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Beyond telecom service: (3) LG Telecom’s Taltongsin initiative

Posted: July 22nd, 2010, by Yunho Chung

In Korea, there are three MNOs; SKT, KT, LGT. They respectively possess 50.67%, 31.42%, and 17.91% of the telecom market (April, 2010) according to KCC (Korea Communications Commission). In this series of feature posts dealing with Korea’s three MNOs, I will provide an overview of SKT, KT, and LGT’s survival strategies in approaching Korea’s highly saturated telecom market, and how they seek to go beyond just providing telecommunication service.

LG Telecom’s Taltongsin initiative, “beyond telecommunication”

LG Telecom’s new growth initiative is called Taltongsin, meaning “Beyond Telecommunications.” This strategy aims to strengthen LGT’s core capability as a Telco and at the same time to increase the market pie by collaborating with other industries where LGT’s communication technologies will be able to offer value. It is different from a market expansion strategy in which LGT will enter into other markets to make profit and end up intensifying the market competition. LGT expects to create a new service genre by applying their ICT to the businesses of corporations and SMEs. LGT hopes to contribute to the welfare of Korean citizens through new services and technologies such as Smart Grid and u-City. Overall, LGT’s Taltongsin hopes to vitalize the ecosystem of the IT industry.

LGT’s survival strategy against SKT and KT

LG Group is Korea’s one of the biggest conglomerates operating their business mainly in electronics, telecom, chemical etc. LG Group used to have three different Telcos in its group, which were LGT, LG Dacom and LG Powercom. LGT is ranks 3rd amongst Korea’s three MNOs. LG Dacom provides local and international telephony services, while LG Powercom provides broadband services. These three Telcos in LG group were merged into one entity in January 2010 and began the new era of integrated LGT.

This month, integrated LGT changed its corporate name into LG U+. “U” means creating a new world where customers can enjoy communication technologies and services ubiquitously. “+” means offering more than the traditional telecom services to customers through its enhanced ubiquitous technology. Such a change in name also reveals LGT’s strong intention to stretch their customer base further onto enterprises such as ICT solution providers.

Korea’s telecommunication market, which had been segmented into fixed and mobile, was integrated into one in 2009. For example, KT acquired its mobile arm KTF. SKT acquired Hanaro Telecom and founded SK Broadband. LGT’s merge with LG Dacom and LG Powercom was just another follow up strategy against its bigger competitors. (LGT, as the smallest player, had always followed the market rules set by its bigger competitors.) Since last year, the B2B sector has risen as a new target market among the bigger Telcos, and thus LGT had to respond accordingly to this market change. External market environment, such as the saturated B2C market, was another factor that urged this B2B initiative, as in the other two Telco’s cases as well.

How LGT plans to carry out its Taltongsin initiative

Mr. Lee Sang-Chul, a former minister of Korea’s Ministry of Information Communications, was appointed as new CEO of the integrated LGT in January 2010. His first initiative had been “Taltongsin.” However, it has been moving on rather slowly for the last five months.

In May 2010, LGT announced its plan to raise Taltongsin funds which amounts to 15 billion KRW per year. This fund will let LGT invest in new technologies and acquire companies with high potential. Based on this, LGT will be able to maximize synergy in Taltongsin business areas. The main areas of interests include media, advertising, education, utility, healthcare, and etc.

LGT will select the target to invest in but the operation will be trusted to VC or LG Future Fund – LG group’s R&D fund. To do so, LGT established a dedicated team for this work and made an investment committee in the strategy group. They are in charge of the investment appraisal, execution and management.

What are the prospects for LGT’s Taltongsin initiative?

There are three phases in developing a B2B business; preparing, piloting, and penetrating. I believe LGT is still in the preparation stage while KT and SKT have moved further on to the penetrating and piloting stages. As described in the above, LGT’s Taltongsin initiative is yet to be fully developed. There are neither apparent trials nor achievements other than its funds.

However, the market’s expectation towards LGT’s Taltongsin initiative is quite high. LGT, as the smallest player, has often come up with very clever strategies for its survival. The company is talented at designing unique values that target specific segments of customers. With such strategies, LGT has always managed to go beyond the market order. Some examples of the company’s successful strategies include an FMS (Fixed-Mobile Substitute) service called Givun Zone, which was a strategy against KT’s fixed voice, a full browsing service with a very cheap price plan that made an impact on Korea’s mobile data services. Likewise, industry experts are expecting another surprise from LGT with its new Taltongsin strategy.

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