KT, SKT, LG join hands to maximize profitability

By Kim Hyun-bin

The country's three major telecom companies have agreed to cooperate with each other to better compete with new rival information and communication technology (ICT) firms, namely Naver and Kakao, and to maximize their profitability.

Previously, KT, SKT and LG Uplus had competed fiercely for subscribers in a saturated market, which led to drastic drops in revenue as high marketing expenses impacted their profitability.

The three telecoms have jointly invested in ONEStore, a traditional application market platform ― KT and LG Uplus spent a combined 26 billion won ($23.1 million) to acquire stakes in the SKT project. They now own 53.9 percent of the company, with KT and LG Uplus being seen as joint managers of the platform, not merely investors.

Prior to this, the three firms also joined hands in 2018 to establish the PASS mobile authentication certificate by combining their previous certification systems into one. The number of PASS subscribers has surpassed 31 million as of the end of last year, ahead of Toss' 24 million and Kakao's 20 million subscribers. In addition, LG Uplus is taking part in KT's AI One team that is researching opportunities in the fast-rising artificial intelligence sector.

They also increased cooperation in setting up fifth-generation (5G) networks in rural areas nationwide to save on infrastructure costs by sharing 5G base stations in mountainous and sparsely populated regions.

In the past, SKT, KT and LG Uplus had been throwing money into marketing to lure subscribers away from each other, which was not only costly but also deemed wasteful.

The three companies made hefty investments into 5G networks to become the world's first to commercialize the service in April 2019 ― but there were no significant shifts in each company's market share.

After learning the hard way, they reduced marketing costs, resulting in higher profitability even amid the COVID-19 pandemic.

“Telecom companies have realized that excessive marketing only increased expenses and inefficiency, so they are no longer engaging in excessive marketing tactics against each other,” an industry official said.

The cooperation between the three major telecoms is expected to expand further. According to industry watchers, the companies are reviewing the launch of a 28GHz high-speed 5G network as a new commercial model. The observers believe further cooperation could happen in over-the-top platforms, as well as the game and content sectors.