Mobile evolution: Latest trends of Korean mobile market and its movement

Seoul Office, Copyright © 2006 Innovation Norway. All rights reserved.

Mobile evolution:Latest trends of Korean mobile market and its movement

Changan CHOI

Market Adviser, IN Seoul office

INBDP Market Report

related to wireless future and Mobile Monday


II. Introduction: success or delemma?

Table of Contents

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II. Mobile phones: more than PC

III. Maturity of mobile network: next runner, 3G network

IV. Mobile media: new trials, failures and successes

V. Mobile payment: crossing the chasm

VI. Business use of mobile Internet

VI. Industry structure and new challenges: mobile evolution


Success?

or/and dilemma??Too much dependent on

Hardware

Network infra. services

Technology-driven

USD 287.7 bil (p) in 2007

35% out of total export

40% contribution to GDP growth

- 16% of total GDP

Mobile

HSDPA, Wibro, DMB

90% mobile users

Internet broadband:

91% in 2006 <- 70% in 2002

(Norway: 61% <- 10%)

World’s highest avg. speed

ICT industry

Network infra.No. 1 ICT product lines

DRAM – 45.1%

Mobile phone – 24.7%

LCD – 46.5%

PDP – 54%

Flash Mem – 41.1%

…

Balanced onto

Software

Application services

Practical/society use

Korea has done a great job for the last decade! The highly unbalanced development, however, weighted

onto certain areas is now pulling its back from going ahead for further/continuous growth in the future

I. Introduction: success or delemma? Korean Mobile Market

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Chasm theoryGeoffrey A. Moore 1991

innovative Practical

Customer value

Source: Crossing the chasm, Geoffrey A. Moore 1991

Mobile solutions in Korea

Mobile Media

Mobile Payment

Mobile Phone

Coverage of this report

As Korean mobile market players are making new trials balanced onto services and applications, they are to

face, are facing or faced challenges of bridging users from their innovative uses to practical ones in daily lives

I. Introduction: success or delemma? Korean Mobile Market

Revenue drop!

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II. Mobile phones – more than PC

Camera function90% (2007)

Smart phoneabout 5% (2008)

Multimedia&music function

70% (2007)

Voice conferencefunction 30% (2008)

Premium

Open OS

Touch Screen

Ultra low cost

Functional popularity of mobile phone Anticipated killer applications in 2009

Source: Naver KM, etnews, i-news, 2007, 2008

Source: Allux, 2008

Priority in preference for touch phone purchase

High resolution camera: 19.8%

MP3/VOD multimedia: 17.4%

Internal/embedded memory size: 11.7

Mobile TV/DMB: 11.2%

Multi-tasking: 9.2%

Video conf. Call: 7.7%

Source: Survey by ARG, 2008

Cf.: most of touch phone is Win CE based smartphone

Korean Mobile Market

Mobile users are very active in using multimedia phones such as camera and music, and a recent survey says

that they are moving toward more use of smart phone styles overtime, which has been very small in Korea

Strategic targets for the coming years!!

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III. Maturity of mobile network – next runner, 3G network

Total number of mobile subscribersYear Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08

Subscribers 38916.8 39382.5 39703.2 40197.1 41101.2 42319.8 42801.2 43497.5 44266.0 44982.8

Unit: thousand

Penetration rate (as of June 2008) CDMA vs. WCDMA

0

10000

20000

30000

40000

50000

1

0

2000

4000

6000

8000

10000

12000

14000

Total population: 50,429,173 (exp)

Mobile users: 44,982,823

Mobile users: 89.2%

June, 2008Feb Mar July June

2007 2008

Commencein Feb, 2007

주석

45,274,511(Sep.)

Now,17,000(Jan.)

WCDMA

CDMA


After its launch in early 2007, WCDMA based 3G service has been growing very rapidly mostly thanks to big

subsidies both from government and telecom players – currently 1/3 of total mobile users

2009

To be updated!!

