Going Global Is the Name of Game for Korean Carriers

By Tim Alper
Contributing Writer

It is Korean technology's biggest paradox - while Korean hardware sells like hotcakes abroad, services and software are strictly domestic concerns. Everyone in the world knows Samsung Mobile, but nobody outside Korea has ever heard of Naver or SK Telecom.

However, globally, the competition for mobile operators has never been fiercer. In Korea, over 90% of the population now have mobile phones, and worldwide, the demand for mobiles grows not by the year, but by the day. For most mobile providers, it is sink or swim time, as successful mobile operators from other countries are now getting involved in overseas mergers and buyouts, or launching their own services abroad.

It is a well-known fact among mobile industry insiders that the real money is not to be made from mobile subscription fees, but from the add-on services that operators provide along with their contracts. In this respect, Korean companies have been ahead of the game. SK's Melon was a remarkable success. The music download service, the first of its kind in the world, picked up 4 million customers in its first year, and over half a million monthly flat-rate subscribers.

However, their success was a distinctly Korean concern, as Korea's three warring mobile service providers, SK Telecom (SKT), KTF and LG Telecom have been locked in a struggle to stay at the top of the domestic pile. As things stand, SKT have the most subscribers, but the race to stay at the top is intense.

SKT have started to adopt new tactics in the tough competition. Recently, Kim Shin-bae, President of SKT, said, "We will continue to provide low tariffs by reducing excessive marketing and by making out management system more effective."

KTF and LG, meanwhile, have been trying to persuade customers to choose them, as they offer 10-20% discounts to customers who sign up for four of their services, as both groups also operate landline telephone services, broadband Internet, and are now launching Internet Protocol Television (IPTV) services.

But as Korean companies scrap it out for control of domestic operations, elsewhere, the fight for global mobile dominance has already begun.

In Europe, things are getting cut-throat. Telefonica, Spain's former state telecommunications company, has been doing well in Latin America, a market few other International companies have successfully broken into, while Germany's Deutsche Telecom has also enjoyed some serious success, making inroads into the Eastern European and American markets, as well as doing well in other Western European countries.

However, while the Europeans have enjoyed some success, the mobile world's biggest prizes lie closer to home for Korea. Asia is the biggest market for almost everything now, and that goes double for mobiles.

The appetite for mobile phones in China and India is voracious. In India, there are already 250 million mobile customers, with 7 million more people every month becoming mobile users. In China, the number of subscribers is even higher ― 565 million ― meaning that out of the top ten mobile providers in the world, two are Chinese. And although Samsung's Anycall mobiles do a booming trade in mobile hardware sales in China, Korean mobile operators are nowhere in sight.

Indeed, although Korean hardware is popular abroad ― Samsung and LG phones can be found pretty much anywhere in the world ― Korean service providers have been relatively slow to make progress in the global market.

However, with the Korea-US Free Trade Agreement (FTA) coming into play soon, things might need to change quickly for the likes of KTF, SKT and LG Telecom. These companies need to go global fast - or face being killed off by the competition, as the boundaries restricting foreign trade in Korea start to disintegrate.

Until recently, the mobile triumvirate have exercised a virtual stranglehold over the Korean market. With almost every Korean now owning a mobile phone, there have been rich pickings for the three companies, but should any of the big foreign mobile powers get involved in the Korean market to the point where they can challenge for a significant stake of the domestic market here, these companies might be in for a nasty shock.

One more possibly contentious issue for the three Korean mobile superpowers is the increasing reach of Internet telephony. In the last few years, software developers around the globe have been introducing programs that allow users to communicate over the web at no cost. Simple, free software now enables people to call directly from PC to PC with no need for a phone, only a simple headset.

While in the past, Internet telephony was only a real worry for landline service providers, as users needed to be at their PCs in order to use them, a dangerous new development is on the horizon for mobile operators. Customers are starting to demand Wi-Fi and full web services on their mobiles, and all companies have been singing the praises of a mobile Internet.

However, should users really be able to access the Internet freely, there would be nothing to stop them downloading Internet telephony programs, and using them to make Internet-based calls, instead of calling though their mobile providers.

Skype, possibly the biggest name among these Internet telephony companies, recently announced their Korean arrival, and will be working in conjunction with a Korean Internet site, Auction, in a drive to sell Internet telephony-enabled hardware and promote the Skype brand here. Should users take to Skype, particularly mobile customers, it could represent massive potential profit losses if users choose to call each other using mobile Internet telephony rather than via their mobile providers' traditional networks.

It was thought that the big telephone companies would use their sway with the Korean government to get laws passed to allow them to block access to Internet telephony services, but it seems, in some respect, Korean companies are taking a more forward-looking stance on the issue.

In the UK, mobile operator 3 Mobile recently took the bold step of launching a pay-as-you-go Skype-enabled device that allows users to make free Internet calls as long as they pay a minimum of around $15 a month in top-up fees. But the big question is: are there any Korean companies willing to take such a brave plunge into the murky waters of Internet telephony-based mobile calls?

Lee Sang-hoon is a Business Department Manager at Dasan TPS, a Korean company involved with Internet telephony. He believes Internet call options are being explored by the Korean telecommunication companies. He says, "Certainly, when it comes to land lines, they are making a concerted effort to get involved. SK and LG are already at an advanced stage with systems up and running for Internet telephony, although it may be difficult for them to integrate Internet telephony within the current structure of their mobile operations."

However, although Lee holds out hope for Korean telecom firms' potential foray into the world of Internet-based calling, he is not so optimistic about Korean companies' prospects on the global stage.

He explains, "Korean mobile operators have no real track record abroad. I don't think globalization is really a possibility, and if there is to be any expansion, it would all have to be in the form of joint ventures. And that is just a best-case scenario."