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Beyond telecom service: (2) KT’s S.M.ART Initiative

Tuesday, July 20th, 2010

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 KT

(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


SMART Practices

Smart Enterprise

  • IT Infra Outsourcing: orders of KRW 2000 billion in 2009 from Dongyang Group
  • Mobile office: In process of providing smartphones to 130 firms, such as Seoul Metropolitan Rapid Transit Corporation and Kolon Group
  • Smart Factory: In process of optimizing the production site processes through IT solutions for 5 companies, including Hyundai Heavy Industries


  • For S / W developers in Seoul Guro Digital Complex, if they work with KT Smart Biz instead of using different solutions for each of their tax accounting, personnel payroll, and insurances, they can both reduce cost (70%) and management support staff (50%)

Smart Government

  • Seoul City: Enhancing operating efficiency by using individual CCTVs for crime prevention, and monitoring garbage disposal, illegal parking and rainwater pumping stations through an integrated control center
  • Department of Labor: Promoting citizen convenience by providing 82 real-time visual information services (policy information, employment information, etc.) to visitors of the National Employment Service Center
  • Sunchon Bay Ecological Environment Management System: Transferring to portable terminals a real-time detection and ecological information on acidity, temperature, oxygen level, etc through an environment monitoring system

Smart Building

  • Star city: Providing an integrative car parking and energy control using WiBro to reduce management cost
  • VIP service for corporate customers: Starting August/September, adding VIP services such as monitoring of electrical facilities for 200 customers around public institutions and large buildings of city A

Smart Zone

  • Digital Signage: 2.6 million displays providing lifestyle info, advertising, and etc. throughout roads, buildings, universities, subways, and airports across the country
  • Paprika Farm: Improvement of credibility for overseas customers (Joint with Gyeongnam Trading)
  • Mushroom Farm: Notice displayed on mobile phones when changes are detected for critical elements temperature, humidity, or carbon dioxide concentrations, allowing farmers to easily manage their mushroom farms and cultivate them more conveniently and efficiently; furthermore, the provision of the past DB, has allowed scientific farming to be achieved (currently became an essential service to more than 130 farmers)

Smart Green

  • Green IDC (Internet Data Center): Green IDC, with DC power applied, will be established in 3 sites including KT Bundang and Yeongdong area IDC as model constructions that enhance the efficiency of power usage
  • Video Conferencing: By providing video conferencing services to over 300 companies, CO2 emissions reductions can be achieved through reduced needs for transportation between offices for meetings

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Beyond telecom service: (1) SK Telecom’s IPE Initiative

Thursday, July 15th, 2010

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.

SKT logo

SK Telecom’s IPE Initiative

“SKT’s breakthrough strategy for highly saturated telecom market is IPE (Industrial Productivity Enhancement). We hope to be a ‘Global ICT Leader” by achieving 20 Trillion KRW of IPE sales by 2020, at least 50% of which will be from global business” said Mr. Chung Man-Won, the CEO of SKT, at a Press Conference in Oct. 2009

As the name itself suggests, SKT’s brand-new IPE strategy aims to enhance the productivity of companies in other industries by utilizing SKT’s advanced ICT solutions. SKT’s new growth strategy IPE is crossing its telecom market boundaries. Yet, this does not necessarily mean that SKT will actually penetrate into other markets and compete with their incumbent players. Instead, SKT will enter into other markets and help incumbent players to run their business better. It is totally different dimension of initiative from SKT’s former convergence strategy that aimed at providing services such as mobile TV, mobile banking and mobile music.

Since the inauguration of Mr. Chung Man-Won in January 2009, he has been fully committed to pursuing IPE.

IPE – SKT’s survival strategy

IPE is SKT’s B2B market strategy targeting various enterprise customers in Korea. SKT is Korea’s oldest and largest MNO with more than half of the market share. SKT is a major subsidiary of the SK group, one of the biggest conglomerates in Korea (such as Samsung, LG, etc). By acquiring Hanaro Telecom, Korea’s once 2nd ranked broadband player, in January 2008, SKT became Korea’s leading integrated fixed/mobile network operator.

