In the night, many Korean cars glow with LCD screen-light. Thanks to the local custom of not naming streets, vehicles are often equipped with GPS. Moreover,  seeing a bored car driver trapped in traffic jam watching a movie is  not uncommon in Seoul,  due  to  DMB-carried TV. But a new step to convergence has been done.

[ Third-party equipement : Computer with Wibro ability ]

 Hyundai and Kia issued a joint statement with KT  today announcing the launch of cars equipped natively with WiBro starting from 2012. Long-range and in-motion internet will enable high-quality movies and driver-tailored services such as traffic conditions, weather or emergency informations.

There is a battle outside and it is raging, for two Korean giants are struggling. KT & SKT threw all their strengths in the fight, downsizing investments and innovation. The recent interesting events concerning a hypothetic launch of iPhone are a part of this bigger picture.

[ iPhone’s deployment planning – Can you see Korea ? ]

“A penny is a penny and we need it”, Korean operators are in a tight spot, looking to keep their income to fuel the tussle. SK Telecom is the biggest Korean mobile operator with a 50.5% market share while KT, which merged KTF, has 32 %. The two giants are trying to retain customers while seducing competitor ‘ones in the saturated market caught in economic slowdown. Hence, companies cut network investment: on a year-to-year basis, KT reduced 60% down to KRW 621.9 billion, while marketing expenditure reached more than KRW 4 trillion.

Furthermore, a recent OECD report shows that annual Korean telcos customer spending are higher than OECD average (227$ > 171$) . Government and the Korean Communication Commission are aiming to lower prices, to suppress monthly basic fees and will maybe introduce MVNOs(mobile virtual network operators) to increase competition. Right now, every won is needed to maintain marketing pressure.This consideration weights heavily in the iPhone’s cold reception in Korea

Double-edged iPhone. A survey among smart phone users shows that more than 9 out of 10 are eager to buy an iPhone. As it comes from a tech-savvy portal with specific profile visitors, it doesn’t tell us that much about how successful iPhone will be in Korea. Anyway, telcos expect to secure at least 500 000 buyers and probably one million. But one of the main reasons Apple and Korean telcos cannot reach an agreement has to do with business model. Korean telcos do not want share any profits from communications service with Apple. In addition, Korean telcos are threatened by Apple’s business model like Appstore since Korean telcos have had full control for mobile contents.
The iPhone passed through restrictive technical norms, handset manufacturers lobby and now face half-hearted operators. SKT seems to be in a position to win iPhone exclusivity, with a release next month, but KT ‘s CFO also announced ambiguously two weeks ago:

“Apple iPhone will be in our smartphone line-up. [We expect that the] iPhone will help to expand the smartphone market and will contribute to increasing the ARPU”

Some jumped to conclusion and consider it is an official announcement leading to a launch both by SKT and KT, a first in iPhone exclusivity-only deployment history. However KT announced one week later customers with iPhone bought overseas will be allowed to subscribe its service, a violation of Korean regulations. SKT denounced a luring PR operation.

The strategy of KT is not clear. Did KT play a trick to force iPhone exclusivity negotiation to push SK telecom or to get maximum exposure for its own non-exclusive launch? iPhone is tangled in a complex tactic operation, involving large spending and market face-shaping. For the moment, customers yet have to wait and expect firm and precise releases.

KT announced voice mobile phone service will be launched in November using WiBro technology as carrier. Network installations and infrastructure are already initiated. The homegrown long range and in-motion standard will deserve Korean market at cheaper rates for customers and aims to demonstrate positive results to back up its losing-ground worldwide struggle against LTE standard, said KT.

I suggest the underlying truth may be different. This blog has already covered here the governmental walled-garden strategy and pressures over Korean companies to champion WIBRO despite their increasing reluctance.  Contrary to publicly expressed motivations, this move have to be understand in a long-term strategic perspective and have little to do with WIBRO success - or rather lack of success -  abroad. KT is indeed preparing the up-coming IT disruption : the mobile VoIP.

<!–[if !vml]–><!–[endif]–> According to Gartner - and my own experience as consultant -,  VoIP is the inevitable evolution of mobile phone market. The American firm estimates that 50% of mobile voice traffic will be under VoIP in 2019.  Only the companies providing such services will have opportunities to make comfortable benefits from the global mobile voice market, whose size is today 692.6 $ billions. The key factor is a wide 4G coverage, LTE or WIBRO whatever, reached around 2017. Once this condition meet mobile VoIP will full bloom, wrote Gartner analyst Tole Hart.

Until now, mobile network operators was really suspicious of VoIP. Terms of service for mobile data  exclude VoIP use, which displease most competition authorities, even pushing  the European Commission to consider regulation issuance.

Because with mobile VoIP will come new competitors, some of them very threatening. VoIP Players such as Skype, already the first operator in international communication with a 8% marketshare, can leverage valuable expertise. Powerful Internet giants may enter as well : Gartner predicts than more a third of mobile voice traffic will go through portals and social networks like Google, Facebook, Myspace or Yahoo.

A business saying goes : “If your core product can be cannibalized, better will be by you”.  VoIP is not only a technical issue, it’s a disruption in the business model. The value will shift from the call itself to its integration in an ecosystem.

The report was released in May and predicted a quick stance change from MNOs. As Korea is known to be a window to the future, we hope KT decision will give us a glimpse to this radically different future and we will follow this topic thoroughly.