Several events have taken place since we uploaded our last post about Korea Game Watch, our new business branch for Korean online games. The first of all is G-Star 2010, the largest game exhibition and trade show in Korea. We were there to meet some small, mid-sized game studios and foreign publishers interested in Korean games. Overall, G-Star 2010 was a big success, drawing over 280,000 visitors from all over the world – that is 40,000 people more than last year’s G-Star, a 9% increase. In addition, according to KOCCA (Korea Creative Contents Agency), a total of 166 deals were secured in this year’s show, and the total amount adds up to USD 198 million, exceeding last year’s record of USD 28 million by a large margin. Here are some photos of G-Star 2010 taken at the B2B fair.

A long line of booths in the B2B area; In this year’s G-Star, 316 game-related businesses participated from 22 different counties.

 KOCCA also opened up a booth of its own in order to promote and provide support for games from small and mid-sized studios in Korea. For your information, the booth is named “Global Game Herb Center, a Joint Information Center”

More pictures and information regarding our trip to G-Star 2010 can be found here on our Korea Game Watch site:

1)      G-Star 2010 ends in record-breaking success

2)      G-Star’s Big Fours – Blade & Soul, TERA, ArcheAge, and Diablo 3

Another big event was Korea Game Watch’s very first seminar, “Strategies for Korean Online Games Entering Europe” held on November 23^rd at Seoul Partners House. The seminar was hosted in joint with ICO Partners (CEO: Thomas Bidaux), our UK-based partner consultancy that specializes in arranging European partnerships for online gaming business. The seminar invited Korea-based game studios and related business agencies to offer insights and guidelines on entering the European online game market, an untapped market for many online game developers in Korea.

The three-hour long seminar consisted mainly of analyses of the European market and the market’s characteristics. There were also case studies of Korean online games that became successful role models in Europe and those that failed to appeal to the European audience. Overall, the seminar ended with fruitful results and spurred up KGW’s motivation for more research and activity. Korea Game Watch also managed to receive much press attention as many game webzine reporters and newspaper journalists attended the seminar as well. Here is a link to our post on Korea Game Watch that recapitulates the seminar: Reflecting on Korea Game Watch’s very first seminar. More information on ICO Partners is also available on SlideShare: ICO Partners: Building Your Business in Europe.

Korea Telecom announced yesterday that it is opening up its network to MVNOs (Mobile Virtual Network Operators) and launching MVNO services for the first time in Korea. KT has partnered with “Entaz” (http://www.entaz.com), a mobile contents provider, and with “Free Telecom” and “Evergreen Mobile,” both of which are prepaid service providers. KT will open its mobile network to these selected MVNOs so that they can utilize KT’s network infrastructure to offer inexpensive data and voice services, especially to consumers within a niche market.

(source: JoongAng Daily)

Entaz, Free Telecom, and Evergreen Mobile

Entaz has a mobile portal service called “Free Mobile Town” that provides various contents including mobile game, cartoon, photobook, and ebook services. As Entaz will be taking advantage of KT’s low wholesale rates for data service, consumers will be able to access “Free Mobile Town” contents with no charge for mobile data service itself. While Entaz is utilizing KT’s network for data usage service, the other two are using the network for a prepaid voice call service; “Free Telecom” and “Ever Green Mobile” are targeting foreigners or short-term users, to whom they will offer their services at a low rate thanks to KT’s MVNO policies that aim to create a mobile ecosystem.

The first MVNO service in Korea?

It is only recently (March, 2010) that the Korean government passed a bill allowing the leasing of mobile networks, or MVNO business in the country. Previously, MVNOs were not allowed, and the Korean telecom market was fully dominated by the three MNOs, creating a huge market barrier for new entrants. The advent of MVNO companies is expected to work for the benefit of consumers by driving accelerated price competition into the market. By September 23rd, KCC (Korea Communications Commission) will prepare a complete set of guidelines and regulations for MVNO services. Once the guidelines are out, many changes are bound to take place as SKT, currently holding over a half of the market share, will be legally obliged to open its network, and as other companies, such as Onse Telecom and KCT (Korea Cable Telecom: a consortium of seven cable operators providing VoIP services throughout Korea) have demonstrated their willingness to start a MVNO business.

A fourth MNO in Korea

With KT launching its first MVNO services, which are not yet complete MNOs themselves in that they only offer either data usage service or voice call service, the idea of a fourth MNO in Korea seems to be gradually turning into reality. Soon, mobile phone users in Korea will have more options to choose from, compared to when they had only three choices: SK Telecom, KT, or LG U+. In addition, the advent of KMI (Korea Mobile Internet), a MNO that will be based on mobile WiMAX network and one that will generate many other MVNOS there forth, is imminent as well. (more about KMI at an upcoming entry) It will be interesting to see how such factors will play out in Korea’s telecom market. Meanwhile, let’s wait to see a myriad number of MVNOs rolling out starting from next year.

