Korea Telecom Freetel looks at technology alternatives


NEW YORK-Korea Telecom Freetel, the second-largest wireless provider in South Korea, is leaning toward deploying new technology in the third-generation license band.

As recently as late June, Y.D. Hong, KT Freetel’s chief financial officer, told securities analysts at a public forum in New York that the carrier, of which Qualcomm Inc. owns 1.8 percent, “is focused on CDMA 1XRTT.”

Recently, news reports have surfaced that KT Freetel, along with SK Telecom and LG Telecom Co. are considering wideband Code Division Multiple Access technology for new 3G licenses the government plans to issue later this year.

This means that some carriers in South Korea could operate two versions of CDMA technology: one based on Interim Standard-95 technology they have deployed today, and the other based on w-CDMA technology, promoted by Nokia and L.M. Ericsson.

Hong said the Korean government’s handset subsidies ban, which became effective June 1, likely would increase KT Freetel’s operating profits this year and next. Already, the carrier reported its first net profits during the first quarter of this year, “after just two years of operation,” he said.

By contrast, Qualcomm in late June blamed the subsidy sunset in South Korea as a significant contributor to its expectations of decreased fourth-quarter orders for its chipsets.

It also is possible the handset subsidy ban might be a short-lived phenomenon, as wireless operators in South Korea display their best behavior in advance of the country’s 3G spectrum licensing.

“LG Telecom and Hansol (PCS) believe the ban on handset subsidies is not sustainable in the long term. In the short term, our sources indicate that operators are likely to comply with the Ministry of Information and Communication rule for fear of being blacklisted … ahead of 3G licensings,” said Hani Abuali, a Hong Kong-based analyst for Donaldson, Lufkin & Jenrette Securities Corp.

“By early next year, however, operators may be included to sidestep the rule in order to promote their new wireless data services more effectively. According to one source, operators could potentially finance R&D operations of handset manufacturers instead of offering handset subsidies, which should translate into lower handset prices for end users.”

Notwithstanding Qualcomm’s assessment of a slowdown in handset chipsets, Hong said KT Freetel is not seeing any slackening of subscriber additions, which passed the 5 million mark at the end of May, a 5.4-percent increase from the April total. The company, which closed out 1999 with about 4.3 million customers, expects to complete this year with about 5.4 million.

However, at least some of the net additions will be derived from another Korean government directive that also became effective June 1.

“Our May figures indicate that KT Freetel is the main beneficiary of the government’s decision to impose a 50-percent market share restriction on SK Telecom,” Hong said.

Now with about 30-percent market share, KT Freetel’s goal is to achieve 35 percent by year-end, he added.

Beyond simply adding subscribers, the carrier is in the midst of a planned transition to become a wireless Internet service provider, the chief financial officer said. By the end of this year, it expects wireless data users to comprise about 680,000 of its total customer base.

The company completed upgrading its Interim Standard-95B network nationwide in the first quarter of this year and plans to begin 2.5-generation services, along with other personal communications services operators, in the fourth quarter. Also late this year, KT Freetel plans to test IS-95C High Data Rate technology.

As it pushes forward with advances within its own borders, KT Freetel also is keeping an eye on potential opportunities to the north.

“North Korea is a potential market over the long term. If it opens up, our company is in the most advantageous position to go into North Korea,” Hong said.

About Author