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ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806

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“LTE 2.0 Begins”, leading to another phase in the Telecom industry

What will be the smart business strategies for LTE 2.0 service which accounts for 73% of total mobile users in Korea in 2013?

David Kim, CEO/Head Consultant

Kyung Hyun Lee, Senior Consultant

James Kang, Senior Consultant/Infographer



Part I. What Is LTE 2.0? – Concept and Understanding of LTE 2.0

LTE 2.0 is on the rise.

How is LTE 2.0 distinct from LTE 1.0? LTE 1.0 refers to the mobile market competition in Korea to secure a

nation-wide LTE network and was begun with LGU+’s full-coverage efforts to overcome its limitations in the

3G market with LTE. Accordingly, the three mobile carriers in the domestic market were concentrated on two

factors with their LTE marketing: whether to secure a nation-wide LTE network, and whether to offer better

quality and faster services compared to WCDMA. Now, however, the argument over ‘the nation-wide LTE

network’ is completed. The focus of TV ads for LTE service is fast moving from the network to contents and

service platform. Then, what is LTE 2.0 and how that can be defined? ROA Consulting defines LTE 2.0 as

follows.

Figure 1. Evolution from LTE 1.0 to LTE 2.0

Source: ROA Consulting



Definition of LTE 2.0 – LTE 1.0 can be defined as the competition to expand ‘Network Coverage’ among the

three mobile carriers and LTE 2.0 is the competition for the ‘Maximization of Service Utilization’ by

providing users with big contents and better service platforms through a stabilized and sophisticated network.

To maximize LTE service utilization, which is the final goal of LTE 2.0, progresses must be made with the

following order of Network à Device à Service à Utilization.

l Network – Infrastructure Enabler (Stabilization and Sophistication of Networks)

- As LTE is developing into LTE-A (LTE-Advanced here after) or the development is being prepared,

CA (Carrier Aggregation) and Multi Carrier technologies are being adopted (LTE is required to utilize

spectrums allocated for other purposes to guarantee a faster service).

l Device – Smart Media Device (Introduction and Growth of LTE Devices)

- In addition to LTE smartphones, new media devices such as reasonably-priced tablet PCs and other

M2M devices are being introduced.

l Service – Big Data, Big Content Service (Big Data and Big Contents)

- Big content services including HD Voice (VoLTE) and cloud-based games are being expanded

thanks to the faster network.

- More and more platform-based services, social, commerce and payment services in particular, are

being used.

l Utilization – Utility Value (Enhanced Utilization Value)

-Subscription-based content use is replacing streaming and pay per view-based utilization.

-Bundle products offering various contents with reasonable prices are being introduced.

As seen from the case of Multi Carrier, which was developed by SKT for the first time in the world, LTE 2.0

started with introduction of technologies improving early-stage of LTE networks into LTE-A. Accessibility to

high quality and big data services equipped with HD video and sound is improving as smartphones and

tablet PCs such as Nexus 7 (Google) and Suffice (MS) are playing the role of a new media offering a better

user experience with reasonable prices. In addition, bundle products (game bundle services and music bundle

services) are providing attractive service rate for the large data services which were impossible with CDMA

and WCDMA. In the age of LTE 2.0, mobile market paradigm of Korea will be shifted by those who control

the value chain comprising Network à Device à Service à Utilization.

This report is written to analyze the mobile carriers’ Network / Device / Service / Utilization businesses and to

provide strategic points in accordance with the definition of LTE 2.0 by ROA Consulting.



Part II. Analysis of Current LTE 2.0 Market Competition

1) LTE Subscriber Increases from 2012 to 2013

As of July 11, 2012, as many as 89 mobile carriers in the world have succeeded in commercialization of LTE

service. In Korea, LTE has been commercialized for one year and has secured 8.25 million users as of July 20,

2012. According to the analysis of ROA Consulting, LTE subscribers is expected to post a rapid growth in

Korea with increasing to 15.98 million by late 2012, and to 42 million or 73% out of total mobile users in

Korea in 2013. In 2013, most new mobile handsets in the market will be smartphones, 70% of which are LTE

handsets (WCDMA smartphones will account for 30%).

Combined LTE subscription goals of the three mobile carriers for 2012 totals 16 million, similar to the analysis

of ROA Consulting, and their advertisement and marketing of the last half of 2012 is being concentrated on

LTE. All in all, 2013 is expected to be the year when LTE market expands exponentially.

