The two lifelong rivals in South Korea’s mobile game genre, Com2uS and Gamevil, are each propelling different strategies for the global mobile game market.
The difference in strategies comes from their contradictory approaches to the recent smartphone boom in Korea and worldwide. Com2uS, the number one mobile game developer in the market, seeks to target the global open market, such as Apple’s App Store; As a part of its strategy, Com2uS plans to develop and release smartphone-based games first, and then to publish them to the feature phone market.

On the other hand, Gamevil is taking a rather different path. Its main focus will be on the feature phones, as it had been in the past, and only those games that were successful in the domestic mobile market will be selected to enter the global market.

(Zenonia, one of Gamevil’s action RPG)

It seems, though, that Gamevil’s choice had been wiser. In the second quarter, Gamevil, who had always been in second place next to Com2uS, surpassed the number one runner both in sales profit and net profit by a large margin. In addition, the Guardian, UK’s leading daily newspaper, recently mentioned Gamevil in its article, Ten essential Google Android games. One of Gamevil’s magnum opuses, Zenonia was introduced in the article as a popular mobile game in the Android market, which boasts of “An amazingly rich and detailed RPG, with loads of weapons, spells and quests, and some truly lovely visuals” according to the Guardian.

Meanwhile, the founder and CEO of Com2uS, Ji Young Park was recently chosen (for the second consecutive time) as one of the top 50 female CEOs in the world by UK’s mobile content monthly magazine, ME . Here’s what ME wrote about Ji Young Park. (source: Mobile Entertainment)

“Park’s passion and ideas have made Com2uS number one in Korea, and a growing presence outside it. The company is well-known for its innovation in both casual and massively muliplayer gaming.”

Overall, an intensified competition is expected to take place among the two rivals as most of their major title games are scheduled for release in the latter half of this year. Let’s wait and see who takes the number one place in Korea’s mobile game market.

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.

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