S Korea revokes LG Telecom 3G licence

South Korea on Wednesday revoked LG Telecom’s licence to offer third-generation wireless service and said its chief executive must step down to take responsibility for not offering a service.

The decision will be a blow to LGT, which has struggled to upgrade its networks to compete against larger rivals such as SK Telecom and KTF to meet growing demand for data services.

The ministry of information and communications also fined LGT Won100bn for missing the deadline by which it should have offered 3G services, based on synchronised CDMA IMT-2000 technology. The company said the necessary technology and equipment had not been developed.

“LGT did not begin the service by the extended deadline of end-June and also made it clear it has no plan to provide the service or make investments in the standard,” the ministry said.

The company bought the IMT-2000 carrier licence in May 2002 for Won220bn in an initial payment after the government rejected its bid for the right to offer services based on W-CDMA technology.

However, the IMT-2000 technology has fallen out of favour as W-CDMA has emerged as the most common type of 3G technology adopted worldwide. SK Telecom and KT, the parent of KTF, are offering 3G services based on W-CDMA technology, after they obtained the licences in 2000 for $1.1bn each. But demand for 3G services in Korea has not picked up yet.

Under South Korean telecoms law, Nam Yong, LGT’s chief executive, is required to step down to take responsibility for dropping the 3G service plans. Mr Nam has been the longest-serving head among Korea’s biggest telecom companies, after he came to office in 1998.

LGT baulked at the government decision and said it planned to launch 3G services using a different frequency at the end of this year. “It is regrettable that the government cancelled the licence, without considering the circumstances in which we could not offer the services because the technology and equipment have not been developed,” the company said.

Separately, LG Electronics, LGT’s affiliate, on Wednesday said it had swung to a second-quarter net loss, due to falling handset prices and lower-than-expected LCD sales. The country’s largest home appliances maker reported a Won9.7bn net loss in the April-June period, compared with a Won151bn profit a year ago.

Its mobile phone division suffered a second consecutive quarterly loss of Won3bn, despite an 11 per cent gain in revenue. But the world’s fourth-largest handset maker predicted that the handset business will turn profitable in the third quarter. Meanwhile, the company’s display division reported a Won21bn profit, compared with a loss a year earlier.