5G Frequency Additional Allocation Deadline Today... Will Only LGU+ Smile?

5G 3.40~3.42GHz Band Application Deadline
LGU+ Holding Adjacent Band Likely Sole Bidder
SKT and KT Hesitate to Participate Due to Massive Facility Investment Costs

Three Major Mobile Carriers

[Asia Economy Reporter Cha Min-young] As the deadline for additional 5G frequency allocation applications approaches on the 4th, there is a high possibility that LG Uplus will be the sole bidder. Although the process is formally an auction, the likelihood of SK Telecom and KT participating is limited due to the high costs involved, as the additional frequency band is adjacent to LG Uplus's existing spectrum.

According to the Ministry of Science and ICT and industry sources on the 4th, applications for the 20 MHz bandwidth in the 5G 3.40?3.42 GHz band will close at 6 p.m. This additional allocation was initiated by LG Uplus's application last July.

The market is strongly anticipating LG Uplus to be the sole bidder. This is because the additional frequency band is directly below the 80 MHz bandwidth of 3.42?3.50 GHz currently used by LG Uplus, allowing immediate use without significant additional investment.

The situation is different for competitors SK Telecom and KT. They would need to use 'Carrier Aggregation (CA)' technology to combine separated bands, which would exponentially increase facility investment costs. The frequency bands currently used by SK Telecom and KT are 3.60?3.70 GHz (100 MHz bandwidth) and 3.50?3.60 GHz (100 MHz bandwidth), respectively. Although some speculate they might participate to 'check' LG Uplus, the possibility is considered low.

The frequency allocation will proceed via an auction. It will start with a multi-round ascending bid in the first stage, followed by a sealed highest bid in the second stage. If a single operator bids alone, the allocation will switch to a government-assessed fee through review, according to Article 11, Paragraph 1 of the Radio Waves Act.

If LG Uplus bids alone, it may acquire the frequency at the minimum competitive price. The current minimum competitive price proposed by the Ministry of Science and ICT is approximately KRW 152.1 billion plus alpha, which reflects an annual increase of about KRW 5.6 billion compared to the 2018 allocation (KRW 135.5 billion plus alpha). According to the ministry, there have been 10 instances of sole bidding in 2011, 2013, 2016, and 2018, with about six cases allocated at the minimum competitive price.

There are also allocation conditions. Telecom operators must build 150,000 5G base stations (total cumulative) by December 2025, and the completion date for the rural shared network must be advanced by six months from June 2024 to December 2023. Additionally, they must prepare measures to enhance network reliability and stability and present these in the frequency utilization plan.

There is speculation that the current 5G communication quality rankings may change due to this allocation. In the government's 5G quality evaluation in the second half of last year, download speeds ranked SK Telecom-KT-LG Uplus, while 5G coverage ranked LG Uplus-KT-SK Telecom. If LG Uplus receives the additional 20 MHz bandwidth, it could potentially reverse the rankings.

Since differences arising from the use of domestic and foreign equipment are reflected, there have been calls to delay the frequency allocation to ensure fair competition. This is because there is a technological gap between Huawei equipment (64TRX) used by LG Uplus and the domestic equipment used by competitors. The commercialization of domestic equipment to compete with Huawei is expected by June 2023.

In this regard, the government has emphasized a fundamental stance that 5G frequency resources should be distributed and utilized focusing on consumer benefits. A Ministry of Science and ICT official stated, "Supplying frequencies has the advantage of increasing 5G speeds and expanding coverage for the public," adding, "No specific manufacturer's equipment has an absolute influence."

The Ministry of Science and ICT plans to review the eligibility of applicants on the day and announce the selection results within July. Frequency allocation is scheduled for November 1 this year, with the usage period lasting until November 30, 2028, coinciding with the end of the current 5G frequency usage period.