In conjunction with the global economic environment, the telecommunications market in Korea is also expected to become more brisk in comparison to the previous year. Along with a deregulatory governmental mood, the competition between telecom players will be even fiercer.

The first commercial LTE (Long Term Evolution) commercial service began in Sweden last year and is expected to increase LTE service all around the world. Korean telecom operators have also shown more detailed blueprints for 4G technologies with LTE and WiBro(Wireless Broadband).

Sparked off by Apple’s iPhone, the domestic smartphone market will quadruple over last year, and stir up the release of new models, especially Android platform-based smartphones. By expanding the smartphone market, mobile Internet usage is set to explode this year.

# Merger Continuing

To increase benefits from economy of scale rather than new investments and expansion, Korean telecom companies are seeking to share the roof. While telecom companies are struggling to stay alive in a saturating market, consolidation efforts may further work to prohibit other companies from entering the telecom market.

LG Group’s three communications companies, LG Telecom, LG Dacom, and LG Powercom, will merge as LG Telecom this month to compete with larger rivals KT and SK Telecom.

LG Telecom is the smallest of the country’s three mobile operators, with LG Dacom providing fixed-line and Internet telephony and IPTV (Internet protocol television) services. LG Powercom is the third-largest broadband Internet service provider behind KT and SK Broadband.

LG Group expects the merger to enable LG’s telecom companies to improve profitability by gaining business synergy and efficiencies, even though the merged entity is still the smallest in the Korean market.

With the merger of LG telecom companies and the merger of KT, the country’s biggest telephone company and Internet service provider and its wireless unit KTF in June 2009, the number of telecom operators in Korea will go from seven to four and there will be three if SK Telecom absorbs its affiliate SK Broadband.

Although SK Telecom, the No. 1 mobile operator, denied a plan to absorb its fixed-line telephony and broadband Internet service provider, SK Broadband. Industry watchers, however, think the merger of the SK telecom companies could be completed sometime during this year.

# Convergence Era: KT FMC vs. SK Telecom FMS

With the launching of KT’s fixed-mobile convergence (FMC) service, called “Qook & Show,” in October 2009, Korean telecom operators are rushing to introduce similar services to absorb new market demand.

The Qook & Show is a kind of mobile VoIP (Voice over Internet Protocol). The FMC service allows users to switch between fixed-lines and mobile networks using their mobile phone. With Wi-Fi-enabled handsets, KT customers are able to use fixed-line networks when making calls at home or in the office, while accessing wireless networks on the move.

Thanks to a low VoIP charge, Qook & Show users are able to use voice call via mobile phone at lower charges than conventional wireless service. But the main drawback of the FMC service is a requirement for a special mobile phone supporting Qook & Show. Currently KT has introduced three kinds of mobile phones that support the FMC service, including Show Omina by Samsung Electronics.

To compete with KT’s FMC service, SK Telecom, the leading mobile operator, launched a FMS (Fixed-Mobile Substitution) service, called “T-Zone,” in November 2009. T-Zone service allows users to designate an area as a discount zone, for example home or office, and calls made from within the specific area are charged at the same rates as fixed-line VoIP services.

Different from KT’s Qook & Show, SK Telecom’s T-Zone is a kind of new payment plan. The main benefit of SK Telecom’s FMS over KT’s FMC is that users are able to use the service with their current their mobile phone.

However, SK Telecom’s FMS is just offering discounted voice calls while KT aims to seize an emerging mobile Internet market through FMC based on its Wi-Fi infrastructure. KT has around 13,000 Wi-Fi zones around the country that account for most of the Wi-Fi APs in the nation.

LG Telecom also plans to introduce FMC service from this month, first aimed at the corporate market and then expanding to regular customers.

# Stick to WiBro or Move to LTE

Despite a massive investment on WiBro, or Wireless Broadband (Korean version of Mobile WiMAX), KT and SK Telecom failed to secure a meaningful amount of subscribers. However, the Korea Communications Commission (KCC), the nation’s telecom regulator, plans to push WiBro operators to more investment this year.