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III. Maturity of mobile network – next runner, 3G network Korean Mobile Market

From major stream of CDMA network until 2006, Korea has launched high speed mobile network services

including HSDPA, Wibro(Mobile WiMAX), CDMA 2000 Rev.A. And, it is said that no. of 3G subscribers will pass

the no. of 2G subscribers within this year, 2009

CDMA Rev.A

Wibro*

CDMA(2000),

PCSabout 62%

about 0.6%

HSDPA

(WCDMA)About 36%

launchedin 2006

about 1.4%

launchedin 2006

launchedin 2006

Source: SKT, KTF, LGT and KCC combined, 2009

SKT51%

KTF31%

LGT18%

* Source: Wibro = Mobile WiMAX

Major Players in Korea (2008.6) Make-up of mobile network (2009.1)

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III. Maturity of mobile network – next runner, 3G network

Source: KAIT, 2007

Residential area for 45% of total populationPlus major universities and hot zones in other provinces

Players No. of Subscribers Main coverage

KT 190,000 National capital area

SKT 3,400 55 hot zone in 44 citiesSource: KCC, 2008

Wibro(mobile WiMAX) major coverage HSDPA national-wide full coverage

With Wibro covering the Seoul metropolitan area, HSDPA covers most of residential area in S. Korea.

Recently, market leaders are seriously considering the combined service with these two, taking advantages

from both of them


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IV. Mobile meida – new trials, failures and successes

Mobile Media

Online

Offline

Broadcasting

Web browsing

WAP* browsing

SMS

DMB/DAB

Client SW

3G (WCDMA, Wibro)

Intr.: unrestricted Internet accessjust like Web browsing at PC

Case:OZ by LGT (CDMA Rev.A)SKT FB, limited (HSDPA)

Prospect: market leaders are facing an obligationto open its service and network based on openarchitecture, which gets popular overtime

Intr.: restricted Internet accessthrough WAP* gateway

Case: closed telecom portals providing ringing tones, music, VOD, gmes, information, etc. -Nate (SKT), Magic-N (KTF)Ez-i (LGE)

Prospect: as being forced to openwireless network and in responseto strong demand for WB, WAB browsing will apapt open accessmore and more* WAP: Wireless Application Protocol


Mobile media in Korea can be broken down into three major categories such as online, offiline and

broadcasting, followed by 6 sub categories as following below

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Mobile Media

Online

Offline

Broadcasting

Web browsing

WAP browsing

SMS

DMB/DAB

Client SW (VM)

3G (WCDMA, Wibro)

Intr.: on-deman contents updatethrough the downloaded clientapplication SW

Prospect: this type of services are developed with M2M services using USIM chip

Intr.: Short message service

Case:1. notification: confirmation onpayment, ticket, reservation, etc. simple AD, alerm, gifts, etc.2. fishing to WAP page: gifts, AD3. SMS/MMS-ticket: text or barcode

Prospect: SMS is well awared by users and will be developedtogether with M2M services

Case:1. Frontpage and WAP page link - mobile video, Magazine, newspaper, public trans. info, membership service, financial service (stock, banking, credit card, etc.), ticketreservation, online game, public service reservation2. Stand-alone: mobile game, anti-mosquito, etc.




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Live skin

Ring tone, music

Mobile game

E-Mail, chatting

Stock, lottery,

banking, T-money

Location based services

VOD, Magazine, News

Mobile shopping

Client SW (VM)

Stand-alone OnlinePartial online

Server

Downloadonce for all

Server

Downloadonce for all

Updates Server

Download,connected to

the Net

Server

SWDownload

USIM

CreditCard

Banking Telecom

Top-up/refill

Bus, SubwayTaxi, Cultural centers,Convenient store,Internet cafe,Vending machine,Public parking lot,Online malls, etc.

Server

SWDownload

USIM

NewsServer

Daily update/early morning

Reading

Detail request/Additional chrge

IV. Mobile meida – new trials, failures and successes Korean Mobile Market

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8.5 millionAccumurated

download


download


download

As of Feb, 2009

Hit games: 6~7 month -> 3~4 month, Million downloads


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http://www.monawa.com/game/game.html?t=skt&gno=2814



http://www.monawa.com/game/game.html?t=ktf&gno=2840

http://www.monawa.com/game/game.html?t=ktf&gno=2885


Daily update:Auto/manual

Profitmodel??


