Will 4th mobile carrier spur ‘catfish effect’?

New telecom firm selected for 28 GHz frequency 5G network license

A new mobile carrier is at the center of attention in Korea, while skepticism remains high over the ability of the new telecom company to meet the government’s expectations of promoting competition in the country’s highly monopolized mobile carrier market.

Stage X was selected, Wednesday, as the nation’s fourth mobile carrier through the auction of a 28 gigahertz (GHz) 5G network license. The company, one of three that was authorized by the Ministry of Science and ICT to take part in the auction, became the winner by offering the highest bid price of 430.1 billion won ($322.8 million).

However, industry officials are expressing skepticism about the new mobile carrier’s potential to trigger a so-called “catfish effect” of stimulating competition in a market traditionally dominated by three major players — SK Telecom, KT and LG Uplus. Doubts persist over the likelihood of positive outcomes, such as a reduction in network usage fees, as the telecommunications sector demands substantial investments in network infrastructure, management and marketing.

“Building the infrastructure for a new mobile carrier will require a huge amount of investments and the bid price of over 400 billion won seems like a very high amount,” a local mobile carrier industry source said on condition of anonymity.

“Building base stations nationwide for a telecom business and managing those networks also cost a lot. If they also think about the marketing costs for promotion, it remains to be seen whether the expected effect of reducing network fees from the new mobile carrier will be realized,” the official added.

Other industry experts forecast Stage X to have only a limited short-term impact on the domestic mobile carrier market. But in the long term, they projected the new mobile carrier to spur competition in the market.

“The impact of Stage X on the domestic telecommunications market will be limited in the short term,” Jung Ji-soo, a researcher at Meritz Securities, said. “However, there are advantages to starting a business with various benefits, such as the method of paying for the frequency, policy financing and joint use of network equipment under active government support for the introduction of the fourth mobile carrier. In the medium to long term, Stage X is a potential risk factor for the existing mobile carriers.”

Stage X is a consortium led by Stage Five, which was spun off from Kakao. The consortium includes Shinhan Securities and Intellian Technologies.

“We adhered effectively to the established rules within the framework of the scenario we had planned from the outset. Despite the prolonged and challenging nature of the competition, I am pleased that it concluded with a favorable outcome,” Han Yoon-je, a bidding agent for Stage X, told reporters on Wednesday evening after winning the bid.

Stage X announced that it will focus on creating value by utilizing the 28 GHz frequency as the fourth mobile carrier.