Figure 2. LTE Subscriber Increases from 2012 to 2013 in South Korea

Source : ROA Consulting

SKT, the leading mobile service provider of Korea, is maintaining its dominant position in the domestic LTE

market, and ranks 2nd in the global LTE market following Verizon. The achievement was possible as the



company upgrade its 3G to LTE networks rapidly and successfully. LGU+, the third player, obtained 2nd place

in the domestic LTE market by following the trend. On the other hand, KT is lagging behind its competitors

with LTE subscribers less than half of SKT and LGU+ due to its belated lunch of LTE service in January 2012.

SKT has a goal to secure 7 million LTE users by the end of 2012. KT, on the other hand, is poised to attract 4

million LTE users and LGU+ is to secure 5 million. Combined subscription goals of the companies reach 16

million (similar to the analysis of ROA Consulting) or 29.3% of total mobile users in Korea, hinting that they

will be involved in an intensifying competition to secure more LTE users.

Table 1. LTE Subscribers in South Korea

End of

November

(2011)

End of

December

End of

January

(2012)

End of

February

End of

March

End of

April

End of

May

End of

June

As of July

20

Goal for

the end of

the year Coverage

SKT 380,572 634,311 1,002,642 1,336,753 1,766,325 2,380,880 2,908,964 3,400,000 4,000,000 7,000,000

Nation-wide,

84 cities and 889 local

districts with covering

99% of total

population (as of

June)

KT - - 111,929 232,434 350,921 580,319 926,605 1,200,000 1,400,000 4,000,000

Nation-wide,



90% of total

population (as of

June)

LGU+ 315,578 557,023 849,275 1,153,894 1,484,375 1,889,274 2,268,464 2,700,000 2,850,000 5,000,000

Nation-wide,



99% of total

population (as of

March)

Total 696,150 1,191,334 1,963,846 2,723,081 3,601,621 4,850,473 6,104,033 7,300,000 8,250,000 16,000,000

Source : ROA Consulting, Korea Communications Commission, Reports of Each Mobile carrier

Considering that all mobile carriers in Korea have secured a nation-wide LTE network covering even small

local districts, they can’t guarantee a differentiated LTE service with large service coverage any more. The

market competition surrounding LTE are ushering in another phase or LTE 2.0 in which mobile carriers strive

to be differentiated with competitive devices, networks, service platform and service utilization.



2) Analysis of Market Competition for LTE 2.0

Ø Network

l Spectrum

Wireless spectrum is the key asset for mobile carriers because their network capacity is dependent on them.

Insufficient spectrum leads to slow network speed, which is the barometer for users to evaluate mobile

communications service. In addition, mobile carriers are required to secure so called ‘golden spectrum’ for a

better international roaming service.

Table 2. Allocation and Use of Spectrum in South Korea

SKT KT LGU+

Frequency bands 800MHz

1.8GHz(2x10MHz)

1.8GHz(2x10MHz)

900MHz(2x5MHz)

: Plan to use

800MHz

2.1GHz(2x10MHz

: Plan to use

Source : ROA Consulting, Report of Each Company

SKT has commercialized MC (Multi Carrier)1 for the first time in the world and is offering LTE with 40 MHz

bandwidth by combining 800MHz and 1.8GHz spectrum. KT and LGU+ is offering the service with 20 MHz,

utilizing 1.8GHz and 800MHz, respectively. As of now, KT strives to secure 900MHz and LGU+ is poised to

obtain 2.1GHz for LTE service. In case of the US, 700MHz is the main spectrum and 2.6GHz is being used in

Europe for LTE. The three mobile carries in Korea are expected to compete with each other to secure 700MHz

and 2.6GHz for an international LTE roaming service.

1 The technology allocates traffics to various spectrums for a flexible and faster service



l Network Technology

Technologies to make full use of the allocated spectrums are also playing an important role for bettering

communications service. To level the playing field, the Korean government has banned on monopoly of

specific spectrums, allowing the mobile carriers to utilize various spectrums of various bandwidths. CA (Carrier

Aggregation) is one of the key technologies for LTE-A as it allows various spectrums to be used just like one

big bandwidth. Multi Carrier(MC) is similar to CA in terms of improving efficiency of spectrum utilization. MC

distributes traffics to various spectrums seamlessly for a faster and more flexible service. The technology

enables SKT to enhance its service speed and stability by utilizing the two spectrums for LTE more efficiently.

MC has been commercialized by SKT for the first time in the world and was launched in July in Korea. By

early 2013, MC utilization will expand to 23 cities across the nation. LGU+ is poised to build MC in three

popular places in Korea including Myeongdong, Sinchon and Hongdae in late July this year. KT will follow suit

in late 2012.

