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South Korea is an incredibly dynamic information, communication and technology society, with penetration of both broadband and 3G mobile technologies among the highest in the world.
2008 will be the year that telecoms operators experience head-to-head competition under new rules, due to changes in telecoms regulation. In 2007, the regulator announced a reformed regulation framework, which implies a shift of weight from retail and ex ante regulation to wholesale and ex post regulation. Several measures, such as deregulation of bundled services, introduction of number portability for VoIP and termination of handset subsidy banning, have been or will be implemented in 2008. In addition, a long-delayed realtime IPTV service is likely to be launched later in 2008, as a result of regulatory settlement in December 2007. More importantly, in the new government the MIC will be abolished by transferring its functions into several government departments. Despite the concerns about diminished centralized ICT leadership, we believe this will bring new opportunities, by enabling ICT to be truly converged with diverse industries such as broadcasting and finance.
In the last couple of years, Korean service providers launched new wireless services such as Digital Multimedia Broadcasting (DMB), WiBro (Wireless Broadband) and HSDPA. Following these earlier investments in network deployments, in 2008 the service providers will focus on sophisticated service offerings and customer care, as market saturation increases the importance of customer retention. The telecoms business paradigm is moving from technology to marketing.
Key strategic issues:
- Increased pressure for price cuts will be the key challenge for both fixed and mobile service operators. In particular, LGT is likely to trigger price reductions in mobile data services with the launch of its EV-DO Rev A service. In addition, active introduction of bundling products and IP service will be another driver of price reductions. What will be the extent and speed of these price cuts?
- To date, operators have focused on acquisition, and their marketing costs skyrocketed in 2007. However, in 2008 customer retention will be the priority for operators. What kind of retention strategies will be implemented and how effective will they be?
- IP-based services such as IPTV or VoIP will gain momentum in the market. The regulatory environment is more favorable than before, and techno-savvy domestic consumers will adopt IP services if they deliver clear value, either with price competitiveness or with better quality. What will be the adoption level of these services and what impact will they have on the existing legacy services?
- Increasing demand for bundled offerings will cause changes in operators' corporate governance structures. Mergers and acquisitions will be a key topic for 2008.
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