StageX, which is about to launch as the 4th mobile carrier, is starting a hearing procedure to make a final decision on whether to cancel the selection of candidate qualifications. The reason for the cancellation is that only an amount less than the capital stated in the allocation application was paid through the capital payment certificate.

The Ministry of Science and ICT announced that after reviewing the required documents submitted on May 7 by StageX Co., Ltd. (hereinafter referred to as “StageX”), a corporation eligible for mobile communication frequency allocation, it was determined that the corporation failed to comply with the requirements stipulated by law, and therefore, there was grounds for cancellation of selection.

The Ministry of Science and ICT requested additional explanation and implementation, but the reasons for the cancellation were not resolved, and as the major shareholders did not keep their pledges made when applying for frequency allocation, the Ministry of Science and ICT announced that it would initiate hearing procedures to make a final decision on whether to cancel the selection of the corporation subject to frequency allocation.

■ Government, Cancellation of Allocation Target Corporations Is Inevitable

The Ministry of Science and ICT selected StageX, which submitted the highest bid of 430.1 billion won in the 28 GHz band mobile communication frequency auction held in January, as the company eligible for frequency allocation. StageX submitted the necessary documents proving that the corporation had complied with the relevant regulations for frequency allocation by May 7, within three months.

Stage X submitted a receipt for payment of 43.01 billion won, which is 10% of the frequency fee, a certificate of complete corporate registration, a certificate of stock payment deposit, and a letter of allocation condition fulfillment. Stage X disclosed the list of consortium members and stated that it planned to have 200 billion won in business capital and that the initial funds secured were in the 50 billion won range.

StageX also announced that it would “complete the planned overall capital increase early and complete the Series A investment of 200 billion won, which is necessary for facility investment and launching innovative services, before the service launch next year.” StageX also reported that it has been in detailed discussions with multiple global investors since April.

Meanwhile, Kang Do-hyun, Second Vice Minister of the Ministry of Science and ICT, said, “In accordance with Article 12, Paragraph 3 and Article 13 of the Frequency Allocation Notice, we will confirm whether the necessary provisions have been implemented and decide on the cancellation of the selection of the corporation subject to allocation or the issuance of a frequency allocation notice.” He added, “In addition, the Ministry of Science and ICT must verify the capital payment certificate and the copy of the corporate registration, and the pledge in the format of Appendix 2 to the Frequency Allocation Notice, written and submitted jointly by the major shareholders with 5% or more shares when applying for frequency allocation, must ensure that the corporation at the time of the frequency allocation application and the actually established corporation are the same, prohibiting arbitrary changes in constituent shareholders and ensuring that each constituent shareholder adheres to the capital procurement plan stated in the allocation application documents.”

The Ministry of Science and ICT said, “After receiving the necessary documents from StageX, we confirmed that the amount paid in capital was significantly less than the 205 billion won stated in the frequency allocation application, and we immediately requested an explanation for the reason for the difference.”

Accordingly, StageX submitted an explanatory material stating that it plans to repay its capital in full in the third quarter of 2024. However, the Ministry of Science and ICT said, “We requested the submission of supporting documents and also checked whether there was an intention to extend the deadline for submitting the required documents. The business operator replied that they were not considering an extension,” and “Article 12, Paragraph 3 of the Frequency Allocation Notice stipulates that selection can be canceled if the target corporation for allocation does not comply with the required matters. StageX’s failure to pay the capital stated in the original frequency allocation application is grounds for cancellation of selection.”

In addition, the Ministry of Science and ICT said, “We requested each constituent shareholder to submit a certificate of capital payment on three occasions, on May 9, May 21, and May 23, in order to urge them to fulfill their capital requirements and pledges. StageX responded that it would proceed with the necessary procedures for investment after securing the status of a new mobile communications service provider.” He added, “The Ministry of Science and ICT has separately confirmed that the major shareholders have not finalized their capital payment plans.”

The Ministry of Science and ICT concluded that “it is inevitable to cancel the selection of the target corporation for allocation, taking into account concerns that may arise in the future, such as equipment manufacturers, partners, investors, and users.”

■ Government fails to acknowledge failure to revitalize telecommunications market

Ryu Je-myeong, director of the Network Policy Office at the Ministry of Science and ICT, responded to the difference between the claims of business operators and the government in the frequency allocation procedure by saying, “The government says that the qualification review is a procedure to grant qualification to participate in the auction, but the business operator says that the Ministry of Science and ICT approved the contents of the documents submitted by the business operator through the qualification review.”

In addition, the Ministry of Science and ICT's position is that "the notification of selection of the target company for allocation is the step to confirm the integrity of the frequency allocation auction and confirm the qualification as the final successful bidder, but StageX claims that it has in fact been granted the qualification for allocation, but this is not the case."

In other words, the government explains that StageX is a business operator notified as an allocation target corporation, and that there is a separate step to determine whether or not the necessary requirements have been met. At that time, the Ministry of Science and ICT requested the business operator to submit necessary documents such as a frequency allocation application, frequency operation plan, and criminal record, and the review continued until May 8. Therefore, the argument is that “the qualification review is to see if the business operator has the basic qualifications to participate in the auction, and the government has not approved the business operator.”

Vice Minister Kang Do-hyun said, “StageX stated its capital as 205 billion won in its frequency allocation application and frequency use plan, and the full amount of 205 billion won must be paid when the corporation is established. “If the business operator can arbitrarily determine the timing and amount of capital payment, it will be difficult to ensure the reliability of the application form and usage plan submitted by the business operator,” he said.

Due to the Ministry of Science and ICT’s measures, attention is being paid to the fate of the 28GHz frequency. The three mobile carriers are currently restricted from participating for three years. If StageX participates, the process itself will have to be redone, and the 43 billion won will likely be returned.

The Ministry of Science and ICT stated, “StageX is claiming that it did not intend to pay in the early stages of establishment by using the expression ‘early stages of establishment’ and that it planned to pay in installments,” and explained, “Since this does not guarantee investment, it could end up being a company with 0 won in capital at the time of application.”

The Ministry of Science and ICT said, “We had high expectations for the content regarding the 4th mobile network, starting with the aspect of activating competition in the actual telecommunications market, but the content was very lacking, and so we are very disappointed about that,” and “We plan to additionally review the laws and systems that need to be improved for 28GHz, and continue to promote the content regarding the progress thereafter.”

Also, “With regard to the capital that has become controversial this time, the government did not present or set the capital size. When the period telecommunications business licensing system was changed to a registration system, market entry regulations for telecommunications companies and the telecommunications industry were significantly relaxed, but the government did not present the capital size for frequency allocation; the businesses themselves presented it,” he added, “The issue of confirming whether the capital has actually been paid is not a problem at the stage of examining financial capability, but rather an issue because the substantive issue is whether the corporation at the time of application, which is the basis for frequency allocation, and the corporation that will receive the allocation are the same.”