KTF hedges bets with range of next-gen offerings

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NEW YORK-KTF, South Korea’s second-largest mobile operator, has hedged its bets on a next-generation wireless strategy, with plans to launch or expand this year on cdma2000 1x EV-DO, W-CDMA and wireless local area network access technologies.

The carrier, formerly doing business as Korea Telecom Freetel, said 6 March it would start testing W-CDMA technology, the European third-generation (3G) standard, in April. Its goal is to launch this variation of next-generation mobile communications in Seoul and Pusan, the country’s two largest cities, by mid-year, and to sign 300,000 customers by year-end.

KTF has an even more ambitious target for expansion of its EV-DO customer base, which totaled about 150,000 as of late February, said Yung Do Hong, vice president and chief financial officer (CFO).

“We plan to expand our EV-DO business to about 1.5 million subscribers by the end of this year,” he said during a recent presentation at the Merrill Lynch & Company “Global Communications Investor Conference.”

“Last year, we had some problems with handsets, but they have been resolved now. Prices are coming down, and the cheapest (EV-DO) handset is now about US$290.”

Samsung and LG provide the EV-DO handsets. Some models have MPEG chips embedded; others are capable of multimedia messaging service.

So far, KTF is the only mobile operator in South Korea to offer consumers a bundled bill for EV-DO and WLAN use, he said.

“We have developed a combination of EV-DO and WLAN. We offer it with just one PDA (personal digital assistant), which costs about US$600, and we are trying to get that price down,” Yung said. “The prospects for fixed and mobile convergence are fairly bright.”

KTF commercially launched its EV-DO service last May under the brand name FIMM, which stands for First in Mobile Multimedia. FIMM’s high-speed data offerings include real-time television broadcasting from 10 channels, video on demand, video telephony and multi-messaging, which combines text, sound and still photos.

During the fourth quarter of 2002, monthly average revenue per user (ARPU) for FIMM subscribers totaled US$52, well above the US$34 average for all of KTF’s 10.23 million customers.

“Our goal with FIMM, as with mobile payments, is to capitalize on our first-mover advantage,” Yung said.

Last July, KTF launched its “K-merce” program, taking advantage of smart cards that work as credit cards and are embedded into the phones it sells. To date, Kookmin Bank and LG Card are participating in the program, which allows consumers to use their mobile phones as credit cards in stores.

KTF receives an activation commission plus a 0.3-percent commission on each charged purchase, while consumers get a 0.5-percent discount for each purchase they make using their cell phones’ smart cards.

“The prospects for this look quite promising. We get a commission from the credit-card companies. Customers get a benefit from the credit-card companies. There is good potential for revenue growth because, in the future, most consumers will want this,” Yung said.

“The standardization of technology for point-of-sale terminals is in progress. We are negotiating with our peers on standardization to heat up the market, and we expect standardization to be finished within a few years.”

Ultimately, KTF envisions its K-merce offering to comprise push-and-pull marketing, including advertisements, coupons and gift certificates; online and off-line shopping, including reservations and ticketing for lodging, leisure events and transportation; banking and securities trading; and micropayments.

“We intend to offer a complete solution for mobile commerce,” Yung said.

Moving up the value chain in the lives of consumers is an important part of KTF’s strategy in a country where penetration of mobile use was about 70 percent at year-end 2002.

“Some believe the market already is saturated, but it is low relative to countries like the U.K. (United Kingdom), Italy and Portugal, and we expect penetration in (South) Korea to reach 80 percent in 2010,” he said.

KTF benefits from the fact that only 3 percent of its subscribers are prepaid users, and nearly 70 percent of its customers are under age 40, Yung said. GW

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