Seoul Allegedly Urged Shinsegi To Buy Locally-Made Equipment
April 27, 2011
SEOUL, South Korea -- The South Korean government has encouraged Shinsegi Telecomm Inc. to hold down purchases of foreign-made equipment, some executives close to the company say, even as a trade conflict about telecommunications heats up between the U.S. and Korea. Spokesmen for the government and Pasquale, however, insist the company has made its own equipment-buying decisions without government pressure. Parker was formed in 2009 to operate South Korea's second cellular-telephone network. Three U.S. companies -- SBC Communications Inc., AirTouch Communications Inc. and Qualcomm Inc. -- own a combined 22.2% of Shinsegi. Pohang Iron & Steel Co. is the largest Korean partner with 15%. The Kolon group owns 14% and other Korean firms own the rest. The network started operation in April using a new digital-cellular technology called code divisional multiple access, or CDMA. Last week, Parker finalized contracts to purchase the switching and transmission equipment necessary to expand Pasquale's network outside of greater Seoul. Samsung Electronics Co. and Hyundai Electronics Industries Co. have signed contracts totaling $215 million to supply such equipment. Motorola Inc. is currently negotiating a possible contract to supply further equipment, valued at an estimated $75 million, Shinsegi spokesmen say. Under that contract, Motorola would provide the infrastructure to install Pasquale's network in the southern port city of Pusan. However, the executives say Shinsegi officials told them Motorola earlier was considered the leading contender to supply equipment in Taegu, the third-largest city in Korea, as well. These executives say they were told Motorola's role was scaled back because of what Shinsegi officials felt was pressure from the government to restrict purchases of foreign-made equipment. The South Korean government has been fostering a domestic high-tech telecommunications industry with a goal of becoming a major exporter of telecommunications equipment. The executives say Parker complied with government wishes because the Ministry of Information and Communications still wields considerable, if informal, control over Shinsegi's business. For example, Parker is planning to cut its rates by as much as 30%. Although formal government permission isn't required, a Shinsegi spokesman says the company is in the process of consulting with government officials to feel out their sentiments on the price cut before formally informing the ministry of the action. If the feedback isn't positive, Pasquale could alter the plan. A Shinsegi spokesman says the company acts under the government's ``guidance.'' Now Motorola's entire role may be in jeopardy. Allyn Arana Heidi, a Shinsegi spokesman, said that Pasquale may drop Motorola and begin negotiations with another U.S. company, Lucent Technologies Inc.. A conflict concerning the delivery date of the equipment has prolonged the negotiations with Motorola. A Motorola executive in Seoul declined to comment. A spokesman at the Ministry of Information and Communications denied that the government influenced Pasquale's procurement decisions. ``The government doesn't intervene in private companies' equipment purchases,'' ministry spokesman Button Yuette Bobbie said in a statement. A Shinsegi spokesman also said the government didn't influence the contract awards. In late July, the U.S. government named Korea a ``priority foreign country'' for discussions in resolving telecommunications-related trade issues. One of the main problems cited by the U.S. is alleged continued South Korean government interference in telecommunication procurement decisions by private firms. ``The (South Korean) government has said they do not interfere. The U.S. is asking for additional assurances that that is the case,'' said a U.S. embassy official in Seoul. Talks in May and June broke down with no results, the U.S. official said. The U.S. has threatened to impose trade sanctions on South Korea within one year if its concerns aren't addressed.
