South Korea Telecommunications Report Q2 2013 - New Study Released

The rapid rise of LTE in South Korea ensures it remains one of the world's most developed markets. Operators reported upgrades from 3G to 4G had seen LTE subscriptions reach 15mn by the end of 2012. BMI expects this trend to continue with operators keen to generate growing income from their LTE investments. Early signs suggest ARPU may be growing, but it is still early days for the technology and promotions may lower prices as conversions slow and competition for new subscribers increases. We believe LTE has the potential to further slow the growth in fixed broadband technologies in South Korea if wireless broadband can offer similar service speeds.

Key Data

Our mobile forecasts see all subscribers on 3G or 4G networks by the end of 2015, although there is potential for SK to seek an earlier switch-off of its 2G infrastructure. Mobile penetration will creep up slowly but operator focus will be on converging subscribers to 4G platforms from 3G.

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The fixed-line market is still expanding, but slowing quickly. Our downwards revisions to forecasts envisage fixed-line penetration of 56.2% by YE12, falling to a still healthy 55.4% at YE17.

ARPU forecasts were revised upwards as operators began to show ARPU growth. We believe there is still plenty of downside potential to our forecasts but the growth is a positive sign for operators.

Key Developments

KT introduced a cloud-based mobile wallet service in December 2012. The service is called MoCa and can be used by all subscribers in the country, not just KT's customer base. MoCa users will be able to make online payment and in-store payments. KT has attracted 60 banks, card issuers and retailers, including some merchants to the new application.

SK Telecom became the first mobile operator to charge customers once it launches over-the-top (OTT) voice and SMS over IP service Joyn. We believe that SK Telecom's price strategy for Joyn will not be replicated in many other countries given net neutrality laws and it remains to be seen whether subscribers will be willing to pay for the service or not.

LTE is the market's main focus as operators seek to make back their investments on network rollouts. KT and LG U+ announced 'unlimited' LTE packages in an attempt to grab market share from SK Telecom. While good for subscribers, we are concerned that operators could be moving towards the same direction as the 3G market with generous data plans and weak monetisation ability.

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