Research Notes

South Korea shows operators the roadmap for successful mobile services business on the third day of the GSM World Congress

Carl Williams, Strand Consult

Wednesday 19th February
GSM World Congress 2003, Cannes
Today it was the turn of the mobile operators to kick of the third day of the GSM World Congress with their keynote speeches. The first operator to take the stage in front of an audience of somewhere around 1000 people was Moon Soo Pyo, President of South Korean SK Telecom.

Not unsurprisingly for those who have take a closer look at the South Korean mobile market and what the mobile operators have been doing out there, Moon Soo Pyo showed the audience that it is content and services that drives new technology and by focusing on the users and their needs – SK Telecom were doing very well with their 2.5G and now also 3G rollout.

On their 2.5G Nate mobile services, Mr. Pyo noted that ARPU on mobile services increased by 50% to 7$ when the mobile users had colour screens and with the high numbers of colour handsets in use in South Korea amongst the over 16 million 2.5G users, the multi media mobile services usage was on the increase, although still not the largest service area.

SK Telecom have used their experience and the success of 2.5G mobile services to launch their new 3G mobile services offering called “June”. June is a premium brand service for 3G mobile multimedia, with the core services being entertainment and communication. Mr. Pyo said that he expected video mail and MMS to be huge cash cows.

June is based around MMS, music, VOD and live broadcast. The data speed can reach 1.8 Mb with an average data speed of around 700 Kbps, 3G mobile users are enjoying speeds many still do not have on their PC at home! Right now, June has over 7000 services available, compared to Nate’s 80.000 2.5G services and from the launch of June in September 2002 and up to February 2003, 156.000 mobile users had subscribed to June – on a market where subsidising of handsets is not allowed.

SK Telecom launched June with a massive promotion campaign and after only 2 months of TV ads were pleased to note in an independent survey that 84% recognised June as a new 3G service.

SK Telecom and the other two South Korean mobile operators have been doing what most of the rest of the mobile operators are still wondering about – made sure that it is the mobile operator that is in the driving seat with a strong strategy, making sure that the mobile market moves forward as they want it to – not as the terminal manufactures or others would like it to – simply by focusing on the users and their needs, rather than technology, making sure that there was lots of innovative content for the different user segments and that the handsets were capable of handling that content.

With todays presentation, SK Telecom have driven home the point that it must be the mobile operators who drive the mobile market forward, by on the one hand making it attractive for content providers to join forces with them – and on the other hand, pushing the terminal manufactures for the types of devices that fit in with the operators strategy and not the other way around. The South Korean mobile operators are 2 – 3 years ahead of their European and American counterparts and have in effect created a roadmap on how to achieve success with both 2.5G and are now well on the way to do the same on 3G.

Strand Consult has published two comprehensive reports about the fascinating South Korean mobile market, their mobile services and the results they have achieved:

The Korean Mobile Market – a window to 3G

The Korean Market for Mobile Service

Following a presentation with a success story like SK Telecom’s is not the easiest job and while the next speaker from NTT DoCoMo, CEO Keiji Tachikawa presented many of the new services from DoCoMo, including 3G Foma services I-motion video and I-motion mail and showed how these types of services could be used for personal security and monitoring children, we did not really see any figures on how the new services were effecting ARPU – or how many users were actually using the new services.

While i-mode in Japan today has over 36 million subscribers – that figure does not give an indication of how many of those subscribers actually use non-voice services – even with the 63.000 content sites to choose from. In 2002 DoCoMo grew with 6 million new subscribers and sold 40 million handsets – so there is no doubt that their users want the newest phones in their palms – and as the price of 3G phones has dropped to the same level as I-mode and the cost of data traffic has dropped even more, there should not be any reason why users should not start using 3G services, so it would have been interesting to seem some more figures from DoCoMo in the presentation.

AT&T’s Jim Grant showed that the USA is not that far behind Europe as some would believe. Although the US mobile phone penetration is still far behind Europe at only 49%, compared to around 80% in Europe, AT&T are doing some things that will make some European mobile operators somewhat envious. For example, they only sell GPRS enabled mobile phones, customers can simply not buy 2G mobile phones with AT&T – maybe one reason why ARPU is around 50% higher in the States. AT&T only have 10% pre-paid customers, treating them as a segment that are not as attractive as post paid customers. So AT&T has a very good idea of who 90% of their customers are, what they use their mobile phones for and how AT&T can address those customers.

Moving forward, AT&T will have EDGE online in 2003 and will not be starting 3G services until sometime in 2004. Getting mobile phones preconfigured for mobile users is high on the agenda for AT&T and Jim Grant showed a really cool application developed with Microsoft called “Airloader”. Taking a Pocket PC mobile phone out of the box, a user could in one easy step install the software necessary to connect up to a Microsoft Exchange Server in within minutes, synchronise his Pocket PC mobile phone over the air – via GPRS. With Airloader, AT&T and Microsoft have made an earlier rather complicated process so simple that it will hopefully send a signal to others, that it is time to stop talking about “ease of use” and preconfigured mobile phones – and just do it – because it can be done – even for complicated configuration setups.

02’s CEO Peter Erskine spent some of his presentation lashing out at the regulators, stating that competition was hard enough on the UK mobile market, without the regulators stepping in everytime an operator managed to make a little money. Mr. Erskine hoped that the regulators would see that just the fierce competition on the UK market had been driving mobile prices down by around 40% in the last 3 or 4 years and would therefore adopt a more “light touch” approach in the future and let the mobile operators get on with their business – which includes making money.

Orange’s CEO Jean-Francois Pontal, who announced his retirement in December, fittingly finished off the operators keynotes with a fond farewell to his colleagues and competitors alike. While stating that voice would still be the biggest source of income for mobile operators for many years to come, Jean-Francois was delighted that the Windows based Orange SPV had gotten off to such a good start and expected to pass the 1 million sold handsets mark by the end of 2003. He noted that 85% SPV users synchronise their SPV with their PC, 75% watch video or play games on it and on average, SPV users have 5 GPRS sessions a day. All very promising figures and a feather in the cap for Microsoft and their strategy of putting the mobile operators back in the driving seat of their business.
Strand Consult 3GSM website

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