2009 North Korea and South Korea - Telecoms, Mobile and Broadband

BuddeComm’s annual publication, North Korea & South Korea - Telecoms, Mobile and Broadband provides a comprehensive overview of the trends and developments in the telecommunications and converging media markets in North Korea & South Korea.

South Korea is the fourth largest economy in Asia and has one of the most vibrant telecommunications markets in the world. The market is supported by a visionary government program of stimulating development through liberalisation, deregulation and early privatisation of the incumbent, a creative and energetic private sector and a technology savvy population.

Loans were given and licences awarded to alternative operators to build networks and increase penetration. To foster a knowledge-based society, a major government education initiative provides Internet education to all segments of the population. Electronic commerce is common in private and public sectors. Of particular interest are the developments in the broadband market including the shift away from DSL, the move to A-LAN and FttH services, the development of mobile DMB services and the launch of WiBro services.

Over 90% of South Koreans have at least one mobile phone. The three main mobile operators are SK Telecom, KTF and LG Telecom. At the start of 2009, SK Telecom held just over 50% of the mobile market, KTF about 30% and LG Telecom almost 20%. South Korea is considered a leader in 3G mobile technology and has the world’s highest percentage of mobile users on 3G.

In an increasingly competitive market the three operators have concentrated on delivering 3G growth via WCDMA and CDMA EV-DO Rev A. There have also been higher levels of investment in mobile content in an attempt to offset downward pressure on ARPU rates. With saturation not far off, the market has a subscription rate rising by less than 10%, one of the slower growing markets in the region.

South Korea has the world’s highest number of broadband services per capita. By early 2009, over 30% of the population, or 90% of households, were broadband subscribers. South Korea is an early adopter of triple play models, which provide TV, broadband Internet and voice telephony as packaged services from a single provider.

The country’s fixed-line telephone market continues to be dominated by the incumbent KT Corp. The South Korean Government is committed to transitioning the country to digital terrestrial, digital cable and digital satellite TV broadcasting by 2010. By 2010 KT plans to have transformed its network into an NGN running over 50 times faster than current rates.

In 2008, the government introduced several stimulus initiatives to help the struggling economy. It has proposed to create a joint fund with Japan and China totalling at least US$80 billion to shield the three countries from the global financial crisis. Another stimulus package will be announced during 2009. The unemployment rate has fallen in recent years but is expected to soar in 2009. Korea’s birth rate and its female workforce participation rate are both among the lowest in the world.

Any government initiatives in South Korea and conducted against the backdrop that the share of the population over age 65 is increasing faster than in other industrialised countries and the number should double in the next two decades. Long-run projections indicate a steep rise in the old-age dependency ratio, making Korea one of the oldest countries in the world by 2050. This should foster exciting development in the areas of e-health.

By contrast, the development of the telecoms sector in the Democratic People’s Republic of Korea (DPRK) is seriously impeded by the country’s parlous economic state and the government’s general repression of communications. North Korea’s obsession with secrecy has made it extremely difficult to get a clear picture of the sector. The announcement in February 2005 that the DPRK had nuclear weapons did nothing to help the flow of useful telecom technologies and expertise into the country.

Key highlights:

·         The South Koran Government expects the economy to contract by about 2% during 2009, resulting in the country’s first recession in a decade.

·         The Korea Communications Commission has consented to allow for the KT and KTF merger to go ahead thus creating a single entity truly capable of offering triple play services.

·         SK Telecom enlarged its market position by acquiring the broadband operations of Hanaro Telecom, renaming itself as SK Broadband.

·         The KCC announced the deployment of a national broadband network offering speeds of around 1Gb/s by 2012 on the fixed-line network and 10Mb/s on the wireless broadband network, by investing approximately US$24.6 million. This is largely designed to improve the country’s economic prospects, and the regulatory authority hopes around 12,000 new jobs will be created as a result of the project.

·         Entering 2009, South Korea had the sixth largest broadband subscriber base in the world. The country had just over 15.5 million broadband subscribers at the time, while Japan had around 30 million and China around 85 million.

·         In early 2009, fibre technology accounted for 43% of all broadband subscribers in South Korea. The country has the highest fibre penetration rate among the OECD countries at nearly 14%. In terms of broadband speeds, South Korea is second only to Japan with an average 78Mb/s speed compared with 90Mb/s. These two countries rank first and second in the OECD for broadband speeds.

·         VoIP subscribers have continued to grow at an impressive rate to reach over 3 million in early 2009. The introduction of number portability in mid-2009 fuelled the growth of VoIP as fixed-line operators turn to VoIP to increase business. Subscriptions could pass the earlier target of 5 million by end-2009.

·         3G-based HSDPA and HSUPA services continue to show great success, with KTF planning to migrate all its subscribers to 3G by 2012 or earlier.

·         The KCC awarded IPTV licences to KT, Hanaro Telecom and LG Dacom in September 2008. All three recipients bid for licences with a view to offsetting declines in traditional phone services by expanding their product offerings.

·         Partial legalisation of handset subsidies should lead to greater competition in the market.

·         The very low number of prepaid subscribers remains at under 2% of the market; however, the majority of net additions are coming from the low-end segment.

South Korea – key telecom parameters – 2004; 2008

(Source: BuddeComm based on NIDA and industry data)

Data in this report is the latest available at the time of preparation and may not be for the current year.

For those needing high level strategic analysis and objective analysis on Korea, this report is essential reading and gives further information on:

·         The relatively limited success of WiBro due mainly to limited coverage, unreliable connectivity and lack of ‘killer applications’. HSDPA continued to outperform even though WiBro is cheaper.

·         Korea’s policy emphasis on completing a BcN or Broadband Convergence Network evolving to a UBcN or Ultra Broadband convergence Network by 2012/13.

·         Announcements by KT Corp and Japan’s Softbank to launch a KRW40 billion (US$41 million) fund focused on new media content. The fund is to invest in companies aiming to develop educational, entertainment and other media content to be used for IPTV services.

·         The KCC and Ministry of Education, Science and Technology (MEST) deciding to build IPTV networks in schools in 2009 by advancing the previous 3 year plan to a year plan.

·         The South Korean social network Cyworld being a trendsetter in e-commerce and generating an astounding amount of revenue in 2008, surpassing that of Facebook. The majority of their cash flow is built up out of digital presents, not advertisements.

·         A law that went into effect April 2009 although passed by the South Korean Government in 2008, to prevent cyber bullying and curb the spread of false information online.

·         Korean government plans to pay up to 50% of all mobile phone calls for people in low-income brackets to help them cope with inflation. This was an increase from the previous level of 35%.

·         The new structure for the ‘Informatization Promotion’ execution body including the Ministry of Knowledge Economy.

·         The take-off of music, gaming, TV, social networking and advertising.