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SMS

Notification:

confirmation on your payment, ticket,

reservation, Simple AD, alerm, gifts, etc.

Fishing to WAP page:

Gift – ring tone, music, bg. screen, ect.

AD – mobile game, VOD & photos,

PR event, etc.

SMS/MMS ticket, coupon:

Text type

Barcode type

Server

SMS/fishing

SWserver

or

request

WAPpage

access

request

download

Webpage

User

Reservation/payment

WAPpageReservation/

payment

or

MMSServer

MMS/Barcode

Pass/reader

App. SWInfo.

RFUSIM

Screen

Spam/virus/crime -> regulation -> new business model?


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Ring tone/ Biz ring..

MMS coupon

SMS event

MMS event

call

Musical messageor logo song

1

2

3

You can listen to the logo song or any sort of musikal message

when you make a call or receive a call

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Mobile Media

Online

Offline

Mobile TV,Broadcasting

Web browsing

WAP browsing

SMS

DMB/DAB

Client SW

3G (WCDMA, Wibro)

Intr.: mobile TV using DMB/DAB technology

Case:Terrestrial DMB, Satellite DMBTPEG* service

Prospect: as 30% (15 mil.) of total population is usingDMB, it is expected to grow together with othercommercial services, such as TPGE, interactive services through BIFS** technology and 3G network

Intr.: realtime or on-demand mobile TV service using 3G network such as HSDPA and Wibro

* TPEG: Transport Protocol Experts Group** BIFS: BInary Format for Scenes

Case: Nate(SKT), June (SKT), Fimm(KTF), ez-imiTV(LGT) - realtime terrestrial broadcasting, Cable TV, Home shopping, event/spotlighted program, etc.

Prospect: as telecom players would get involved in thecontents delivery and make more data traffic, flat fee or discount fee based pricing models are coming out and will compete with DMB service in a way




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V. Mobile payment – crossing the chasm

Users

Telecom Financial bodies

New technologies;Smartcard, contactless(RF), Bluetooth, etc.

Payment portalService providers


T-money/transportation

card

Mobile payment market is becoming a battle ground for different market players such as financial bodies like

bank, credit card companies, transportation card company, telecom players and payment portal providers

Relational map between mobile payment market players

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*Average foreign exchange rate : 1,035/USD 193.9/NOK (2008), 929/USD 158.8/NOK (2007), 955/USD 149.1/NOK (2006)

**CAGR: Compound Annual Growth Rate

0

200

400

600

800

1000

1200

1400

Unit: KRW* bill.

20072006

(Est.)

2005200420032002

CAGR**: 29.3% 40%

20,651 (48.1)

Mobile PaymentUsers

22,250 (51.9)

Source: Mobilance, K-research, NIA(2007)

Mobile payment market growth % of mobile payment users

Mobile banking users

Handset payment users

For statistical reason, this will be covered by two different categories:

Unit: thousand (%)


Despite its small size yet, mobile payment market is growing very fast, and more than half of mobile users

are registered or using mobile payments in their daily lives

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cf.) Total population: 50,429 thousand, 2008.6

Source: BOK, NIA, 2007.6

Mobile banking

Mobilesubscribers

6,620 (13.6)

Unit: thousand (%)Internet banking during 2nd Q of 2008

- 21,990 thousand transactions (3.8% up)

- KRW 22,011.7 billion transaction (2.1% up)

-> 1.6 transaction with KRW 1.6 million per person

Mobile banking during 2nd Q of 2008

- 978 thousand transactions (9.5% up)

- KRW 138.1 billion transaction (16.3% up)

-> 0.14 transaction with KRW 20,846 per person

Transaction by number of cases

- ATM (42.9%) > Internet (24.4%) > Tele (12.6%)

Inquiry and information access

- Internet (57.9%) > Tele (12.2%) > ATM (10.6%)

35,105 (69.6)

