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Why Korea's 8th attempt to launch 4th telecom carrier fell through

June 23, 2024 - 14:36 By Jie Ye-eun
Stage X, which had been expected to become the country's fourth mobile carrier, joining SK Telecom, KT Corp. and LG Uplus, will likely lose its status as the Science Ministry has decided to revoke its license. (Stage X)

South Korea's recent attempt to launch the fourth telecom carrier -- the eighth of its kind -- fell through again, raising skepticism about the government's preparedness and the feasibility of the plan itself.

The Ministry of Science and ICT earlier this month decided to cancel the license of Stage X as the fourth mobile carrier, citing a lack of trust in its capitalization plan.

Amid the long-standing dominance of three telecom carriers -- SK Telecom, KT Corp. and LG Uplus, the government has attempted to create a fourth player since 2010, saying increased competition could reduce the burden on consumers brought by communication expenses.

But experts question whether this is still worth doing when telecom companies are increasingly rolling out affordable monthly plans of 20,000 won ($14.40) to 30,000 won to lure customers in the already saturated market.

“Concerns had been consistently raised about the financial ability of the business operator, but the government failed to verify this in advance,” said Moon Hyung-nam, a professor of global convergence at Sookmyung Women’s University.

With the absence of this more sophisticated verification system, the government’s eighth effort to launch the fourth telecom carrier, which had been in preparation for a year, once again fell through.

For Stage X, losses became inevitable as the business rights were revoked after nearly half a year of investment in technology development, infrastructure construction, personnel recruitment and office preparation, experts analyzed.

Some experts criticize the government’s point that the emergence of a fourth mobile carrier promotes competition and runs counter to the global trend of realizing economies of scale. For instance, Britain's Vodafone is pursuing a merger with Three, while the US carriers T-Mobile and Sprint merged in 2020.

“Looking at the situation in which Samsung Electronics and LG Electronics are actively competing in the home appliance market, it is not necessarily accurate to say that competition becomes more intensified if there are more market players,” an industry source, who asked for anonymity said.

“I think it would be more effective (for the government) to focus on communications policy in other directions, such as promoting MVNOs, rather than being obsessed over the fourth mobile carrier, to truly alleviate the burden of household communication expenses and creating a competitive socialism among telecom carriers.”

While the Ministry of Science and ICT announced its plans to comprehensively review the problems with the selection system, another industry source suggested that incentives that enhance the profitability of telecom businesses would be necessary to attract significant capital to the telecom industry.

"Larger firms or foreign entities may be equipped with capital stability to launch a fourth mobile carrier. But when compared to high-growth areas such as artificial intelligence and semiconductors, entering a saturated telecom market seems less attractive to them," the anonymous source said.

"If the government really wants to give a license to the fourth mobile carrier, it needs to come up with compelling points to attract them as well.”