Telecom Industries of
Korea and Japan
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Brian Toll
Greg Zelenka
Aaron Cowen
Jennifer Barker
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Outline
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Telecom Overview
Korean Competitors
Japanese Competitors
Regulatory in Korea
Regulatory in Japan
Discussion of Korea Telecom
Questions for Korea Telecom
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Technology Primer
• Land Line
– Dial-up
– ISDN
• Broadband
– DSL
– Cable
– LMDS
• Wireless
– 1G, 2G, 2.5G, 3G
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Korean Competitors
COMPANY
LINES OF
BUSINESS
2000
REVENUE
NOTES
SK Telecom
Wireless,
ISP,
broadband
via CATV
$5 Bn
(5,760 bn
W), up 34%
from 1999
Primarily wireless provider with 54%
market share.
Korea
Telecom
(KT)
Wireline,
wireless,
broadband
via DSL
$11 Bn
(12,734 bn
W), up 8%
from 1999
Primary wireline, DSL provider. Leads
broadband at 44% market share. KT
Freetel, wireless subsidiary, is #2 with 31%
market share.
Hanaro
Broadband
via DSL,
LMDS,
CATV
$260 MM
(300 bn W),
up 29%
from 1999.
Second broadband market share at 27%..
Pursuing CDMA 2000 license for 3G.
LG Telecom
Wireless
$ 1.8 Bn
(2,058 bn
W)
Speculation that loss of 3G license will
lead to exit of wireless business via sale to
KT. Currently #3 wireless carrier with
15% market share. British Telecom
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contemplation sale of investment.
Japanese Competitors
COMPANY
LINES OF
BUSINESS
2000
REVENUE
NOTES
NTT
Wireline,
wireless,
broadband
via DSL
$108 Bn
NTT maintains wireline domestic
monopoly.
Wireless division is called
Docomo, with 59.1% market
share, and is famous for I-mode
service. NTT Docomo plans to
be first company in world to
launch 3G.
KDDI
International
LD, wireless
$30.2 Bn
Original provider of inter-country
long distance. Launched wireless
venture called “au”.
Japan
Telecom
Wireless only $14 Bn
Called J-phone. Former AT&T
investment, sold to Vodafone. 5
Active Regulation - Korea
• Multi-ministerial purview (FTC, MOFE,
MIC, KCC)
– Potential regulatory conflict
– Excessive regulation
• ‘Dominant player’ regulation
– Regulators control rates
– Caps on wireless handset subsidies
• Other players
– File tariffs, but no rate controls
– In January 2000, banned handset subsidies
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Ramifications of Regulation
• Geographically
– 5 national players in wireless, no regional
• Technologically
– CDMA standard nationally
• Competitively
– For wireless, price competition is severe (over
33% drop in 3 years).
– Similar technology, similar marketing
strategies, no handset subsidies.
– 3G postponement announced by SK Telecom.
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Movement to Passive
Regulation- Japan
• Ministry of Post and Telecom is single regulatory
body in Japan.
• NTT Incumbent maintains wireline monopoly.
Still very high new phone installation fees.
• Late 80’s deregulation with advent of wireless
• Increased wireless phone use by removing user
deposit system and handset leasing fees (approx
$2,700 per user)
• Since 1996, MPT exercises no pricing restrictions,
which has increased price competition and caused
wireless prices to decline by 56% in last 5 years.
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Ramifications of Regulation
• Geographically
– NTT DoCoMo dominates, smaller players compete
regionally
• Technologically
– Newer technologies cultivated, or;
– Multiple technological standards compete
• Competitively
– Non-price differentiation based on technological
differences and service quality and coverage.
– NTT continues to dominate, but faces serious threats as
competitors build infrastructure.
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Korea Telecom
• Korean incumbent - $11Bn in revenue.
• Local, domestic and int’l long distance,
business & data communication services,
DSL, cellular service
• Virtual monopoly in local services, 85%+
share domestic LD and 60%+ share Int’l LD
• Leads broadband at 44% market share.
• KT Freetel, wireless subsidiary, is #2 with
31% market share.
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KT – Responding to Competition
• Aggressive Restructuring
Area of Restructuring
Measures Taken
Employee Reduction
Reduced by 12,500 to 52,500 employees
Disposal of Non-profitable
Businesses
Sold 9 business
Reduction of Branch Offices
Reduced to 91 from over 2600
Reduction of Subsidiaries
Disposed of 3 subsidiaries and ICO investment
• Broadband in 92% Korean Households
– KT developing new broadband services
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Questions for Korea Telecom
• What are revenue drivers for 3G in Korea? How
much will you spend on 3G and how will you
recover this investment?
• What marketing techniques are used to attract
customers and reduce churn?
• How will CLEC industry develop in Korea?
• What are the three most important challenges
you face in the next 5 years?
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