Categories

Newsletter archives

Archive for the 'New Stuff' Category

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

Thursday, July 22nd, 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.

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.

  • Share/Bookmark

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

10.1Q

Subscribers (thousands)

47,071

47,660

47,944

48,776

Penetration Rate (%)

96.7

97.8

98.4

100.4

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’ (www.englishbean.co.kr) 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.

  • Share/Bookmark

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.



  • Share/Bookmark
me like problem... Purchase african mango extract african mango diet