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24th January 2003

By Yang Sung-jin Staff Korea Herald reporter ...

SK IMT, a third-generation (3G) mobile service unit of SK Telecom, announced Tuesday its selection of Samsung Electronics and LG Electronics as the priority negotiating bidders, as the industry remains mired in a dispute.

Inset 2 SK Telcom staff demonstrating 3G mobiles.

SK IMT, which is scheduled to offer W-CDMA 3G mobile service later this year, plans to sign supply contracts with both firms around October. Price terms and other details are to be decided later, the company said. The bidding value is reportedly worth more than 280 billion won ($227.5 million).

SK IMT started the benchmarking test (BMT) for the second round of 3G equipment testing Sept. 30 last year. The BMT lasted until Oct. 23 and five contenders - Samsung Electronics, LG Electronics, Nortel Networks, Alcatel and Nokia - demonstrated their technological edge to survive the abrasive competition.

As the five contenders, amid increased signs of anticipation, awaited the announcement, SK IMT remained silent about its decision. The wireless industry in Korea earlier predicted that SK IMT would unveil the bidding result before Dec. 15; however, the nation's presidential elections on Dec. 19 effectively delayed SK IMT's decision. Problems also arose when SK Telecom issued a bungled and confusing press release regarding the selection of priority negotiating bidders, leaving foreign participants and observers puzzled with regards to the bidding and selection procedure.

Early Tuesday, SK Telecom distributed another press release to the media; however, SK asked the media to hold their stories since until last minute changes were made. Two hours later, SK Telecom hurriedly explained that the selection details were not final, suggesting some internal disputes had led to yet another delay, and further indicating that SK Telecom was a company quite adept at upstaging itself.

In a revised press release, the company finally said that Nortel Networks had been selected as a negotiating partner. The firm said Samsung and LG are currently prime candidates and if any of the two firms fails to cut a final deal, Nortel might be invited to start negotiating for the equipment deal.

SK IMT was formed in March 2001 through an SK-led consortium upon receiving a Korean government license to begin W-CDMA 3G mobile phone service business.

SK Telecom is the largest shareholder in SK IMT with a 61 percent stake, and the two firms are expected to merge with each other.

Both domestic and foreign players staged a showdown for SK IMT's high- profile 3G telecom equipment bidding, a major wireless beauty pageant in recent months.

SK Telecom is currently promoting cdma2000 1x EV-DO service named "June," splashing massive ads on television and other public media. The EV-DO service can compete with SK IMT's W-CDMA 3G service, an awkward competition structure that neither SK Telecom nor SK IMT wants to witness next year.

SK Telecom's June service is scheduled to offer video telephony via the EV-DO network. Analysts said SK Telecom wants to experiment with as many 3G services as possible through the EV-DO network before migrating to W-CDMA 3G service.

With Korea at the forefront of 3G implementation and standardization, SK IMT's runner-ups - Alcatel and Nokia - are expected to suffer some setback and reshape their market strategy. Some local media speculated that Alcatel and Nokia effectively have lost their last chance to grab a piece of the country's wireless market.

Notably, the fallout of the bidding result for KT ICOM in late May is still pervasive in the telecom equipment industry here.

At that time, Ericsson was disqualified from the W-CDMA 3G mobile equipment bidding process for KT ICOM. Ericsson accepted the setback gracefully, while its competitors - LG Electronics, Samsung Electronics, Nortel Networks - went beyond the initial bidding to proceed to the final selections. Ericsson's disqualification for KT ICOM's bidding is believed to have significantly undermined its brand image in the domestically and elsewhere, and as a result, engaged in massive workforce reductions and layoffs at its Seoul office, despite strong protests from its employees.

SK IMT officials earlier said that they would select at least two final bidders in consideration of the initial W-CDMA 3G network installation. The company said it would provide a commercial version of W-CDMA service in Seoul and Busan in the second half of 2003, before expanding it to 13 major cities in 2004 and other areas in 2005.

Copyright Korea Herald 2003. All Rights Reserved.