The origin for high hole concentration in Mg-doped GaN films grown by metal-modulated epitaxy has been explored. We observe a Mg acceptor band characterized by a broad emission without phonon replicas and a high energy tail that overlaps with the valence band of GaN, giving rise to a reduced effective Mg activation energy. We attribute the high hole concentrations to the reduction of compensating nitrogen vacancy concentration and to effectively dispersed Mg atoms, which are incorporated into the lattice as single substitutional atoms. This has been achieved by a low temperature growth, a decrease in the III/V ratio, and a planar growth interface that results from the layer-by-layer approach using the metal-modulated epitaxial technique.