Since the official release of the iPhone last year November 28th, with sole custody by KT, SKT and LGT has been very aware of the consequences Apple is going to bring to Korea’s telco industry. Reaching 100,000 in iPhone subscribers within the first month of its release(continued to 500,000 in 4 months), the iPhone has certainly been KT’s miracle drug who had only accumulated 20,000~30,000 for the past two years. However while KT has been quite laid back with its taste of victory, SKT(dominant in Korea with over 50% of mobile market shares) has been vigorously pursing strategies to stand up against the iPhone. LGT has its own strategies, but is happening to be lagging with a weak line up of new smartphones  just as KT is, without its bread winning iPhone.

KT
KT has been tasting the fruits of its, well, heavy “investment” for monopoly over the iPhone supply in Korea. However, recently they have also been facing a curb in number of smartphone models obtained from Samsung. It is no secret that Samsung has expressed its disregards towards the entry of iPhone into the Korea (of course we cannot simply draw an induction with these two parallels).
Moreover, though KT has been believed to be stepping ahead with release of other Wi-Fi-enabled smartphones in the market, it has only three smartphone line ups consisting of Nokia X6, LGE’s Android phone, Pantech.

LGT
LGT has not been so hot either. Though it has always ranked 3rd amongst the 3 telcos in Korea, its new ‘Integrative LGT’ project’s communication system has made it the incompatible to foreign manufactured smartphones. Like KT, its number of line ups has been limited to two, the Eclipse phone and Samsung’s Android phone.

SKT’s forthcoming smartphones are △ Samsung’s ‘Galaxy A’, ‘Galaxy S’ △ HTC’s ‘Designer’, ‘HD2′ △ Sony Ericsson’s ‘Xperia X10′ △ Motorola’s ‘droid’, ‘XT800W’ △ Pantech’s ‘Sirius’ △ Research In Motion’s (RIM)  ‘BlackBerry Bold 9700′ △ LG Electronics ‘SU950′, 10 species in total.

…

SKT
SKT on the other hand, has been on fire with its plans to release 10 kinds of new smartphone in the second quarter. This is astonishing compared to the 13 models it has released over the past 5 years. It is basing most its models on the Android OS, with it grand trophy phone, the Galaxy S (of which SKT has sole supply rights) releasing hopefully this June. Its high utility with acute telecommunication openness and portability, has given it high expectations to be most competitive against the iPhone in Korea. Its further announcement in April 14th to go all-out open WiFi is likely to bring an inevitable showdown with KT.

The arrival of iPhone has certainly made its waves in Korea’s telco market. However, there is certainly more yet to be seen of what will become of the three telcos – KT, LGT and SKT – of Korea.

Second left is Choi See-Jong, CEO of KCC (Korea Communication Commission)

and to his right is Andy Bird, Chairman of Walt Disney

Why did Andy Bird, Walt Disney’s chairman visit Seoul?
On May 11th, SKTelecom and Walt Disney completed signing of their joint venture company PP(Program Provider). The joint venture PP was made to establish Disney’s content broadcasting for Korea’s cable TV, IPTV, and satellite DMB, and also for subscriber based mobile phone VOD service. They are planning to launch two Walt Disney channels next year, and targeting the 3S (3screens) mobile phones, TV, and PCs. This will also mean the world’s first movie contents program provider for mobile phones.

Before, Disney had to retransmit their contents through local cable companies, but now they will be able to broadcast their contents directly. And with the broadcasting service experience and expertise of SKT, Disney’s contents are expected to be aired in a more Korean viewer-friendly method.

It has been revealed that SKT has the leading shares of 51% and Walt Disney has 49% of their joint venture company, and also planning to appoint the CEO form SKT.

They are certainly expecting to generate more shared profits as Disney fosters a more Korean suited content delivery, but there are also individual interests at hand.
Andy Bird has expressed their desire to strengthen Disney’s international competitiveness and business capacity through this joint venture.

Whereas, Choi See-Jong, CEO of KCC (Korea Communication Commission) indicated hopes that Walt Disney will support further overseas expansion of Korean broadcasting content.

SKT and Walt Disney have also stated that they are planning to further their cooperation in content development into games and other diverse fields. How will all this turn out? We will just have to wait and see. Nonetheless, the joining of hands between a world major studio and Korea’s largest telecommunication operator is surely going to make waves for the domestic media market.

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.