The 'Frequency Dispute' Ignited by KT CEO Koo Hyun-mo's Resolute Statement

"High Cost of Reassignment" VS "Calculation According to Principles"

[Asia Economy Reporter Koo Chae-eun] On the 8th, the '5G+ Strategy Committee' was held with Minister Choi Ki-young of the Ministry of Science and ICT and executives from telecommunications companies in attendance. The meeting, which discussed the competitiveness of the 5G industry, quickly lost momentum due to a frank statement by KT CEO Koo Kwang-mo. The issue began when CEO Koo suggested to Minister Choi that "the method for calculating the frequency reassignment fee should be improved." This meeting was CEO Koo's first external schedule since his appointment and also his first face-to-face meeting with the minister in charge.

As such, it was expected that there would be some cordial exchanges, but CEO Koo continued with his candid remarks. "The government should not set the reassignment fee excessively high so that there is room to increase investment in 5G. Compared to other countries, Korea's frequency reassignment fees are too high." Therefore, CEO Koo argued that the method for calculating reassignment fees should be reformed to reduce the burden on telecom companies. An attendee at the meeting said, "This was not something that had been agreed upon at the working level. The government representatives looked uncomfortable," describing the situation at the time.

Frequency Fees Surface Following CEO Koo's Remarks

The telecommunications industry has offered various interpretations of CEO Koo's remarks. First, considering CEO Koo's practical nature, it is seen as natural for him to raise industry issues. On another note, KT appears to be aiming to take a leading role by responding aggressively to industry challenges. Regardless, the common view is that CEO Koo is likely to speak out actively whenever industry issues arise in the future. An industry insider said, "Unlike his predecessor Chairman Hwang Chang-gyu, CEO Koo will proactively voice opinions on matters affecting the industry," adding, "This tone and manner will be maintained even on other contentious issues such as low-priced 5G plans." Above all, since the frequency reassignment fee affects corporate performance depending on the calculation method, the industry is closely watching the government's stance.

Currently, the three major telecom companies use a total frequency band of 410MHz for 2G, 3G, and LTE. Of this, 320MHz, or 78% of the total frequency, is subject to reassignment next year. The usage period for 125MHz expires in June next year, and 195MHz in December. The contentious issue is 'if linked to past auction winning bids.' If the fee is calculated based on actual sales, the combined amount for the three companies is expected to be around 3.5 trillion KRW. However, if the auction winning bids are reflected, the amount could sharply rise to between 8 and 10 trillion KRW. The three telecom companies previously conducted frequency auctions in 2011, 2013, and 2016, with the burden rate relative to sales steadily increasing from 3.0% in 2011 to 4.1% in 2013 and 5.9% in 2016. Given this situation and considering 5G network investments, the telecom industry is calling for improvements in the method of selecting frequency reassignment fees.

Experts Divided: "Should Lower" VS "Should Pay Fair Price"

The Ministry of Science and ICT, the competent authority, is expressing reluctance. Since frequency allocation fees are national assets and effectively quasi-taxes, they cannot be arbitrarily lowered at the companies' request. A ministry official stated, "Allocation fees cannot be simply compared with those overseas," drawing a clear line.

There are also differences of opinion among telecom companies regarding the frequency reassignment method. For example, the 30MHz 2G frequency band held by SK Telecom and LG Uplus, which are approaching the end of 2G service, is a 'chicken rib' (something of little value), but they are also reluctant to let it pass to competitors. A senior telecom industry official said, "Since each company's band plan strategy has not been finalized, there is still a possibility of bidding. In this situation, it is difficult for the government to signal lowering the total reassignment fee, and no consensus has been reached."

Experts' opinions are somewhat divided as well. Professor Shin Min-soo of Hanyang University's Business School said, "Frequency reassignment fees reflect the price or trend at the time of allocation, but a reasonable fee level should be established considering the future market size." Ahn Jeong-sang, senior specialist at the Democratic Party, said, "The government set the 3.5GHz and 28GHz 5G frequency bands cheaper than overseas, but this did not directly lead to diversification of 5G products or B2B investment by telecom companies," adding, "Rather than unconditionally lowering the frequency fees, which are national assets, for the benefit of operators, comprehensive consideration is needed for the efficient use of frequency resources."

This content was produced with the assistance of AI translation services.