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