In the strategic context of IPE, SKT serves customers from various enterprises. IPE’s core target sectors include Retail, Logistics, Financial, Education, Healthcare, Manufacturing, Construction and SME. SKT is cooperating with POSCO(Steel Manufacturing), Chungdam Learning (English Education), Dongbu Group (Finance, Construction, Logistics, etc) and so on.

SKT is a highly profitable company with a 34.8% EBITA margin as of 2009. SKT also leads Korea’s wireless market with more than half of its market share. SKT’s ARPU has also reached 42,698 KRW as of 2009 4Q, which is approximately 37% higher than its follow up competitor, KT. However, SKT needs to grow continuously and it is difficult to achieve such a target by simply repeating their past strategies for the following reasons. First of all, Korea’s wireless market as a whole is highly saturated since the penetration rate already exceeds 100% as of 2009 4Q. In addition, SKT could not increase its market share in wireless due to government regulations. Keeping in mind the fact that SKT has focused only on B2C market so far, SKT opts for B2B market as its next target with its IPE strategy.

Number of subscribers/Penetration Rate

09. 2Q

09. 3Q

09. 4Q


Subscribers (thousands)





Penetration Rate (%)





For who?

In December 2009, SKT signed a MoU(Memorandum of Understanding) with Chungdam Learning, Korea’s leader in English education services. SKT aims to provide SLS (Smart Learning Service) by developing a u-Learning Platform, Learning Management System and customized hand devices. Its first output called ‘English Bean’ ( was launched in January 2010, which focuses on practicing verbal English through mobile and online study platforms.

In addition, SKT will collaborate with POSCO (Korea’s global leader in steel manufacturing) to construct a Smart Factory. In the next 4 years, current landline phones will be replaced by wireless and the smartphone based ‘Mobile Office’ which includes e-mail, name card, e-signature, schedule, bulletin, etc., enabling workers to work at multiple locations ubiquitously. The smart factory solution is expected to bring positive effects on the overall efficiency in logistics, equipment, safety, and energy savings for POSCO.

The Task Force team for IPE was formed in mid-2009 and executed an in-depth analysis of the market including about 300 interviews with experts from a range of industries. The IPE business group was formed this year to diversify its business models.

What will be the future of IPE strategies by SKT?

A few days ago, SKT signed a MoU with Telkom in Indonesia to establish a JV (Joint Venture) for building DCEH (Digital Contents Exchange Hub). DCEH is the hub for diverse digital contents such as music, game, and video for customers, music contents providers, and network operators. SKT will be in charge of the platform building, service operation, and contents sourcing. Overall, SKT’s IPE in Indonesia will focus on automotive, healthcare, and education.

SKT’s IPE plan aims to grow together with its enterprise customers in other industries by providing them SKT’s advanced ICT solutions. While enterprise customers themselves will benefit from improved productivity, SKT will also acquire great advantages for their global business. As a matter of fact, SKT has barely achieved success in their global business so far. It was mainly due to failure in understanding the local customers. While B2C market customers are more complex and difficult to understand due to cultural and emotional factors, B2B market customers are rather straightforward and their needs are more standardized. In addition, SKT will have greater opportunities to accumulate strong track records by providing their solutions to Korea’s manufacturers, many of who are global leaders in their fields, such as POSCO, Hyundai Motors, and so on.

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Credit card in mobile, a new trend in finance

Monday, July 12th, 2010

On March 26th, HanaSK Card, the JV of Hana Card and SKT, launched its first service called Touch 7. Touch 7 is a mobile credit card consisting of a mobile card loaded on a 3G USIM. It also has its plastic card version. After downloading the HanaSK VM through SMS, users can pay by a simple touch of their mobile phones at Touch 7’s member retailers. At non-member retailers, they can still pay by swiping the plastic card.

