Research Notes

New report concludes: South Korea is probably the most developed market for mobile services in the world

A new report by Strand Consult concludes that mobile operators should look to South Korea rather than Japan or elsewhere for mobile Internet success stories:

South Korean operators are managing ARPU rates similar to those of European operators, yet the GDP per capita is 1/3 of that of Europe.

South Korea has an operational 2.5G network with transmission speeds of up to 144 kbps. In Japan, i-mode is currently only operating at speeds of up to 9.6 kbps.

There are 28 million users of mobile services in South Korea. 4,2 million of these are using the CDMA2001X (2.5/3G) technology. In Japan, there are 27.000 users of the FOMA (3G) technology.

The 4.2 million users of the CDMA2001X technology were generated without subsidising the terminals. In Japan, the FOMA terminals were heavily subsidised.

The only true measure of how successful mobile operators are in the market, is ARPU; how much revenue the operators are generating on average per user. ARPU is about the quality of users, not the quantity. It is about operators’ ability to make money, and as such their ability to remain competitive in the market for content-based mobile services.

By offering revenue share on 2.5G mobile services, South Korean mobile operators have made it very attractive to content and service providers to develop and market quality services. This, in turn, has made it attractive to users to subscribe to these services and to upgrade their terminals from 2G to 2.5/3G. This virtuous circle has again meant a considerable increase in the number of content and service providers.

South Korean operators have done what many European operators refused to do. They have accepted their role and responsibility as drivers of the market for mobile services. They have understood that this virtuous circle is key to the successful development of the market for 2.5G and 3G mobile services.

Instead of ensuring this virtuous circle, European and other mobile operators are instead focusing on 2G services like Premium SMS. However, the revenue potential of Premium SMS is nothing compared to that of 2.5 and 3G services. The revenue generated from Premium SMS and WAP services will simply not be enough to finance the debts incurred from buying UMTS licences.

European and other mobile operators can learn invaluable lessons from studying the South Korean market for mobile services. Lessons far more important than those learnt from the Japanese market, which in many ways is an artificial market due the level of subsidising and the dominance of DoCoMo. The South Korean mobile market tell the story of how non-voice mobile services became a success under market conditions more realistic than those governing the Japanese market. As such, it tells a story much more relevant to the European and other markets.

In a new report ‘Show Me the Money’ Strand Consult maps and analyses 28 different operators’ – including the three South Korean operators. The report highlights the South Korean market for mobile services and compares it to markets elsewhere. The report provides answers to why the South Korean market and its mobile operators have been so successful in developing and marketing non-voice mobile services.
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