Overseas expansion tests new SK Telecom CEO
Two predecessors' fall attributed to lackluster attempts to grow out of saturated domestic market
By Kim Yoo-chul
SK Group Chairman Chey Tae-won apparently knows his conglomerate’s future lies abroad.
Chey’s message of looking beyond the borders of the nation to find new growth engines for the conglomerate is evinced in the strengthening presence in China.
Its flagship, SK Telecom has plans to expand outside the saturated domestic market, while SK Innovation, formerly known as SK Energy, has also outlined the same scheme.
Chey’s conundrum is that the group’s expansion efforts are taking longer than expected, requiring a lot of patience.
SK Telecom’s international businesses have been stalling without breakthroughs,’’ said a top-ranking SK source, asking not to be identified, adding that much of the attention of its CEO Ha Sung-min is focused on it, because going overseas is the only way out.
SK Telecom is eager to bolster its international profile to move away from its heavy dependence on the saturated local telecom market, although previous efforts didn’t pan out.
SK sold back its stake in China Unicom for $1.3 billion, underscoring its lack of success in a market that it had once pinned high hopes on.
The South Korean carrier also left the U.S. market when it sold struggling mobile unit Helio to Virgin Mobile USA.
Although SK Telecom has renewed its overseas strategies capitalizing on platform- and content-related areas, there is doubt that even such fine-tuned plans will help it find an edge outside the peninsula, according to officials and analysts.
``I think SK Telecom is in a `sandwich position.’ In the local market, its biggest rival KT is aiming to narrow the market gap in handsets and to lead the next telecom-related sectors with its edge in fixed-line infrastructure. Meanwhile SK also feels a sense of urgency for international business,’’ said another SK source, who is familiar with the situation.
Additional losses in China
SK Telecom is in the progress of withdrawing from China’s online gaming market three years after it had ambitiously entered in May 2008.
``SK Telecom is in the process of liquidating Magic Tech Network, a Hong Kong-based company of Magicgrids Networks in Shanghai, China,’’ said a top ranking SK source. It’s not just about a loss of funds but more about the loss of confidence.
SK had previously invested $7.8 million in Magic Tech Network for a 30 percent share, while actively participating in the development and publishing of online games and taking part in key decision making through board of director meetings.
``But SK agreed to completely fold upon the request of Magicgrids due to sluggish business. The $7.8 million cash investment will evaporate,’’ added an high-ranking industry executive.
An SK Telecom spokeswoman Kim Ji-won declined to comment as it’s not company policy not to talk about current important pending issues.
The so-called ``Magic Tech project’’ is the third attempt by SK Telecom to boost its Chinese presence.
SK Telecom once believed that online gaming would be crucial in the new convergence industry along with music, citing that the revenue growth of China’s online gaming market was surpassing 82 percent and that total market volume had reached $1.17 billion as of the end of 2007.
``SK Telecom tried but experienced another setback in China,’’ said the industry executive. The executive declined to give more details.
Established in 2006, Magicgrids Networks develops and publishes advanced online games. It has distribution and marketing networks for a nationwide publishing service in China.
Time-consuming process
Officials say SK Telecom should continue its vigorous pitches to other markets, although it needs to have greater patience to see a return.
South Korea has already over 50 million registered mobile subscribers, higher than the nation’s total population of 48.9 million, according to data from the Korea Communications Commissions (KCC), the nation’s top telecom regulator.
SK earlier presented the so-called industry productivity enhancement (IPE) and platform as its next top words for future earnings.
SK plans to reap 20 trillion won in IPE-related businesses by 2020. It is increasing budgets for ``N-Screen’’ services _ based on cloud computing technology and aimed at offering content across a variety of platforms such as TVs, PCs and cell phones to share and consume information.
The mobile carrier said it has been providing customized solutions to 600 local companies from those in conglomerates to banks as it’s been receiving more calls to construct competitive mobile office systems.
Its platform-linked businesses have made smoother progress through its T-Store.
Recently, SK has partnered with East Power, a Taiwanese mobile device supplier, to launch a mobile application store called T-Store in Taiwan.
All Android-based smartphone users in Taiwan could get a localized version of T-Store and enjoy its applications and content from June this year.
Industry officials and analysts say the move is not too risky as SK Telecom has prowess in mobile apps.
SK officials say the localized mobile apps and content provided in Taiwan could be used to enhance its efforts in China and countries in Southeast Asia.
``IPE and the platform businesses could be SK’s next targets. What it needs now is to advance its T-Store applications for an effective global approach,’’ said an analyst at a foreign brokerage in Seoul, adding the recent decision to introduce the iPhone 4 will increase its lead over rival KT in the local handset market.
The T-Store was launched in September 2009 and provides over 80,000 applications and content items.
SK earlier said it passed the 100 million downloads mark as of the end of December 2010.
A month after, SK struck a memorandum of understanding with Taiwanese laptop maker Lenovo to offer content for Lenovo smartphones.
``This kind of strategic partnership is that should SK Telecom push for. SK just needs to reap small yields overseas rather than look to hit the jackpot. History will speak to and guide SK Telecom,’’ said the analyst.