SK Telecom sees falling market share

By Yoon Ja-young

The market share of SK Telecom, the country’s biggest mobile carrier, is dropping. As the players in the telecommunications market have kept consistent rankings, slow but meaningful change amid a transition to new technology is taking place.

According to the Korea Communications Commission, the country’s telecommunications regulator, there were 52.7 million mobile subscribers in the country as of February, up 0.1 percent from the previous month.

SK Telecom had 26.5 million users, taking 50.4 percent of the market. This marks a fall in market ratio by 0.1 percentage point from the previous month. LG Uplus, the smallest player in the industry, meanwhile, gladly reaped that 0.1 percentage point to mark 18 percent as its subscribers grew by 0.6 percent to 9.5 million. The market ratio remained stable for KT at 31.6 percent, with 16.6 million users.

While the 0.1 percent change may seem insignificant, it is notable in this mature market where the market share of telecommunications companies have made little change during the past few years. Until 2008 SK Telecom used to take 50.5 percent, KT 31.5 percent and LG Uplus 18 percent.

In 2010 LG Uplus weakened to 17.8 percent due to sluggish moves in the smartphone competition. SK Telecom, meanwhile, rose by 50.6 percent, and KT pulled up to 31.6 percent thanks to being the sole provider of Apple’s globally successful iPhone until early last year. KT succeeded in pulling up the market share by 0.3 percentage point in 2010.

“The 0.3 percentage point change is not small at all in this industry. Especially since it is so difficult to make the slightest change,” an industry analyst said. He said that KT’s iPhone was threatening enough that SK Telecom took aggressive measures by adopting an unlimited data scheme.

“Marketing determines the market share. The greater subsidy you give subscribers, the bigger your slice of the pie gets,” he added.

It is estimated that it takes hundreds of billions of won in marketing costs to get an increase of 0.1 percent of market share.

The transition from third-generation (3G) to fourth generation (4G) long-term evolution (LTE) service is triggering the changes in market share.

SK Telecom has been refraining from taking an aggressive mode in marketing in this game, as it doesn’t have much cash after acquiring Hynix, the world’s second largest semiconductor firm. SK Telecom acquired the chipmaker for a trifle 3.4 trillion won in February, seeking synergy and a new growth engine to motor the group. Another reason to hoard cash is a recent letter of intent to buy Japan’s Elpida Memory.

LG Uplus, meanwhile, bet everything on 4G. It was the first to complete nationwide coverage of LTE and is aggressively marketing it.

Consequently, the rankings in the LTE market reflect these aspects. SK Telecom has 1.3 million LTE subscribers, closely chased by LG Uplus with 1.2 million. A belated start puts KT last in the LTE competition, with 232,434.

“The LTE market is basically split between SK Telecom and LG Uplus. When considering the ratio of LTE users among all users, LG Uplus is victor,” said Choi Nam-kon, an analyst at Tong Yang Investment & Securities. “LG Uplus has improved not only competitiveness in handset and networks, but is also showing improvements in consumer evaluations.”

He said that LG Uplus is highly likely to achieve the 4 million LTE subscriber target this year. “There is concern whether the increase will continue after KT completes its nationwide LTE network, but that concern is groundless. … The transition from 3G to LTE will accelerate and consumers will have more reason to choose LTE when the mobile carriers focus their marketing efforts on that,” Choi said.