SKT also adopted Advanced-scan, which improved call quality by controlling signal interference between base

stations, in January and commercialized it in March 2012 for the first time in the world. KT is offering it with

the name of Warp. LGU+ plans to adopt CCC2 technology in late 2012, to apply it to its network across the

nation. On top of that, SKT commercialized LTE femtocell. As seen, all three mobile carriers are pursuing

various measures to sophisticate their networks in an aggressive manner.

During the late half of 2012, VoLTE will be main target of mobile market competition. VoLTE enables better

call quality and photo and video transfer during voice call as it offers voice communications service with data

packet through LTE networks. SKT will start the service in September 2012. LGU+ will begin it in September

or October 2012 while KT plans to launch the service in October. According to SKT, its ‘HD Voice’ will provide

much enhanced voice communications service with a high-quality voice codec, 2.2 times larger spectrum and

a reduced connection time by more than 100%.

Ø Device

Unlike 3G, there is no common spectrum for LTE service in the world, which resulted in Spectrum

Fragmentation. Accordingly, the mobile carriers are required to secure not only technologies but also devices

supporting various spectrums. Over the past year, as many as 16 LTE handsets have been released. Among

them, SKT has launched 14 models, while KT and LGU+ released 9 and 10 models, respectively. Considering

that smartphones are the main devices for key services of LTE 2.0 age, demand and supply of LTE devices are

2 CCC refers to the Cloud Communication Center. SKT’s CCC is named SCAN and KT’s technology is Warp.



becoming more and more important. In 2013, 7 out of 10 new devices will be LTE smartphones while share

of WCDMA will drop.

Ø Service Platform

Even though LTE offers 5 times faster service compared to 3G and state-of-the-art devices are being

introduced, they are useless without high-quality contents and service platforms. Securing competitive

contents and service platforms is all the more important in the age of LTE 2.0. The service platforms of

mobile carriers include Media Platform for TV and music contents, Commerce Platform, Game Platform being

offered via the app store, SNS Platform and others.

a. Media Platform

l Broadcasting and Mobile

Korea’s IPTV market has 5.3 million users and has been growing faster than another other countries in the

word. IPTV has a high chance of being utilized for interactive services such as N-Screen and T-commerce and

individualized ads. KT’s Olleh has been leading the domestic IPTV market with securing 3.34 million users as

of April 2012, followed by SKT’s BTV with over 1 million. LGU+ has 0.89 million IPTV users with U+TV service.

SKT launched mobile Btv targeting LTE subscribers in July 25, and is about to offer a real-time broadcasting

service with Hoppin’s N-screen based on Btv. KT and LGU+ are preparing their version of mobile

broadcasting service named ‘Olleh TV now’ and ‘U+HDTV’ respectively, to connect mobile broadcasting

platform with IPTV platform.

They are offering free mobile cloud service with which users can store and utilize contents via mobile devices.

KT’s cloud service offers 50GB, the largest storage, while SKT’s Tcloud and LGU+’s U+box provides 10GB and

15GB, respectively.



l Music

Music is the most important contents in the LTE environment as it is picked as the most frequently used

service by more than 85% smartphone users. Among the mobile music services, SKT’s Melon has the largest

market share of 37.33%, followed by LGU+’s Mnet with 21.19% and KT’s Olleh music with 12.61%.

b. Commerce Platform

SKT is the only mobile carrier operating online open market service named ‘11st,’ which happens to be the

largest domestic online commerce service. Now, it is about to expand the service to the mobile platform.

During the first half of 2012, KRW 100 billion worth of transactions were made on mobile 11st, growing 6

times for just one year. SKT also offers ‘Basket’ connecting SNS and commerce platform via both online and

mobile networks. Basket allows users to compare product prices, gain shopping information and share

product evaluation through SNS.

KT is in provision of ‘Olleh TV Open Market’ enabling product search and purchase through IPTV service.

However, KT’s service is limited to Olleh TV users.

c. SNS Platform

In the SNS market, competition surrounding mobile messenger service has been intensifying more than ever.

SKT launched mobile Nateon, its hugely successful online chatting service boasting largest number of online

users in Korea, but the service is lagging behind KaKao Talk. SKP, the subsidiary of SKT has taken over TiKToK

to strengthen SNS service of the company. KT and LGU+ launched their version of mobile messenger service

named Olleh Talk and Wagle, respectively. But they ended up securing only 1.3 million and 1 million users

respectively. The three mobile carriers are about to jointly introduce ‘Joyn,’ the RCS3 encompassing all types

of messaging services, and to develop it a next-generation communication platform in a way to secure

competitiveness in the field.

