2015 South Korea - Telecoms, Mobile and Broadband

Operators searching for the next growth driver as LTE in South Korea matures

South Korea has one of the world’s most active telecommunications and Information Technology markets backed by strong support from the government. Spending on ICT and high-technology equipment helped lead a transformation of the economy to one that is more progressively knowledge based. Having invested significantly in ‘basic’ telecommunications infrastructure over past decades, the country now possesses well developed national and international communications infrastructure. Government involvement continues with the aim of transforming the country into a knowledge-based information society in a ‘smart-age’.

South Korea’s operators have invested heavily in fibre based broadband deployments, laying the foundations for triple play services. IPTV subscriptions have grown beyond the 10 million mark as more content is available and the operators are able to compete more effectively with their own live broadcasts. To underpin further growth, KT unveiled a new vision known as “GigaTopia” in 2014. The vision is comprised of three goals: delivering Gigabyte speeds to end users, developing an “Internet of Things (IOT)” platform and delivering convergent services such as combined WiFi and LTE-Advanced. To meet these goals KT plans to invest KRW4.5 trillion over three years.

South Korea continues to be a booming mobile market as it rapidly takes up LTE and innovatively explores the options for value-added services. The market passed the 110% penetration level with many individuals carrying at least one mobile phone. 4G LTE now represents the majority of mobile connections after it was introduced in 2011. Not surprisingly, there has also been a rapid increase in mobile traffic, hinting at potential profitability challenges ahead as operators are forced to spend on upgrading network capacity while at the same time reduce tariffs in response to competition.

South Korea has the world’s highest number of broadband services per capita. Into 2015 approximately 40% of the population and around 95% of households were broadband subscribers. Over 60% of broadband subscribers used FttH or Apartment LANs, with the remainder accessing predominantly cable. KT unveiled plans to increase access speeds to 1Gb/s as part of its GigaTopia strategy, triggering a potential round of infrastructure upgrades as competitors spend on CAPEX to keep pace. The move by KT fulfils Korea’s UBcN (Ultra Broadband convergence Network) strategy, which aims for 1Gb/s speeds on fixed lines.

The drive towards a ‘new economy’ has seen significant investments in the Internet of Things (IOT) including Smart Grids and Smart Cities. The major operators successfully utilised LTE introduction to grow revenue by upselling ARPU. However with LTE penetration approaching maturity levels, the major operators are increasingly looking towards the IOT as the next major revenue growth driver.

Market highlights:

• LTE has been used to successfully increase ARPU levels through upselling;
• Strong LTE demand was supported by new LTE plans and introduction of more smartphones into the market resulting in ARPU trending upwards;
• Commercial LTE-Advanced has been launched with the focus now on increasing downlink speeds;
• Convergence has been identified as the next growth driver as LTE penetration matures;
• Fixed broadband population penetration is approaching 40%;
• Into 2015, fibre technology accounted for almost 60% of all broadband subscribers in South Korea while ADSL subscriptions had declined to less than 10%, the remainder is due to cable modem subscribers;
• KT has launched its new GigiTopia vision to stimulate growth through increased fixed broadband speeds;
• Usability of online payment services has improved after the regulatory requirement to use Active-X was removed. The online payment opportunity has spurred new players such as Kakao to enter the online payment market;
• HD voice over LTE (VoLTE) was launched allowing operators to plan towards eventually allocating most if not all spectrum to LTE.