13,615 (27.0)

1,709 (3.4)

Subscribed, but sleeping

Actual users

Internet banking

Mobile banking


As taking 13.6% of the total Internet subscribers, mobile banking subscribers made 138.1 billion transactions

during the 2nd Q of 2008, and it is continuously growing

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47.5%

3.6%8.0%

40.9%

Small amount ofpayment online

Public transportation

Subsitute forcredit card

Havn’t used it yet, but 30% of them has intention to use

N=4272 Source: survery by K-research, etnews, 2008.6

Handset payment experience and intended ceilings

44%

38%

10% 8%

More than onceper month

Less than oncefor 3 months

Oncefor 3 months Once

for 2 months

23%17%

13%

12%6% 6%

23%

USD 10~20

Don’t care

USD 20~50

USD 50~100

More than USD 100

Less thanUSD 5 USD 5~10

Frequency for use

intended ceilings


Around 60% of survyed people have experienced different types of handset payments, and small amount

payment was the most popular type among the payments

Handset payment experience

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Preferences for online contents payment;less than USD 150~200

Payment usage for online contents;regardless of mobile payment, but it could imply future of handset payments

0

10

20

30

40

50

60

70

Handset payment(65.3%)

Credit card(40.5%)

ARS(33.5%)

Banking(17.0%)

Membership point(15.6%)

Gift certificate(9.7%)

e-money(8.7%)

Others

Dual check answers

Source : NIA, KISDI, 2007.10

0 10 20 30 40 50 60 70 80 90

Dual check answers

Music

Movie, TV

News

Game

Community

Education

Stock info.

Others

Source : NIA, KISDI, 2007.10


In the online contents market, a survey said that handset payment was answered to be the most popular

among others, where users had purchased mostly entertainment contents like music, movie, TV, games, etc.

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Stage 1

Stage 2

Stage 3

*PG: Payment Gateway solution provider

Timeline Early 2000~

Usage Online game and community contents

Tech. SMS, Web, CDMAnetwork

Telecom > PG

Low (USD 5~10 ceiling)

Reliance

Security

Timeline 2001~( 2002), now

UsageBank account inquiry,(limited transfer)

Tech.CDMA network, virtualaccount, simple link bet. bank and telecom

Telecom > bank > PG

Low

Reliance

Security

Timeline 2002~

Usage

Creditcard, banking, transportation, membership, online contents

Tech. Smartcard, Bluetooth, RF

Telecom > financial

High

Reliance

Security

Timeline 2003~

Usage Banking, transportation

Tech. Smartcard, RF, VM

Telecom = bank > PG

High

Reliance

Security

Half success with limited number ofphones, financial bodies and franchise

Timeline 2006~

UsageCredit/checkcard, banking, transportation, membership, online contents, stock, etc.

Tech. Smartcard, RF, Bluetooth(integration all into USIM)

Security High

Telecom =(?) financial

Open architecture for USIM to telecoms, pie sharebetween telecom and financials, participation offranchises, standardization

Reliance

Issue

Note: this is only for the cases of normal mobile phones, because PDA phone took advantaged of Internet payment services from early stages

Online contents payments are still used, being very popular

Evolution and integration of all theprevious services into USIM chip under WCDMA network

Survivial technologies


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Public transportation:Bus, taxi, subway

Retailersconvenient store, theater, both, bookstore, etc.

Public facilitiesLocal office, toll fee, parking, museum,

vending machine, telephone, ect.

InternetGame zone

T-Money

USIM

RF

Top-up/refill

Public transportation

Taxi

Subway

Public busbuying

V. Mobile payment – crossing the chasm Korean Mobile Market

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SMS ticket/trainmobile ticket/upgrade

registration, inquiry, payment, postponement, cancel, ect.RF ?by USIM

SMS ticket/movie

V. Mobile payment – crossing the chasm Korean Mobile Market

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Example:USIM based mobile payments


While there are many mobile payment trials by different market players outside of telecom territory, mobile

telecom leaders are paying huge investments in and very keen on taking the lead of this emerging market

