Global Insight Perspective | |
Significance | KTF plans to build a W-CDMA network in 84 cities, with an investment of US$824.4 million. |
Implications | The operator is looking to W-CDMA for its 3G future in South Korea's CDMA-centric mobile market. |
Outlook | KTF will leverage W-CDMA's high-speed data transmission, and NTT DoCoMo's experience and expertise, to ensure the success of its strategy. However, the plan's future depends on whether South Korean customers will be willing to adopt W-CDMA-based services. |
KTF said today that it planned to invest around 780 billion won (US$824.4 million) this year to establish a W-CDMA network in 84 cities across the nation, according to media reports citing CEO Cho Young-chu. The investment is higher than KTF's earlier planned 500 billion won-plus for building such a network in 45 cities by the end of June this year.
Q4 2004 | Q1 2005 | Q2 2005 | Q3 2005 | Q4 2005 | Q1 2006 | |
Total Mobile Subscribers | 36,586 | 37,107 | 37,551 | 37,911 | 38,342 | 38,917 |
Market Penetration % | 75.9 | 76.9 | 77.8 | 78.5 | 79.4 | 79.7 |
Market Share % | ||||||
SK Telecom | 51.3 | 51.2 | 51.1 | 51.0 | 50.9 | 50.7 |
KTF | 32.1 | 32.5 | 32.4 | 32.4 | 32.1 | 32.3 |
LG | 16.6 | 16.3 | 16.5 | 16.6 | 17.0 | 17.1 |
Source: SK Telecom, KTF
Outlook and Implications
Increasing Competition with High Mobile Penetration: At the end of last month, there were 38.9 million mobile subscribers in South Korea, equating to 79.7% of the country's population. The number of mobile subscribers in the country grew by 4.8% y/y in 2005. First-placed SK Telecom remains the dominant market player, but faces a serious threat from KTF and LG Telecom. The already cut-throat market competition has been further intensified since the reintroduction of handset subsidies. All three operators started to offer discounted handsets to long-term subscribers on 27 March, in order to churn customers from each other (see South Korea: 26 March 2006: South Korea to Allow Limited Subsidies from March 2006). It remains to be seen how consumer trends will be affected and which operator will benefit the most from the handset subsidy.
KTF Seeks W-CDMA for 3G Future: At end-2005, KTF reported that 35.7% of its customers were on CDMA 2000 1X EV-D0 plans, up from 26% at end-2004. In order to accelerate the migration of customers from 2G to 3G and provide differentiated services by leveraging W-CDMA features, KTF has been pursuing the promising W-CDMA market. The operator hopes that W-CDMA/HSDPA, which offers far speedier data rates than 2000 1X EV-DO, will enable it to keep a step ahead in the growing 3G market and provide a clearer migration path to future fourth-generation (4G) services. In December last year, KTF signed a deal with the Japanese mobile giant NTT DoCoMo, to jointly push for W-CDMA business (see South Korea: 16 December 2006: NTT DoCoMo in W-CDMA Tie-Up with KTF). Following the strategic alliance, KTF will leverage the experience and expertise that DoCoMo has gained through launching its own W-CDMA services in Japan.
Challenges Ahead: KTF will face fierce competition from SK Telecom, which has also decided to develop a W-CDMA network in South Korea. However, the gains that could be made by both firms hinge on a crucial element: the willingness of South Korean consumers to embrace W-CDMA. Uptake has been unimpressive so far, after limited launches. With the data capabilities of CDMA EV-DO offerings currently on the market, there is little need for users to sign up to W-CDMA services. However, 2006 could bring a strong incentive in the form of cheaper handsets. The South Korean government has allowed operators to offer subsidies, generally banned in the segment, for W-CDMA handsets. This could encourage growth for W-CDMA, a scenario that both SK and KTF will be hoping for.