SKT’s Hidden Agenda
Telecom Firm’s Only Growth Engine Is ‘Mobile’ Credit Card Business
Business is business, because after all it is about making money and fostering a future growth engine. In this sense, SK Telecom has few choices with Korea’s telecom market already saturated. One of those few choices is credit cards. By bringing them into the mobile phone, SKT has a key into the “Blue Ocean.” For SKT (at far left is Chey Tae-won, SK chairman and, at left, SKT CEO Jung Man-won), the card business is not a matter of choice but of necessity but it needs to knock a lot of doors and open them before squeezing itself into that market. ― ED.
By Kim Tong-hyung
Staff Reporter
In one of the most advanced wireless markets in the world, SK Telecom is the undisputed king, controlling more than half of South Korea's mobile telephony customers.
However, keeping growth alive in a country with more handsets than heads has proven to be a difficult challenge, and the company's desperate efforts to gain positions in foreign telecom markets over the past few years are now regarded as sunken costs.
Jung Man-won, who took over the management helm at SK Telecom at the start of the year, is vowing to take a more realistic approach to finding new revenue sources, putting the focus back on the domestic market, rather than continuing to chase fool's gold in unfamiliar territory. And plastic seems to be the main source of his inspiration.
SK Telecom's interest in the country's lucrative credit card market has been one of the industry's worst-kept secrets.
An obvious move came last month when SK Group, SK Telecom's parent company, asked the Fair Trade Commission (FTC) for a two-year extension on its deadline for corporate reorganization to convert to a holding-company structure. With the FTC approving the request Thursday, the conglomerate has gained extra time to reshuffle its corporate empire to bulk up its financial services business.
SK Telecom looks like the centerpiece of the rebuilding plan. The wireless carrier has been consistently expanding its collaboration with banks, and securities and insurance companies to strengthen the financial service applications enabled on the mobile phones of its customers.
And Jung obviously has more ambitious things on his mind, looking aggressively for investment opportunities in credit card companies to gain more direct access to the financial services market.
There has been a lot of talk linking SK Telecom with Hana Financial Group, which recently decided to spin off its credit card unit, Hana Card, from Hana Bank. Industry watchers believe that the move was related with the financial group's future business plans with SK Telecom.
One of the possibilities tossed around is that SK Telecom will establish a joint venture with Hana to provide credit card services, it is refusing to confirm its interest.
Nonetheless, the chemistry between the two looks real. After remaining in denial for months, Jung finally admitted to reporters on the sidelines of the World IT Show last month that the company expects to get deeper into the credit card game.
``Under the current law, SK Telecom, as a subsidiary of SK Group, can't acquire and become the majority shareholder of Hana Card, but we can invest in their shares,'' Jung said.
``The alliance between communications and credit cards will provide customers with something completely new, rather than just inserting the functionality of the plastic cards into the phone. We have no interest in the type of collaboration that is like pouring bottled cola into a can, with customers ending up with the same drink.''
Ubiquitous Mobile Wallets
SK Telecom's impending entry into the credit card market has both the telecommunications and financial services sectors bracing for the possible emergence of an oversized competitor.
The company has about 24 million mobile phone customers, significantly more than the 13 million customers of Shinhan Card, the country's biggest credit card company that controls more than 40 percent of the market in revenue.
About 40 percent of SK Telecom users are subscribed to the company's membership service, which allows them to stack up mileage points on their phones and receive discounts and other benefits in using the services of partner companies, including restaurants, hotels and other leisure businesses. And SK Telecom's 2,000 mobile phone shops around the country could easily double as credit card sales offices.
Count in the SK Group's 30 million subscribers for its ``OK CashBag'' cards, a loyalty cash-back program that enables users to collect points at a wide-range of affiliated shops, and SK Telecom certainly has a strong foundation to build on.
Industry watchers believe that SK Telecom is in an ideal position to take advantage of a convergence between communications and financial services, with more wireless users expecting their mobile phones to double as digital wallets.
Considering the number of people using SK Telecom handsets ― which include young users such as teenage students ― and subscribing to its membership service, it's easy to see the company enjoying an advantage over other credit card companies in securing customers.
``The blending of communications and financial services is a promising possibility for telecommunications companies looking to achieve synergies through convergence, and the mobile sector is at the forefront of these changes,'' said Stan Jung, an analyst from Woori Investment and Securities.
``SK Telecom's massive subscriber pool and marketing strength suggest that it can make something work from its collaboration with Hana Card.''
It remains to be seen how SK Telecom designs its strategies to attack the credit card market. The company is apparently keeping a close eye on the debate within the National Assembly over whether to rewrite the current fair trade law that prevents a non-financial holding company from owning a financial service affiliate. The law had already derailed SK Telecom from its plans to acquire the credit card unit of Jeongbuk Bank in 2002.
There are observations that the saturation of the domestic credit card market may also affect SK Telecom's level of investment in Hana Card or other companies.
According to government figures, an average Korean owns more than four credit cards, but not many of them are issued from Hana, which has less than a 4-percent share of the market in terms of subscribers.
Credit card services clearly seem to be the missing piece in SK Telecom's expanding platform for financial services. The company plans to expand its mobile banking services to cover the customers of all Korean banks by the end of the year, allowing them to check their bank accounts and transfer money through their universal subscriber identity module (USIM) card-inserted handsets.
The company is enabling its mobile users to trade stock on the go, collaborating with seven securities companies including SK Securities, Korea Investment and Securities, Tongyang Investment and Securities, and Eugene Securities.