Credit cardTransportation card

BankingStock security

Online paymentMembership

Ticket reservationID pass

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http://chip.moneta.co.kr/guide/index.jsp



Example:

Other trials – not popular yet

Home/TVShopping

Mobilephone

number

SMSlink

MobileInternet

Creditcard

Number fill-in

Online ticketor

PurchasingPayment

E-Ticketor

Barcode

Passor

Issuing

Vending machineToll gate,

Parking fee,

Payment(mostly prepaid

e-money)


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Business Use

of Mobile Internet

Applications to ERP or enterprise solutions Users reading emailon phones

SMS/MMSfor business purpose

Mostly, they redesign and develop their own applications for their specific purpose in this case

Business use of mobile Internet is very limited if they do not have full support from telecom players

Due to the limitation of adopting new applications, they use PDA phones to meet their technolgical requirements

Except for PDA, telecom players under the support of mobile makers are controlling the installation of applications and

its working on the phone

Thus, business players are using existing applications for different purposes if it is not in the PDAs or the smart phones


Business use of mobile Internet in Korea can be broken down into three categories such as applications to

enterprise solutions, emails on the phone and SMS/MMS for business purpose as following below

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Business Use

of Mobile Internet



Less than 5% of total mobile users (about 1 million in 2008)

Limited environments until the time

- Mostly relying on PDAs or SmartPhones, prior to full

browsing service

- not open architecture; only possible by installing client SW

and in-house or enterprise email solutions

- limited access to public/portal email accounts

- expensive; additional cost for subscription


Cases

- enterprise email for management people mostly

- government officers & staffs for their administration

Prospects: full browsing service will encourage users to use it

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Business Use

of Mobile Internet



Prospect: SMS is well awared by users and will be developed together with M2M services

Issue of spam/junk message- 0.7 spam per day (2007), 2~3 spam per day

(2006)- 70% of loan/financial, 15% of adultary, 6% of

game in order


Cases:1. notification: confirmation on payment, ticket,

reservation, etc. simple AD, alerm, gifts, etc.2. fishing to WAP page: gifts, AD3. SMS-ticket: text or barcode

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VI. Industry structure and new challenges – mobile evolution

Phone manufacturers

Parts suppliers

Potals

Contents providers

WWW

Broadcasters

Financial bodies

Users/Customers

Source: modified from ppt by LGT at IT conference, 2008

Carriers/mobile telecom

Phonemanufacturers

Contentsproviders

Mobile ADs

Supply Subsidiary100% dependency

Wireless Telecomterritory

Biggernego.power

Intervene

Intervene

supply

DMB,TPEG

Payment Gateway

Open access

Telecomportal


In the mobile service market, mobile telecoms have had a higher level and a wider range of control powers

over the related parties, but in the new environment of open architecture, its power will be weaken overtime

27/36



SKT SK Broadband(Hanaro)

KTF KT

LGT LG Dacom

LG Powercom

Integration between wiredand wireless telecom markets


Players in the mobile market are being and are soon to be surrounded by new challenges and unfamilar

business environments in the near future, where they have to compete and survive to success

New or combinedapplications

Payment/M2M Data servicesOpen Internet

New mediaOpen architecture(Quadruple play?)

Government Intervention

USIM, Smartcard, VM, RF, Bluetooth

High speed network: HSDPA, Wibro(Mobile WiMAX)

Mobile TV: DMB

Price cut

Open competition

- Wipi* removal

- MVNO?

- Global standard: browser, OS, etc.

New or newly applied technologies

* Wipi: Wireless Internet platform for interoperability

28/36


Monthly use of data packets has

increased after HSDPA service launch

HSDPA user made a higher level of

ARPU including data one

Increased data use made a good offset

for total ARPU against/despite the price

depreciation of data service

3,580 packet in October compared to

2,405 packet in 2006.101000

1500

2000

2500

3000

3500

4000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

KTF monthly packet use per user, 2007

KTF ARPU increase, 10~12, 2007

Unit: packet

Source: KTF, Woori stock & security, 2007, 2008

Korean Mobile MarketVI. Industry structure and new challenges – mobile evolution

As the mobile telecom market is shifting its weights onto higher speed of HSDPA network, Data ARPU is

increasing its portion to the total ARPU with increased packet consumption

0

5000

10000

15000

20000

25000

30000

35000

40000

21%18%

29,315

5,301

36,481

7,610

CDMA HSDPA

Unit: KRW

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2001 2004 2006 2008.08

SKT 4.4% 18% 25% 22%

KTF 5.6% 14% 17% 19%

LGT 7.1% 6% 7% 10%, (Oz 17%)

?

