KT President Nam Joong-soo, center, poses at an event held to celebrate the opening of the KT Dubai office. The office opened in November 2006.

By Kim Tae-gyu
Staff Reporter

South Korean telecom carriers are going all-out to make inroads into foreign countries as the domestic market shows clear signs of reaching saturation point.

The nation's cross-city rivals _ the fixed-line leader KT and the top mobile operator SK Telecom _ are adopting different strategies and action plans in their quest for expansion.

SK Telecom, which accounts for roughly half of the country's 42 million mobile subscriber pool, is more aggressive in tapping into foreign destinations.

The Seoul-headquartered company has operations in the United States and Vietnam as well as having considerable investment in China, the world's most populated country.

By contrast, KT is more cautious in wading overseas with their international policies involving smaller investments than SK.

Instead, the Bundang, Gyeonggi Province-based outfit is focusing on new businesses for the time being such as the portable Internet or Internet-enabled TV services.

However, the company also understands very well that new cash cows have to be discovered outside national borders in the new era of globalization rather than just expanding business horizons internally.

KT has more than 90 percent of the local landline telephone service market and has roughly half of the nation's high-speed Internet service customers.

``SK Telecom and KT demonstrate different approaches in seeking global opportunities. But they do share the sense of urgency about international operations,'' said Kim Kyung-mo, an economist at Mirae Asset.

``You can guess the reason _ the sated Korean market is losing steam. Without making offensives offshore, they cannot garner profit streams down the road,'' he said.

Saturated Telecom Markets

As Kim pointed out, the crowded Korean telecom market provides thin profit margins with a number of service providers competing head-to-head.

The figures reveal significant detail.

More than 14 million out of the overall 15.9 million households are currently connected to the high-speed Internet _ the world's best penetration rate.

The number of fixed-line telephone subscribers stands at over 23 million outnumbering that of households.

Approximately 42 million among the total 49 million population carry mobile handsets, which means there is hardly any more room for new sign-ups.

In this climate, the growth rates of telecom companies, which once enjoyed impressive gains in both sales and profits, have slowed to a snail's pace over the past few years.

KT, the former state monopoly that was fully privatized midway through 2002, chalked up double-digit growth in the late 1990s and in the early 2000s.

Yet, its sales were almost at a standstill between 11.5 trillion won and 12 trillion won since 2001, when the operator racked up 11.5 trillion won in turnover.

The sales inched up to 11.7 trillion won in both 2002 and 2003 but the figure backpedaled to 11.6 trillion won in 2004 before rising up again to 11.9 trillion won in 2005 and 11.8 trillion won last year.

Things are not so different for SK Telecom. It more than doubled its turnover in four years from 4.3 trillion won in 1999 to 9.5 trillion won 2003.

But the impressive growth lost momentum, with the numbers edging up at an agonizingly slow pace to 9.7 trillion won in 2004, 10.2 trillion won in 2005 and 10.7 trillion won last year.

SK Telecom Goes Global

In order to secure seamless growth engines, SK Telecom and KT started fixing their eyes on fast-growing markets, which are full of untapped potential.

SK Telecom formed an alliance with two other Korean companies _ LG Electronics and Dong-Ah Elecomm _ to form a joint venture named SLD in 2000.

Under the business alliance with Vietnam-based landline telecom carrier, Sigong Post and Telecommunications, SLD introduced the country's first CDMA services in 2003 with the banner of ``S-Fone.''

Short for ``code division multiple access,'' CDMA refers to one of the world's two major platforms enabling mobile telephony, alongside the global systems for mobile communications (GSM).

S-Fone has attracted two million users and its subscriber pool is projected to top three million later this year and four million next year.

In early 2005, SK Telecom joined hands with EarthLink, an Atlanta-based Internet service provider, to offer mobile telephony services the next year through a third-generation network leased from Sprint Nextel.

The two partners launched wireless telephony under the name of ``Helio,'' and they have made every effort to boost the new entity by agreeing to spend $220 million each for the start-up.

In China, SK Telecom decided to make an indirect investment.

Early last June, SK Telecom funneled $1 billion to purchase bonds convertible to a 6.6-percent stake in China Unicom, the second-biggest mobile carrier in the world's biggest mobile service market.

The three-year convertible bonds (CBs) of China Unicom can be converted to stock starting July 5, 2008 and SK Telecom has rights to ask China Unicom to buy them back.

Back then, SK Telecom also agreed to forge a strategic alliance under which the two corporations could make joint purchases of cell phones.

``This hook-up will give us a platform to wade into the attractive Chinese market, which is expected to expand both in quantity and quality,'' SK Telecom CEO Kim Shin-bae said at the time.

Yet, the foreign operations are not all a bed of roses. For one, the current user pool of S-Fone represents just a single-digit fraction of Vietnam's overall customer base amounting to 27 million.

S-Fone is struggling to stay alive in a stiff competition with three leading players, Viettel, MobiFone and VinaPhone, which combine to carve out most of the market there.

Helio also poses a concern.

SK Telecom and EarthLink projected that the big investment would draw 3.3 million subscribers by 2009 but its performance has been disappointing with its user pool hovering just over 100,000 a year after its debut.

KT Sets Foot on Global Scene

As far as the global business is concerned, KT initially moved faster than SK Telecom but of late it has moved much more slowly.

In 1995, KT purchased a 40-percent stake in Mongolia Telecom to become the second-largest shareholder of the carrier.

After taking the first step, KT made bigger strides in 1997 by wading into other areas with the more enormous upside potential _ Russia and Vietnam.

KT snapped up the ownership of New Telephony Company (NTC), which manages businesses in regions around Vladivostok, and holds a 79.7-percent stake in it today.

Last year, NTC chalked up $80 million in sales for $30 million in net profit and the customer base reached around one million as of late June this year.

In Vietnam, KT teamed up with the state-backed landline monopoly Vietnam Posts and Telecommunications by striking a business cooperation contract (BCC) in 1997.

BCC refers to a partnership signed by multiple parties in Vietnam, usually by a foreign investor and a local company, with the goal of jointly conducting business operations there.

Under the deal, KT channeled about $40 million in establishing landline telecom facilities in four distant provinces located in the northeastern parts of the country.

Just like SK Telecom, KT failed to reap tangible results.

Although KT boasts of the achievements in Russia, the customer base and sales of NTC are still negligible from the perspective of Korea's predominant fixed-line player.

Its Vietnamese business is also not about a big financial success because the company failed to secure continuous business.

KT also has worked on other countries including Thailand, China, Malaysia, Saudi Arabia and Indonesia to name just a few but it has failed to make its presence felt there.

``We face challenges in overseas operations. We do know such a barrier, which many telecom companies face in tapping into foreign countries,'' KT spokesman Lee In-won said.

``But our businesses are in the nascent stage and telecom is a business that reaps returns over the long term. We will keep making efforts to be successful in the global scene,'' he said.

voc200@koreatimes.co.kr