1. General Information


South Korea boasts one of the world's most exciting telecoms markets and is a world leader in many of the market's segments. To a large extent this success reflects strong support from the government, both in the form of aggressive sectoral liberalisation, which has intensified competition and kept downward pressure on prices in all areas.

South Korea's mobile-phone market, which is the region's third-largest after Japan and China, is mature, and room for new competitors is therefore limited. However, this sector continues to experience some of the heaviest governmental interference.

Because some of the figures mentioned here are in KRW (Korean Won), to have a consistent overview amongst the data and other countries, the currency exchange rate to convert to USD as on 30th May, 2008 is as follows:


2. Competitive Landscape in South Korea

There are 3 major players dominate the mobile market, SK Telecom, KTF and LG Telecom.


SK Telecom is committed to globalizing its business and diversifying its services to overcome the limits of its key services. It seeks to respond to mobile market saturation and slow net subscriber addition growth. SKT has been concentrating on the entertainment field while maintaining its strong competitiveness in mobile communications services. It has increased investments and strengthened its relations with partners in the music (MelOn), game (GXG), and broadcasting (Satellite DMB) segments. In particular, SKT strives to secure entertainment contents. With its investments, SKT further accelerates its efforts to secure high quality mobile contents which will be provided via WCDMA, WiBro and DMB. In addition, to expand its business scope, SKT is cooperating with Hanaro Telecom, the second largest fixed communications service operator. SKT also strengthens its presence in the overseas market with the goal of globalizing its business. It launched an MVNO service named Helio by joining hands with Earthlink in May 2006, and aims at attracting 3 million subscribers by 2009.

KTF is aimed at laying a foundation for digital businesses by extending its service scope to include the entertainment, information and transaction segments such as financial service while strengthening its position in the global market. KTF puts much endeavor to take the lead in the WCDMA/HSDPA market although it was placed in a disadvantageous position compared to SKT, the front runner in the market, from the outset due to the allocation of bandwidth and others. It has invested as much as KRW 780 billion to improve its networks, launched SHOW, a 3G service by KTF, and introduced two HSDPA video telephony compatible handsets during 2006. Among its new 55handset models for 2007, about half of them are 3G handsets. KTF is expected to appeal to users in a progressive manner by offering differentiated mobile handsets.

LGT, the third player in the market, has been committed to increase its subscribers and sales. The most notable strategy of LGT is that it targets voice communications by introducing a variety of new services because its mobile internet service revenue is much lower compared to its rivals. LGT places focus on introducing a variety of user-oriented service products to increase its subscribers. As LGT utilizes the existing networks, its service will be much more cost effective than HSDPA service, which is pursued by SKT and KTF.


3. Tech Infrastructure

As South Korea is one of the world's most densely populated countries, upgrading infrastructure systems to keep up with economic growth is a constant challenge. Transport and telecommunication links are good by regional standards, although the road network is highly congested. The government's active embrace of information technology has contributed to high rates of internet and mobile phone usage
SOURCE: Risk Briefing

Currently, Korea operates a CDMA network preventing other technology developments such as GSM. CDMA (The code division multiple access) is a technology of wireless communications considered to be a more advanced technology compared to GSM as it provides better quality of transmission, higher speed and less negative affects to human bodies. The country continues to be considered a leader in 3G mobile technology. Wideband Code Division Multiple Access (WCDMA) is the second 3G standard to enter the South Korean market after Code Division Multiple Access (CMDA 2000). This makes South Korea the third-largest in the mobile communications market in absolute terms, after Japan and China.

Forms of 3G offered in South Korea are:

• Code Division Multiple Access (CDMA),
• Evolution Data-Optimized (CDMA EV-DO),
• Wideband Code Division Multiple Access (WCDMA),
• High-Speed Downlink Packet Access (HSDPA) and,
• High-Speed Uplink Packet Access (HSUPA).

