Mobile in Korea

The biggest mobile operator in Korea, SK Telecom announced 57% decline in its third-quarter profit. The higher marketing costs seems to be a root cause of the decline.

SK Telecom has competed with KTF in order to attract customers with WCDMA(3G) service. SK Telecom has maintained its doninant position with market share of over 50%. However, SK Telecom has poured extraordinary marketing cost for attracting 3G service users. Although SK Telecom succeeded to defend its market position against KTF and LG Telecom, the total number of mobile services has not increased. Because most of 3G service users are not new users of mobile service but existing users who only change their mobile service from 2G to 3G.

The penetration rate of Korea's mobile market is already over 90%. Additional growth in the domestic market might be not expected any more except for mobile data service area.

Please refer to the below table regarding SK Telecom's profit.

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   SK Telecom announced to develop and commercialize the first WiBro Femtocell. Femtocell is a small sized base station. SK Telecom has already provided WiBro (mobile WiMAX) service in Korea. However, the service has been able to be used at outdoor areas because of limitation of coverage range. SK Telecom announced that the WiBro coverage could be expanded into indoor areas with the Femtocell.

   I think that the price of Femtocell is still expensive (around $300). If the price of Femtocell could go down to around $50, Femtocell would contribute to the expansion of WiBro service. Because the function of Femtocell is very similar to Wi-Fi Access Point's. (Even the external formfactor) Customers are able to buy a Wi-Fi AP with only $50. In sum, I think the Femtocell could be provided with around $50 in order to have a competitiveness.

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   SK Telecom opened T.um in early October. It is located in 1st and 2nd floors of SKT's headquarter building. SK Telecom put something innovative regarding Korean IT products and services in T.um. People such as foreigners are able to experience the advanced Korean IT services here.

   Also, a Starbucks equipped with advanced technologies was opened in T.um. In this Starbuccks, people are able to order their coffees using a touch screen of each table and pay with their mobile handsets.

   The below is a video clip to show T.um. The background music of the below video clip is "SKT's corporate song."

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   There are two kinds of DMB(Digital Multimedia Broadcasting) services in Korea. Satellite DMB service which is provided by TU media was launched on May. 1, 2005 and territorial DMB service was launched on Dec. 1, 2005. Even if S-DMB (Satellite DMB) was launched earlier than T-DMB (Territorial DMB), S-DMB has been in trouble for a long time because S-DMB is a charged service, but T-DMB is a free service. The monthly tariff of S-DMB is about $11. The free DMB service, T-DMB has attracted over 10 mil users until June of 2008. However, the number of S-DMB subscribers was only 1.3 mil until June of 2008.

   Since June, the number of S-DMB subscribers is increasing at fast rate. TU media attracted new 220,000 subscribers for 3 months since June. Because TU attracted only 40,000 subscribers between Jan. and May, the number of new subscribers between June and Aug. is very surprising result. There are two reasons for the growth of subscriber number.

   First, TU started a price discount promotion based on the partnership with SK Telecom. The regular price of S-DMB is $11 per month. However, if a subscriber of SK telecom subscribes S-DMB service of TU, the subscriber get $6 discount benefit every month. The subscribers of SK telecom can use S-DMB service with only $5 a month. Because TU media is 100% subsidiary company of SK Telecom, SK Telecom decided to provide user benefit in order to retain and acquire customers for TU media.

   Second, 2008 Beijing Olympic Effect. The time difference between Beijing and Seoul is only one hour. Most of olympic games are on-air during working hours of most people. People who want to watch olympic games used DMB services such as S-DMB and T-DMB. Befor Beijing Olympic, even if many people have handsets which have S-DMB function, they did not subscribe DMB service. However, many people subscribed S-DMB service during the last Beijing Olympic.

   The subscriber number of S-DMB surpassed 1.5 mil this month and there are still 13 mil T-DMB users in Korea.

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   SK Telecom announced that a new price discount program for middle and high school students as well as college students. Students will pay 50 percent of regular price when they make a call to other students who are attend same school. Students should call to the customer center of SK Telecom and register the name of their school. After registering the name of school, they can save money whenever calling to friends in same school.