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.

(Olleh is Korea Telecom’s new slogan, which is ‘hello’ spelled backwards)

Korea Telecom’s S.M.ART Initiative

“KT is no longer a company which sells only bandwidth. Instead, we now sell customized services that combine our bandwidth, network and management” said Mr. Lee Sang-Hoon, President of KT’s B2B Business Group at the interview with Korea’s leading IT newspaper, ET News in March 2010.

In January 2010, Dr. Lee Suk-Chae, Chairman of KT, announced its new growth strategy called S.M.ART (Save cost, Maximize profit ART). With S.M.ART, KT aims to enhance the competitiveness of Korea’s traditional industries such as manufacturing and finance by improving their efficiency and productivity through KT’s diverse ICT solutions. Based on S.M.ART, KT targets to achieve 5 trillion KRW in B2B sales by 2012. KT’s initial goal is to increase its B2B sales by 30 billion KRW in 2010 compared to 2009.

Within the S.M.ART strategy, KT has focused on six areas, which are Smart Enterprise, Smart SOHO/SMB (Small Medium Businesses), Smart Government, Smart Building, Smart Zone, and Smart Green. They cover an extensive range of targets, from conglomerates to SMEs (Small and Medium-sized Enterprises) in various sectors, such as Hyundai Heavy Industry, Ministry of Labor, and many other smaller companies.

History of KT

KT is Korea’s biggest Telco with annual sales of approximately 16 trillion KRW. KT dominates the fixed line sector with 90% stake in fixed telephony segment and 45% in broadband. KT is also Korea’s second best MNO with market share of nearly 33%.

KT was founded in 1981 as a spin-off from the Ministry of Communications. It then became a state-owned company in 1997 and later was privatized in 2002. By acquiring KTF, its wireless arm in 2009, KT became an integrated fixed-mobile network operator with the most comprehensive network portfolio including WCDMA, WiBro, and WiFi.

However, even though KT acquired KTF in 2009, by that time, the wireless market had already fully matured in addition to the fixed telephony market which had long been saturated since the 1990s. In response to the saturated landline market, KT had turned its eyes to the broadband market in the 90s and thus could manage to achieve continuous growth. However, the broadband market soon was faced with market saturation as well. At that time, Korea’s IT usage level had reached that of developed countries, but this applied only to households and large companies, not SMEs.

In this context and as a part of KT’s search for a new growth area, KT’s Bizmeka was launched in 2001. KT set its vision as a ‘Value Network Company’ and tried to transform its corporate identity from a network provider to a solution provider. Bizmeka aimed to overcome the digital divide and to improve the efficiency of SMEs. Bizmeka, which included various business solutions such as groupware, virtual hard drives, and security services, was KT’s attempt to penetrate Korea’s untapped B2B market. KT Bizmeka never made a profit, but this year KT brought an upgraded version of the B2B business concept, which is S.M.ART.

How has KT prepared itself for S.M.ART?

Unlike Bizmeka, KT’s new growth strategy, S.M.ART has been finely tuned to the B2B market, with different rationales. To begin with, KT now has more resources to serve enterprise customers than before. In other words, KT has the infrastructure to support their customers 24/7 no matter where their customers are. In addition, KT is equipped with the so called 3W network – WCDMA, WiBro, and WiFi – as well as broadband, satellite and fixed lines. Its WiBro and WiFi coverage especially gives KT a strong competitive edge over its competitors; in fact, it seems difficult to design a valuable business solution for an enterprise without mobile networks now. Furthermore, KT has better market knowledge than before as they have learned from their past trials and errors.

In order to execute the S.M.ART 6 plan, KT did some organizational innovations. KT created a GTM (Go To Market) team consisting of 30 specialists. Their role is to uncover unseen and overlooked IT demands from business customers. KT also established a FIC (Fast Incubation Center). FIC not only develops and launches new services but also operates the Smart Open Forum. FIC cooperates with SMEs and startups through the forum to identify application needs for different industries and functions. KT also acquires the capabilities it lacks from its external partners.  (Case Studies: Refer to Attachment 1 below the article)

What are the prospects for KT’s S.M.ART strategy?

The B2B segment in Korea’s telecom market has been a kind of sanctuary until now. For the last ten years, Korean Telcos have been insisting on creating a B2B market. But their initiatives have ended in a mere gesture and never made any significant success. However, S.M.ART initiative is different. The prospects seem bright for KT. To begin with, KT’s timing for entering the B2B market is very appropriate. In the supply side, KT is now capable of providing more values through 3W networks compared to what it previously could offer through fixed telephone lines only. In the demand side, Korea’s manufacturers are facing fierce global competition with emerging players such as China, and this trend has urged them to improve their productivity using ICT infrastructure. However, more than anything else, the chairman of KT is showing strong commitment to S.M.ART, and it is one thing that can certainly make KT’s future brighter.

Attachment 1: KT’s SMART Strategies Practices by Industries