ARPU

Data ARPU

Voice ARPU

Price cutting period

Voice Conference call

35% 3G users20% 3G users

Source: SKT, ARG, 2008

Source: SKT, KTF, LGT, ARG, 2008

History of mobile operator’s data ARPU

History of SKT data ARPU

IMT-2000

HSDPA


In the middle of fierce price war, use of data and voice conf. call are considered to be feasibile solutions to

telecom providers, and, recently, recovered data ARPU with increased packets is proving its potentialities

40% SMS,Follwed bymusic belldownload

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Telecom

Open WAPTelecom

Open WAPContents

Providers(CPs)

Telecom/Mobile

Network

WWW

Telecom

Portal

Stand-by screen,

VM(client SW)

service

Open WAPTelecom

Open WAPTelecom

Open WAPPortals, CPs

100%dependent

Telecom territory/Pricing range

1

2

3

3

Source: modified from ppt by LGT at IT conference, 2008

User/Customer


In response to potential user demand, the lagging telecom player, LGT, has first launched a open access

service to the Internet, and other market leaders are reacting according to the situation

Status of mobile telecoms’ unlatching door of their sanctuary

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Strategic alliance

Cooperation/Win-Win

Standard

Convergence

Flat pricing

Combined pricing

Incentives/promotion

Affordable phones

Customer use

Innovative -> practicalpayment, entertainment, media, search

Very similar to

Customer costs

Open to collaborationwith unfamiliar industries what?

Internet market

evolved from proprietary network

15 years ago

As market players are struggling to survivie in the new converged environments, business environments are

getting similar to those of Internet market 15 years ago, or even more complicated, where wired telecom

sticking to closed network and its own services eventually was gone out of the market


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’96 ’97 ’98 ’99

3,103 10,8601,634

’00 ’01 ’02

Users 731 19,040 24,380 26,270

Unit: thousand

Source: KRNIC, 2005

Broadband Internet provision& popularization

Pricing policy change: meta-rate system to flat-rate sum system

Network environment/space expansion:from closed telecom network to open Internet

Abundant capital/investment inflowto the market; explosive generation of businesmodels, new services, technology trials, etc.in the open competition

Drivers behind the explosion of subscribersHistory of closed network with low speedVs. open Internet with hight speed

Source: evaluated and surveyed by KRNIC, 2005

Telecom community(closed network)PSTN network (plus a few of ISDN)

Open Internet, open architecturexDSL, Cable network

Subscribers

Time

Though the mobile market has different restrictions and considtions from those of the Internet one, Korean

players will be able to get crucial insights from this history at large


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Wipi removal

10% mobile phonens from abroad

More USIM-based phones

MVNO approval soon

…

Business environment is tougher and getting similar to that of Europe market including Norway,

which means that it is familiar to Norwegian/European companies

Korean mobile market is opening its market to outside overtime in order to make itself more competitive


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Korean Mobile MarketVII. Behind the successes of Korean ICT industry

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To be updated, with two to three points


For more information, please, refer to the the following contact information

Changan Choi (Mr.)

Market Adviser, IN Seoul office

Office: +82 767 2653, Mobile: +82 10 4847 0237

E-Mail: [email protected]

Reidar Grevskott, Commercial Counsellor, IN Seoul office

Mobile: +82 10 3743 5992,

E-Mail: [email protected]

Thank you!!

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Mobile evolution: Latest trends of Korean mobile market and its movement

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Transcript of Mobile evolution: Latest trends of Korean mobile market and its movement