The number of CDMA 1X subscribers has been decreasing since 2002 when EV-DO service was introduced. CDMA EV-DO subscribers reached a high of 15.34 million in 2006 before starting to decrease in 2007. On the other hand, WCDMA recorded a disappointing 0.166 million subscribers in 2006. However, solid growth is expected in the near future, because of the introduction of new handsets, a variety of mobile content, aggressive marketing and attractive tariff plans. WCDMA is expected to secure 23.05 million users by 2010.



4. Mobile Phone Statistics & Forecasts


Mobile penetration was around 89.7% in 2007. This high penetration rate is due to the support of the government, because they foster competition and encourage innovation, which led to South Korea being technologically advanced. Its annual growth was around 6.96%(blended average).


4.1 Mobile Phone Usage Trends

Currently, over 38 million of the country’s 48 million population have at least one mobile phone, one of the world’s highest penetration rates. Popularity of mobile phones results in a variety of new services. High memory gadgets and the ability to transfer high volumes of information drive the development of mobile games, communications, internet and others. Internet banking including financial trading through mobile handsets overtook bank teller transactions in September 2005. According to the Bank of Korea the number of bank tellers has been falling in Korea.

According to Asia Pacific Ventures, SMS is the main mode of messaging on mobile phones. They feel there is an untapped opportunity in mobile e-mail considering the strong technical infrastructure in place.


4.2 Wireless Mobile Phone Usage Trends

2.2.1 Mobile wireless internet usage rate (% as of Dec 2007)

Of the total population that used wireless internet, 46.2% used mobile wireless internet. Of which 47.4% were male, while 45% were female. The majority of the wireless mobile internet population was in their 20s (79.2% of population in age group), followed by those in the 12-19yrs. Age grange (74.1% of population in age range).


3.2.2 Mobile wireless internet usage rate of mobile population (% as of Dec 2007)



Of the mobile phone user population that used wireless internet on their mobile phone, 49.4% used mobile wireless internet within 1 year. Of which 50.6% were male, while 48.2% were female. The majority of these accesses was made by those in the 12-19yrs. Age range (92% of population), followed by those in their 20s (79.6%).

3.2.3 Frequency & Hours on Mobile Phone Wireless Internet Usage (% of mobile internet users)



Currently, most of the population uses the internet once or less times in a week (67.7% of population) and the average usage rate is 1.8 times a week. The average time for usage is 5.1min per usage, with the majority of the population using mobile wireless internet for 5mins or less.

4.3 Wireless Internet HotSpots (% of wireless mobile internet users)

The most popular place of usage for people is on a moving bus, subway or car (68.4% of population), followed by Outdoor places (52.5%). Surprisingly, home usage is fairly frequent (40.4%). Most of the users in the different places tended to be male, with the exception of home and public facilities, in which there were more female than male users.

4.4 Factors for/against Mobile Wireless Internet Usage (% of Mobile Internet User population)

The main reasons for using Mobile Wireless Internet is mainly that the internet can be accessed anywhere, with a corresponding reason that it can be accessed where needed. However, a significant amount of the population uses it to utilise spare time, probably while taking transportation and waiting. After this, the exclusivity of mobile content is the next major factor. Other reasons are considered fairly minor to these main reasons. However, one noticeable trend is that many are curious about the technology, and it is a sizable number.

4.4.1 Factors for/against using Wireless Internet (% of mobile phone wireless internet users)

91.9% of the population use the mobile wireless internet for leisure activities, while 65.1% of the population use it for communication purposes, 33.8% use it to retrieve data and information, while economic and financial activities was 11.3% of the population.

Sources: National Internet Development Agency (NIDA 2007 wireless internet user report)


5. Current Developments

Government pressure on mobile-phone providers to cut costs has also been one of the most important factors behind the explosive growth in mobile telephony in South Korea. With a penetration rate of just nearly 80%, the country's mobile-phone market is, however, near to saturation point. South Korean take-up of third-generation (3G) mobile-phone services has also been relatively enthusiastic, although there have been glitches, including problems with handsets and limited nationwide coverage. South Korea hopes to launch 4G services by 2010.

