By Kim Yoo-chul
Staff reporter
LG Telecom, the smallest of Korea's three mobile-phone carriers, is desperate to bulk up its smartphone lineup to better compete with its bigger rivals SK Telecom and KT in the mobile Internet race.
And a critical part of the carrier's premium handset lineup is expected to be the devices from Samsung Electronics, including smartphones powered by the company's "Bada" mobile platform.
However, some industry watchers point out that LG Telecom's strengthening partnership with Samsung Electronics is reflective of the perils at another LG Group affiliate, LG Electronics, which is now the world's No. 3 handset vendor but is struggling in the booming smartphone market.
In a conference call on Friday, LG Telecom said it is planning to release up to 10 new smartphones by the end of the year, including Samsung devices run on the Bada operating system.
Bada represents Samsung's attempt at creating a developer's network to compete with the Apple iPhone, the undisputed king of consumer smartphones, as the mobile competition becomes more about content and services than hardware.
Unlike Samsung, which is also generating anticipation for its upcoming devices powered by the Google-backed Android platform, the paucity of excitement on LG Electronics' smartphone front is becoming painfully obvious.
"We are reviewing plans to introduce Samsung's Bada phones and talks have proceeded between the two companies," said Seong Ki-seop, LG Telecom’s chief financial officer (CFO).
"The phones will not be targeting for low-end users, as they will be part of our premium lineup," he said, although refused to elaborate further.
Samsung, which trails only Nokia as the world's No. 2 handset vendor, plans to have about one-third of its new smartphones released this year based on the Bada platform.
Samsung is also a major backer of the Android community and has a pipeline for smartphones run on Microsoft's Windows Mobile platform.
It remains to be seen whether LG Telecom's heavy bets on Samsung handsets, which may come at the expense of hurting its traditionally close relationship with LG Electronics, would pay off.
Industry experts are mixed about the potential of Bada, although Samsung intends to differentiate the platform by focusing on social networking and interactive features such as motion sensing and face detection.
"LG Telecom needs to strengthen its smartphone lineup to compete with SK Telecom and KT to take advantage of the rapidly growing sector," Seong said.
Although Bada phones will undoubtedly gather rapt attention, the majority of LG Telecom's smartphones released this year will come from the Android community.
"The popularity of devices powered by the Android operating system will continue to pick up through the year," Seong said.
LG Telecom's first quarter net profit rose more than five-fold year-on-year at 543.2 billion won ($476 million), the company said in a regulatory filing.
Operating profit jumped to 582.7 billion won from 126.4 billion won during the same period, while revenue increased from 1.15 trillion won to 2.42 trillion won.
"We booked revaluation gains of about 496.5 billion won from our newly acquired units ―fixed-line operator LG Dacom and Internet-service provider LG Powercom ― which were absorbed on Jan. 1," a company spokesman said.
LG Telecom spent 409.3 billion won in marketing expenses during the Jan.-March period, but Seong expected the spending to decrease with the government looking to employ measures to prevent the market from over-heating.
The Korea Communications Commission (KCC), the country's regulator for broadcasting and telecommunications, is planning to announce a ceiling to cap the marketing expenses of telecommunications operators, which is likely to be set at 20 percent of the companies' total revenue.
At the end of March, LG Telecom had 14.3 million customers, while its average revenue per user declined 3 percent year-on-year to 32,363 won in the first quarter.
"We will strengthen our efforts to push our fixed-mobile convergence service for corporate customers. This will be part of a variety of new business areas we are focusing on," Seong said.