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29 October 2015

China Mobile buys 40% stake in Korea’s new operator

Past efforts to introduce new competitors to the Korean market have failed, but the latest attempt is different, since it is backed by China Mobile. The world’s largest operator has joined a consortium which wants to create a fourth player in the world’s most advanced mobile market.

The Chinese giant is investing an initial sum of KRW320bn ($283m) to secure more than 40% of the KT Net group, which is bidding for a licence to compete with the well-established incumbents – SK Telecom, KT and LG U+. These have seen little change in their market shares – roughly 50%, 30% and 20% respectively – for more than a decade.
The government has wanted to open the door to a fourth operator since the days of WiBro, but its most recent offer of a new licence has attracted no bidders, until now. KT Net has raised about KRW800bn so far and is targeting a total of KRW1.6 trillion in future, with China Mobile expected to increase its investment. The other shareholders are local Korean businesses and individuals which have been trying for some years to create a viable fourth telco.

For China Mobile, entering the Korean market directly would go a step further than its existing cooperations with SK Telecom, in particular, in areas such as new applications and 5G R&D. It would gain deeper understanding of how the most sophisticated of mobile consumer markets operates; could offer free roaming with China as a competitive weapon; and would have the chance to strengthen a dual-mode TDD/FDD LTE ecosystem in this influential country.

The new entrant will initially get 700 MHz FDD spectrum, with preferred treatment during the upcoming auction, but may also be able to access higher band TDD frequencies in future (for instance, the 2.3 GHz WiBro licence surrendered in 2005 by Hanaro Telecom, a previous hopeful to be a disruptive fourth telco).

China Mobile has already worked with the Korean government and SKT on FDD/TDD interoperability.