Since launching of the world’s first commercial WiBro in June 2006, the combined subscribers of KT and SK Telecom was around 250,000 as of November 2009, far from initial government predictions that saw 1.4 million users by 2008. In 2007, market research firm IDC Korea forecast that the WiBro subscribers would reach 1.4 million in 2010 while KT was expecting the number of its WiBro subscribers to reach 3.1 million in 2010.

Currently KT’s WiBro service coverage is 46% with a 688 billion won investment from 2006 to 2008, while SK Telecom has 43% with a 532 billion won investment in the same period. The KCC will encourage WiBro operators to invest in nationwide coverage.

To boost WiBro service competition, the KCC plans to allow new players with the adoption of MVNO (Mobile Virtual Network Operator). To reduce the investment burden for new entrants, KCC is considering allowing a roaming service using the infrastructure of current WiBro operators.

To help WiBro business, the KCC plans to expand public service using WiBro, and spur new services such as mobile VoIP and mobile IPTV.

Even though the KCC is sticking to WiBro, both KT and SK Telecom are more concerned with LTE and economy of scale. Accepting global market trends, the KCC also plans to support LTE (Long-Term Evolution), which is a major 4G technology candidate backed by major global operators and manufacturers as the next-generation wireless technology. The KCC will inject 22 billion won into developing WiBro and LTE this year.

# Smartphone as a Game-Changer: iPhone and Android

Triggered by the launching of Apple’s iPhone in November 2009, Korean consumers are showing higher-than-ever interest in smartphones. In a month, the iPhone became the best-selling smartphone with sales of around 200,000 units.

Including the iPhone, domestic smartphone market volume in 2009 was estimated at around 500,000 units, however, smartphone sales are expected to triple or quadruple this year. The much-anticipated Google-backed Android phones, especially, will soon shoot to compete with the iPhone.

Industry watchers see the local smartphone market lead by Android phones and iPhone, replacing current market-leader Windows-based smartphones. SK Telecom, especially, is expected to drive the smartphone market with a diverse Android phone line-up, such as Motorola’s Droid to catch up with KT’s iPhone.

The No. 1 of the local mobile phone market with over 50 percent market share, including smartphones, Samsung Electronics may show a more aggressive smartphone lineup to maintain its market position. As in the global market, Samsung will compose its smartphone lineup with a diverse platform including Android, LiMo, and Windows Phone, or even its own Bada platform.

LG Electronics and Pantech will also ride on the smartphone bandwagon with Android-based smartphones.

In a booming mobile Internet market, the Korea Communications Commission (KCC), the telecom regulator, plans to drive the smartphone market by asking mobile operators to lower mobile Internet charges. KCC expects the smartphone, including the touch phone portion, to exceed at least over 24 percent of the total handset market this year.

# IPTV Gaining Momentum

Since KT started the first full-scale service of Internet Protocol TV (IPTV) in November 2008, the combined number of IPTV subscribers of the three operators passed the 1.6 million mark as of December 2009.

KT, the front-runner of IPTV service, recorded 1 million subscriptions as of December 2009, although the combined subscribers of IPTV operators failed to meet the target number of 2 million by end of December 2009, set by the KCC. However, the increased ratio of IPTV subscribers is faster than other pay TV services such as digital CATV and satellite TV.

One of main hurdles of IPTV service expansion – lack of content – was partly resolved. For IPTV content, operators have signed with national television stations KBS, MBC and SBS for program retransmission, and secured some sports channels. However, IPTV operators do not yet show the killer content needed to lure over cable TV viewers.

The government will offer public IPTV services including healthcare, national defense, and education soon and expects this to be a catalyst to expand IPTV service to private sectors.

VOD-based IPTV subscribers will soon change to real-time IPTV, the KT Management & Economic Institute expects the number of full-scale IPTV subscribers to reach 3.5 million by the end of this year.

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