Categories

Newsletter archives

Archive for the 'Statistics' Category

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

Industry

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

Smart SOHO/SMB

  • 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



  • 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

Korean companies increase global marketshares

Monday, September 7th, 2009

In the global turmoil, Korean companies are on the road to fast recovery and seized this opportunity to increase marketshares.

IT exportations on recovery

At the end of last year, predictions was grim. IT exportations fell of almost 40% in January this year. However, in 8 months, the year to year basis tends to stabilize. The shrinkage was single digit in  August for the first time.

According to the Ministry of Knowledge Economy concerning the past month, IT exports fell 7.6 percent year on year to $10.6 billion, exceeding $10 billion for three consecutive months. With shipments of mobile phones, semiconductors and televisions dropping 17.9 percent to $2.28 billion, 7.2 percent to $2.88 billion and 8.6 percent to $440 million, respectively, exports were down across the board. Notably, shipments of display panels increased 7.7 percent to $2.55 billion. Exports to primary trading partners the United States, the European Union and Japan contracted 9.2 percent, 24.7 percent and 1.8 percent, respectively, but exports to China increased 3.8 percent.

Conquering martketshares

Despise the unfavorable overlook of this figures, Korean companies managed to conquer marketshares in an even-harder hit IT market. IDC firm reports that Samsung Electronics and LG Electronics combined marketshare of mobile handsets market went over 30% for the first time. They predated the marketshare of  others majors players, as the rest of Top-5 handsets manufacturers lost ground. Korean companies benefited from previous R&D and introduced many new models. But the main factor was a volatile won exchange rate, who plunged last year, as shown in the following graph.

[KRW/USD rate over 2 years]

 

Korean companies used this decisive advantage to compete on price, on which consumers focus more during economic crisis. Fueled with fresh incomes, companies are less impacted by cash scarcity and sustain comparatively more technology investments and marketing activities.

It will take time for competitors to catch-up : 2010 looks bright for Korean IT sector.

 

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