HanaSK Mobile Credit Card

SKT is Korea’s leading MNO with over 50% of the market share. Hana Card is a subsidiary of Hana Financial Group which is Korea’s 4th ranking financial holding company by total asset as of 2009. Hana Card itself was amongst the lowest ranking credit card issuers in Korea with only 4% of the total market share. These two companies joined hands to create HanaSK Card last year and to provide mobile integrated payment services.

In early 2000, SKT launched a mobile finance service called Moneta, but it ended in failure. One of the reasons included difficulties in cooperating with credit cards companies. They felt threatened by SKT’s entry into the credit card market.

In 2009, SKT began its negotiation with Hana Financial Group in regard to acquiring or investing in Hana Card. The negotiation had been delayed for seven months until reaching an agreement at the end of 2009. In early 2010, HanaSK Card was established and it launched its first service in March.

A brief timeline
2009. 12: Investment agreement
After seven months of a negotiation marathon, SKT decided to invest in Hana Card. SKT paid KRW 400 billion to acquire 49% of shares and became the second largest shareholder. Hana Financial Group holds 51% and management control.

2010. 2: Inauguration of HanaSK Card
HanaSK Card was established to shape the credit card market in new ways by combining ICT and financial services. It aimed to provide smarter card services such as mobile credit cards, integrated memberships, mobile coupons, and etc.

2010. 3: Touch 7 Rollout
Touch 7 gives discount benefits to the card holders at various places such as Home Plus (Supermarket chain), Family Mart (Convenience store), and SK gas stations. Additionally, customers can get discounts for their mobile phone bills up to USD 12 per month. Other benefits include those of financial services such as ATM fee waivers, exchange commission discounts, and loan interest discounts in HanaBank. Touch 7 has mobile coupon functions and is replacing Korea’s major membership cards such as T-Membership (SKT membership card) and OK Cashbag (Korea’s biggest royalty program).

2010. 4: Nexen Heroes
HanaSK Card began to cooperate with Nexen Heroes (one of Korea’s professional baseball teams). Heroes’ home game buyers can get approximately USD 2 discounts for every game. 0.1% of each card holder’s transaction will be contributed to the team’s fund.

What’s behind the rollout of HanaSK Card services?
First of all, high 3G penetration in Korea provides better environment for mobile finance services due to the USIM chips, which can include not only subscriber information but also other applications. In fact, Korea’s 2G standard was CDMA which did not require a SIM card. And thus MNOs (or financial institutions) had to issue a separate mobile finance chip to offer mobile finance services and that required significant investments. However, Korea adopted WCDMA as its 3G standard, and the migration was very fast and successful. According to an OECD report in 2009, Korea’s 3G migration is almost 100%, followed by Japan’s 82%. It means that now almost every Korean has a USIM loaded mobile phone, and that mobile finance services will be able to be deployed easier than before.

In addition, synergy can be created from the cooperation of these two companies. From Hana Card’s point of view, SKT’s subscriber base is very attractive. While the population of South Korea is less than 50 million, SKT has 25 million subscribers. And OK Cashbag, Korea’s biggest loyalty market program of SK group, has 30 million subscribers. SKT, on the other hand, knows from past experiences that cooperation with credit card companies is the key to success in the mobile finance sector.

While it may be too soon to judge the prospects of HanaSK Card and its Touch 7 services, HanaSK Card continues to charge forward on its way to mobile finance with its recent launch of Touch S Card earlier this month, which targets smartphone users, especially Galaxy S users. HanaSK Card’s goal is to be placed amongst the top three credit card companies in Korea within five years. The company also aims to acquire 10 million subscribers and to acquire 12% of the market share.

Overall, there are some positive signs for the outlook of mobile finance services in Korea. In addition to HanaSK Card, Shinhan Card and Woori Card also launched mobile finance services. They are respectively subsidiaries of Shinhan Financial Group and Woori Financial Group. In addition, KT also bought 14.9% of BC Card’s share, becoming the third largest shareholder. Such intensifying competition is likely to bring a wave that will put the mobile finance service into full bloom.

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