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iPhone in Korea

Posted: August 18th, 2009, by admin

There is a battle outside and it is raging, for two Korean giants are struggling. KT & SKT threw all their strengths in the fight, downsizing investments and innovation. The recent interesting events concerning a hypothetic launch of iPhone are a part of this bigger picture.

[ iPhone’s deployment planning – Can you see Korea ? ]

 

“A penny is a penny and we need it”, Korean operators are in a tight spot, looking to keep their income to fuel the tussle. SK Telecom is the biggest Korean mobile operator with a 50.5% market share while KT, which merged KTF, has 32 %. The two giants are trying to retain customers while seducing competitor ‘ones in the saturated market caught in economic slowdown. Hence, companies cut network investment: on a year-to-year basis, KT reduced 60% down to KRW 621.9 billion, while marketing expenditure reached more than KRW 4 trillion.

Furthermore, a recent OECD report shows that annual Korean telcos customer spending are higher than OECD average (227$ > 171$) . Government and the Korean Communication Commission are aiming to lower prices, to suppress monthly basic fees and will maybe introduce MVNOs(mobile virtual network operators) to increase competition. Right now, every won is needed to maintain marketing pressure.This consideration weights heavily in the iPhone’s cold reception in Korea

Double-edged iPhone. A survey among smart phone users shows that more than 9 out of 10 are eager to buy an iPhone. As it comes from a tech-savvy portal with specific profile visitors, it doesn’t tell us that much about how successful iPhone will be in Korea. Anyway, telcos expect to secure at least 500 000 buyers and probably one million. But one of the main reasons Apple and Korean telcos cannot reach an agreement has to do with business model. Korean telcos do not want share any profits from communications service with Apple. In addition, Korean telcos are threatened by Apple’s business model like Appstore since Korean telcos have had full control for mobile contents.
The iPhone passed through restrictive technical norms, handset manufacturers lobby and now face half-hearted operators. SKT seems to be in a position to win iPhone exclusivity, with a release next month, but KT ‘s CFO also announced ambiguously two weeks ago:

“Apple iPhone will be in our smartphone line-up. [We expect that the] iPhone will help to expand the smartphone market and will contribute to increasing the ARPU”

Some jumped to conclusion and consider it is an official announcement leading to a launch both by SKT and KT, a first in iPhone exclusivity-only deployment history. However KT announced one week later customers with iPhone bought overseas will be allowed to subscribe its service, a violation of Korean regulations. SKT denounced a luring PR operation.

The strategy of KT is not clear. Did KT play a trick to force iPhone exclusivity negotiation to push SK telecom or to get maximum exposure for its own non-exclusive launch? iPhone is tangled in a complex tactic operation, involving large spending and market face-shaping. For the moment, customers yet have to wait and expect firm and precise releases.

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