3 RCS, Rich Communication Suite: the service integrates multimedia elements such as text, video clip,

chatting and file sharing.



d. Game Platform

Mobile game market is expected to post a rapid growth, recoding annual growth rate of 33.6% from USD 3.4

billion in 2009 to USD 14.6 billion in 2014 (SERI report in 2011). As of now, social network games are most

and second most popular applications in Apple’s app store and Google Play. In line with the growth, revenue

from mobile game contents will increase. Mobile games will become one of the most important contents

offering 50% of application sales of mobile carriers. Development to LTE will be the catalyst for future growth

of mobile games by allowing PC-based high quality games to be enjoyed on the mobile network.

Against this backdrop, the three mobile carriers are involved in the competition to secure better game

contents and game platforms. SKT launched Kartrider Ruch+, the mobile version of Kartrider, the

representative online game developed by Nexon and succeeded in securing 5,000 subscribers in only two

weeks. LGU+ introduced Portess and Freestyle for LTE users.

Currently, SKT is in operation of Game Center to offer further various and convenient user experience. The

Game Center was designed to increase immersion and incentive for mobile game users. On July 18, LGU+

launched ‘C-Games’ with cloud game platform which offers games based on its cloud server.

Ø Utilization

Currently, LTE encourages content utilization mostly through streaming. However, streaming generates huge

data traffics, placing users under an enormous cost burden. Without bundle and package products to allow

LTE users to enjoy high quality contents and services with reasonable costs, they will become a pie in the sky.

Introduction of bundle and package product is another key to vitalize LTE service.

The three mobile carriers strive to increase content utilization by LTE users by introducing attractive monthly

subscription plans, while conducting various promotion activities. For instance, SKT’s ‘BTV Study Program’

which is an IPTV service, allows the program subscribers to enjoy the same contents from the smartphone or

tablet PC without paying additional costs. All they have to do is sighing up ‘Smart SSam’ application. The

program is designed to encourage content utilization in the LTE environment.



Table 3. Bundle Products (Subscription Plans) in each Mobile Operators

Media

Platform

SKT KT LGU+

T

V

-Btv Monthly Subscription

Plan

-Hoppin TV 10 Free:

offering 10 TV programs

and 2GB data for monthly

fee of KRW 9,000

Olleh TV now Pac: Monthly

fee of KRW 5,000, 3GB data

-U+HDTV

(mobile TV service) LTE

HDTV Moa: Monthly fee of

KRW 5,000: U+box 100 GB

M

U

S

I

c

-Melon: Monthly fee of

KRW 6,000: Melon

Streaming and unlimited

data (reduced by 30% with

T-membership point and

50% discount for mp3

monthly subscription)

-Genie Pack: For Monthly

fee of KRW 4,000, Genie

Streaming and unlimited

data

-Mnet: LTE Music Moa:

Mnet online and mobile

streaming and unlimited

data with monthly fee of

KRW 5,000

Source : ROA Consulting, Report of Each Company



Part III. Who Will Become the Leader in the Age of LTE 2.0?

Over the past year, we went through LTE 1.0, in which the mobile carriers have been concentrated on

connecting the entire nation with LTE network faster than others. Now, LTE 2.0 will continue for one year

ahead (from late 2012 to 2013), during which users are accustomed to the much-enhanced service

experience and different utilization value compared 3G (WCDMA) offered by specific service providers

based on the faster and stabilized LTE network across the nation.

Much-enhanced service experience refers to big content services which were possible but limited with the

3G network (video services such as HD TV and high-quality video call, cloud–based network games and other

SNS games allowing various gamers to be connected simultaneously, and digital content services such as

music streaming) and service platforms (not content-based but platform-based services including commerce,

SNS, App Market in which various 3rd players can be involved). Thanks to the LTE network, they will become

more and more available with much better accessibility.

Utilization value can be generated when the new service experience spreads among users thanks to

reasonably–priced bundle products and service rate plans. Unlike the 3G network offering unlimited data, LTE

should seek measures to enable users to have the new service experience. For this reason, various bundle

products are being introduced to provide unlimited contents (game and music) with minimum service rate. It

is difficult to evaluate strengths and weaknesses of the LTE bundle products because each of the products is

fitted to the characteristics of the mobile carriers which have been developing them competitively. But, SKP

(SK Planet), subsidiary of SKT, seems to be better than others in terms of obtaining users’ experience values

as seen in Part II of the report.

Now, service experience and utilization value are becoming more and more important. During the age of 2G-

3G network, the service providers are required to operate multi-networks including CDMA – WCDMA –

WiMax (WiBro). They have to compete with each other for the various networks. In terms of 4G, however, all

players are pursuing a Single Network of LTE. As a result, the company securing devices and maximizing

service experience and utilization value will rise to the absolute leader.

Who will dominate age of LTE 2.0? LTE 2.0 is the key issue and task the mobile carriers of Korea are

confronting.

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