   Moreover, this discount program is applied simultaneously and together with other discount programs. For instance, most of college students are getting a discount benefit for using mobile phone in a specific region. If a student thinks that he usually use mobile voice services near his college, he can register the region and get discount benefits when using mobile services in the region.

   From August 4th, students can get discount benefits from both price discount among friends in same school and price discount in a specific region. If a student call to his friend in the campus, he only pays abount 0.5 cents per 10 seconds. The regular price is 2 cents per 10 seconds.

   Although SK Telecom is a market leader and expect to attract many new students to its customers, KTF and LG Telecom announced that they did not prepared simmilar program in order to react SK Telecom's strategy.

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   SK Telecom released a new mobile service which is the first mobile mash-up service in Korea. My Portal service enables users to make their own mobile homepages with various such as opened news articles of Google and their own blog postings. For example, most of contents on web are made based on XML language and support RSS function which makes contents to be provided on various devices and applications. When users make a mobile home page using My Portal service, they can gather various contents from Internet.

   I also made my mobile homepage using My Portal service. I could take my blog postings to the homepage using RSS function and post some news article of Naver (the most famous web portal in Korea) regarding mobile services. Because most of current web services provide provided Open API, people can make a mobile mash-up homepages using various contents from many web sites.

   In the initial stage, some famous idol stars made their own mobile homepages on My Portal service and are attracting their fans to the pages. In addition, some companies can make their own mobile homepages for promotion of their products and companies. The below image shows mobile homepage of a famous korean star.

   There are two methods for users to connect  to My Portal service with their mobile handsets. The first one is to push only '479 + send button'. Users can connect to the initial page of My Portal service and see well categorized list of mobile homepages, including famous stars' homepages and ordinary people's. The second methos is to push 'phone numbers + # + send button'. If users know someone's phone number and want to connect to his or her mobile homepages, they only push the phone numbers in order to connect to the homepages.

   SK Telecom started to promote the service through TV commercial. TV commercial emphasizes that users can make their own mobile homepages. If users want to use mobile internet service with their mobile handsets, they had to connect to the initial page which mobile operators provide. However, if users make their own mobile homepages using My Portal service, they can enjoy their own initial mobile services which include contents selected by each user. The below is the TV commercial for My Portal service.

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  iPhone 3G was veiled out on June 10th in WWDC. Because Apple sold 6 mil units of iPhone after launching it last year, iPhone 3G is expected to make new wave of innovative handset in 3G market. iPhone is already proved to be very helpful that mobile operators attract new customers with the innovative handset and get more revenue from data service. According to Rubicon Consulting, AT&T, which has povided iPhone exclusively in US market, sold 3 mil units of iPhone and the yearly increased revenue from iPhone is expected to get to $2 bil, even if AT&T gave $199 per unit to Apple.

  Apple is expected to go into many countries beyond US with iPhone 3G and also go to Asian markets, including Japan and Korea. In Korea, KTF is expected to be a sole provider of iPhone 3G in Korea. SK Telecom, the biggest mobile operator in Korea, might not provide iPhone 3G, because Shin-bae Kim, CEO of SK Telecom, mentioned yesterday that Apple is destabilizing the mobile market through requesting overburdened subsidy and revunue sharing to mobile operators.

  However, it is not sure whether KTF will provide iPhone 3G in Korea. KTF has a strategic alliance with NTT DoCoMo, the biggest mobile operator in Japan. (NTT DoCoMo has 10 percent stake in KTF. In addition, KTF and NTT DoCoMo acquired a Malaysian mobile operator together last year.) Thus, iPhone 3G will be provided by Softbank Mobile in Japan. Until early this year, NTT DoCoMo was expected to provide iPhone 3G in Japan, but the negotiations between the two sides have broken down, the collapse of negotiation that might make KTF not provide iPhone 3G in Korea.

   Apple announced that it will change the strategy for iPhone from providing iPhone through a sole operator in a country under an exclusive contract to providing iPhone through various operators in a country. Many experts are expecting that NTT DoCoMo will provide iPhone 3G in Japan through negotiating again with Apple. If NTT DoCoMo provides iPhone 3G, it is expected that KTF will also provide iPhone 3G in Korea.

  If iPhone 3G is launched in Korea, I will report the news again.

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