggest mobile operator, KT Corp., from bidding higher. Notably, KT Corp. has secured the remaining 800 MHz bands for KRW 261 billion.

The Korean regulator, KCC, had debarred both SK Telecom and KT Corp. from bidding for the 2.1 GHz bands to keep the competition fair. This has benefited the smaller mobile operator LG Uplus Corp. Being the sole bidder for the higher frequency band, LG Uplus won the 2.1 GHz spectrum at the initial price.

LG Uplus is struggling to win market share from its larger competitors. The win of the 2.1 GHz band will enhance LG Uplus’ advanced wireless services and help it to further invest in LTE networks ahead.

The operators can immediately utilize 1.8 GHz and 2.1 GHz bands to deploy its wireless services. However, the 800 MHz band will be available from July 2012.

With respect to LTE deployment, SK Telecom launched its first LTE service in Seoul in early July. The company plans to expand its LTE networks to 23 cities and 6 metros by early next year, with a nationwide coverage in 82 cities by year-end 2013. Similarly, LG Uplus has launched its LTE services in July while KT Corp. is rallying to deploy its services later in the year.