NEW YORK—A new alliance with Korea Digital Satellite Broadcasting is part of an overall plan for LG Telecom to compete successfully with South Korea’s two larger wireless operators, said Yong Nam, president and chief executive officer.
In late April, Martin Lee, chief financial officer, told attendees of an investor-relations meeting that LG expected to sign by early May a final contract with the satellite broadcasting company to converge their wireless and satellite technologies, AFX News reported.
“Korea Satellite’s (digital TV) set-top boxes use our networks, and we get a subscription fee for each of their users,” Nam said 21 May at the Lehman Brothers “Global Wireless Conference.”
LG Telecom also recently introduced a wireless credit card in a pilot program with 3,000 retail outlets in suburban Seoul.
“So far ring tones, character downloads and e-mail have been the services that consumers demand and will pay for. But low-cost cellular broadcasting using multimedia push technology can provide the wireless wallet to replace credit cards, to let people download music and play the lottery without standing in line to buy tickets,” he said.
“Since April 2000, wireless investors have been somewhat skeptical of this opportunity, to put it mildly. If we can offer this for US$2.40 per month, people will say why not have it? We need 450,000 subscribers to break even. We believe that wireless credit cards could be a US$1.7 billion opportunity by 2005 and buying lottery tickets could grow to US$250 million by 2005.”
LG also sees telemetry, telematics and location-based services as ways to drive both consumer and corporate wireless revenues, Nam said.
The Korean carrier also is testing data-only 1xRTT CDMA technology “with pilot programs in highly trafficked areas … and we are testing some packet-based billing,” he said.
“Can this create meaningfully different applications and incremental value to justify investments, and if so, how fast can we catch up? We will decide pretty soon whether to go to EV-DO (data only) or EV-DV (data and voice).”
Deployment of the EV-DO alternative would take about four to six months, he said.
“SK Telecom is advertising EV-DO, but it’s not available because the handsets are not available. SK will probably try it out with a limited number of handsets at the World Cup” soccer games. (See related story under “Features.”)
Overall, Nam expressed satisfaction with the performance of LG Telecom, whose stock he said had appreciated in value by 126 percent between the beginning of 2001 and 17 May, 2002. LG Telecom closed 2001 with 4.3 million subscribers, of whom 3.2 million are wireless data users. In 2000, it counted 3.9 million subscribers, of whom 1.9 million were wireless data users.
“The Korean wireless market is in a transitional phase from a mature voice market to one driven by demand for data services across platforms and devices, and I hope our experience helps other operators (in other countries) capitalize on the future of wireless,” Nam said.
Although Japan has gotten the lion’s share of attention for wireless market penetration and wireless data customers, South Korea actually leads in these areas by some benchmarks, the LG chief executive said. Japan has approximately 67.54 million wireless subscribers, with an overall penetration rate of just more than 53 percent. Of those customers, about 49.44 million, or 73 percent, have Web access.
South Korea has approximately 29.23 million wireless customers, for a penetration rate of about 62 percent. Of these, almost 24 million, or 82 percent, have Web access.
“The reductions in handset subsidies have slowed down the market in Korea, but as soon as consumers realize there will be no further subsidy, they will begin to buy again, probably in the next two or three months,” Nam said.
“With (nearly) 63-percent market penetration, providing subsidies doesn’t provide incremental revenues to carriers.”
LG Telecom derives 11 percent of average revenue per user from data compared with NTT DoCoMo’s 16- percent data ARPU. However, LG obtains more than 14 percent of ARPU from those wireless data users whose phones have color screens. Its goal is to obtain 40 percent of ARPU from wireless data by the end of 2005.
“We offered an affordable handset with a color screen, and the color screen is a key driver of data use,” Nam said.
“In Japan, data seems to cannibalize voice, but that’s not so in Korea. Our wireless data users generate US$29 per month in voice revenues, compared to US$21 from our voice customers.” GW
