Stage X's 'Je4itong' Cancellation Process..."Capital Shortage and Unfulfilled Pledge" (Comprehensive)

Ministry of Science and ICT Cancels StageX 4th Telecom License
Fails to Pay Scheduled Capital of 205 Billion KRW
Shareholder Changes Without Consent... "Cancellation Inevitable"

The government has tentatively decided to revoke StageX's qualification as the '4th mobile carrier.' This is because it failed to pay the capital of 205 billion KRW by the deadline, and major shareholders also failed to fulfill their pledges, thus not meeting the qualification requirements.

Kang Do-hyun, the 2nd Vice Minister of the Ministry of Science and ICT, is briefing on the scheduled cancellation of Stage X's qualification as the 4th mobile carrier candidate at the Government Seoul Office in Jongno-gu, Seoul, on the 14th.
[Image source=Yonhap News]

On the 14th, the Ministry of Science and ICT announced that it plans to cancel the corporate selection of StageX, the entity allocated the 28 GHz band mobile communication frequency. This decision was made after reviewing the necessary documents submitted by StageX on the 7th of last month and determining that it did not fulfill the requirements stipulated by law. The Ministry will make a final decision on whether to cancel the selection after a hearing process in accordance with the Administrative Procedures Act.

Earlier, StageX was selected as the frequency allocation target corporation by offering the highest bid (430.1 billion KRW) in the 28 GHz band frequency auction held in February. Subsequently, StageX submitted documents to the Ministry of Science and ICT to prove compliance with requirements, including the receipt of frequency allocation payment, corporate registration certificate, stock payment deposit certificate, and a pledge to fulfill allocation conditions.

Upon reviewing the stock payment deposit certificate, the Ministry confirmed that StageX paid an amount less than the capital of 205 billion KRW stated in the frequency allocation application. When asked for an explanation, StageX responded that it would make the payment by the third quarter of this year. However, according to multiple legal advisories, the capital of 205 billion KRW should have been fully paid by the submission date of the required documents on the 7th of last month.

Article 12, Paragraph 3 of the Frequency Allocation Notice stipulates that the selection of a corporation can be canceled if the entity fails to fulfill the necessary requirements. Furthermore, as of the day before, the capital recorded in the corporate registry was 10 million KRW, which also did not match the stock payment deposit certificate.

Seo Sang-won, CEO of Stage X
Photo by Yonhap News

Regarding the pledges of the constituent shareholders, discrepancies were found compared to the contents of the frequency allocation application. According to additional materials from StageX, among the six major shareholders holding more than 5% at the time of application, only one, StageFive, partially fulfilled the capital payment. The other five major shareholders did not pay their capital as of the 7th of last month, and two out of four other shareholders were in the same situation.

The Ministry of Science and ICT stated, "Without approval, changes to the constituent shareholders and stock ownership ratios are not allowed, and violating the pledge to implement the funding plan described in the allocation application documents constitutes grounds for canceling the selection of the allocation target corporation."

To urge compliance with the necessary and pledged requirements, the Ministry requested submission of capital payment proof documents from each constituent shareholder three times in total. However, StageX responded that it plans to carry out the necessary procedures for investment after securing the status of a new mobile carrier. The Ministry confirmed that the capital payment plans from the major constituent shareholders were not finalized.

The Ministry of Science and ICT stated, "We judged that the capital formation claimed by StageX is not reliable, and if the capital stated in the allocation application is not properly secured, appropriate business execution will be difficult. Considering concerns expected from equipment manufacturers, partners, investors, and users, we concluded that canceling the selection of the allocation target corporation is inevitable."

The Ministry plans to notify StageX in advance of the intended cancellation of its selection as the frequency allocation target corporation.