Korean Spectrum Pricing – An Analysis

Last week, Korea’s largest mobile network operator SK Telecom successfully acquired 20 MHz of spectrum in the 1.8 GHz band for 995 billion won ($924 million). SK Telecom, which plans to use this band for LTE, beat out KT Corp which dropped out of the race as the price exceeded twice the reserve level of 445.5 billion won set by the KCC (Korea Communications Commission). KT Corp settled for a 10 MHz license in 800 MHz for the minimum bidding price of 261 billion won ($242 million). Meanwhile, LG U+ won a 20 MHz license in 2.1 GHz for the minimum bid price of 445.5 billion won ($413 million) as both SK and KT were excluded from the bidding for fair competition (the Korean market is essentially a duopoly: SK with 51% of active subscribers and KT with 31%). All licenses are for 10 years.

The price of the 1800 MHz band reflects the fierce contest between SK and KT. Although propagation in the 800 MHz band is superior to that in 1800 MHz, the capacity advantage of 20 MHz of spectrum, double that available in the 800 MHz band, was paramount.

The price paid in this auction for the 800 MHz was slightly below that in recent European auctions whereas the price for the heavily contested 1800 MHz band was high and in fact exceeds the price paid for 800 MHz in Germany. The minimum bid price for the 2.1 GHz band was set about 4 times that paid for this band in Germany, but considering it was an uncontested band, the KCC needed to set a price reflective of its general value particularly as it may not have fetched its worth in the German auction where the focus was on 800 MHz.