With possible saturation point hitting, Mobile-phone service providers are to increase the value added component of their offerings in order to retain customers and increase revenue per user. The brisk take-up of MP3 mobile phones (MP3 is a file-compression format that allows storage of soundtracks on files that are a fraction of the size of normal music files) has helped to increase customer volumes, and the introduction of television services on mobile phones also appears to be generating promising sales. New ventures in the mobile sector can be risky, as seen in the case of TU Media, part of SK Telecom. The 2005 launch of the world's first mobile phone that allowed users to watch television programmes with high-fidelity audio and video in motion was celebrated at first, but the service is now facing financial difficulties as it continues to post losses: in January-September 2007 TU Media posted a net loss of USD 50.8 million.

Non-voice revenues have become an increasingly important source of growth for South Korean mobile operators, as they face a saturated mobile market and diminishing voice revenues. Such as online banking, television and music services.Indeed, only the 3G market offers any real room for growth, with the broadband market similarly saturated. 3G users accounted for 44.6% of the total mobile market, compared to Japan, which has over half of its population using 3G.

To this end, both KTF and SK Telecom have raised their capex budgets for further HSDPA deployments, in the hope of encouraging further use of music, video and other data-rich services, while also launching HSDPA-enabled handsets during the year. KTF will spend an additional USD40 million over 2007, while SKT has an HSDPA budget of USD80 million. Meanwhile, LG Telecom is keen to operate a 3G network, beginning sometime in H107, although this is pending approval from the MIC.


6. Regulatory Issues

South Korea's mobile phone market is mature, and thus room for new competitors is limited. However, this sector continues to experience some of the heaviest governmental interference.


6.1 Pricing pressure
Pricing pressure from the government and civic groups makes it difficult for the industry to spend freely on marketing because if they increase marketing spending from current levels, the regulator and the public will cry foul and ratchet up pressure for cutbacks on cell phone fees.


6.2 Reductions in Mobile Phone fees
The incoming government is considering inducing cell phone fee cuts via a market friendly method. They will likely work with the industry on voluntary cuts by lowering entry barriers to resale operators and promoting competition.


6.3 Number portability/Handset Subsidies
In January 2004, the government applied number portability to the market leader, SK Telecom, in order to give a fillip to the two smaller providers, KTF (formerly KT Freetel) and LG Telecom. Number portability was applied to KTF in July 2004 and will be applied to LG Telecom in 2005.

The government also continues to tighten regulations on handset subsidies by SK Telecom, KTF and LG Telecom.


7. SWOT Analysis

[(Q2 2007). South KoreaTelecommunications Report. London: Business Monitor International Ltd.]

South Korea
Strengths 3G market offers continued strong growth and room for a new entrant, possibly LG Telecom, as the mobile market reached penetration rates of 84% by YE06. South Korea is home to the largest broadband market in the world in terms of penetration rates. Strong competition in mobile market between SK Telecom and KTF is helping operators boost 2G and 3G networks.	Weaknesses South Korea’s fixed-line market has peaked and the number of lines is set to decline over the next few years, as more customers migrate to mobile solutions and other alternative technologies Broadband is also suffering having reached saturation, with the top two operators recording stagnant subscriber figures Market may not be ready for expensive HSDPA due to cost and lack of handset availability The continued absence of LG Telecom in the 3G market will hamper growth.
Opportunities Handset subsidies have been partially legalised, which would lead to greater competition in the market SK Telecom is seeking additional revenue growth from the emerging markets of Vietnam and China. WiBro and IPTV could help ADSL growth further in the next three years Stronger data revenue and ARPU growth expected, as HSDPA becomes a focus area for KTF and SK Telecom in 2007.	Threats If growth rates in the mobile take-up pick up later in the year, these additional subscriptions are likely to be at the expense of fixed-lines. Onset of saturated mobile and broadband markets

References:
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