South Korea Telecommunications Report Q2 2008

The biggest change to affect the telecoms industry in South Korea has been the growing consolidation of the market. The country's Fair Trade Commission has approved SK Telecom's purchase of a large stake in Hanaro Telecom, the second-largest broadband provider, at a cost of US$1.15bn. This still remains subject to final approval from the Ministry of Information and Communication. Under the agreement, SK Telecom will be allowed to bundle its mobile services with fixed-line telephony and broadband, extending its service reach. The announcement has provoked Korea Telecom (KT) to re-engage with KTF over a possible merger.

KT has seen its share of the fixed-line market continue to fall as demand for services stalls, while its share of the broadband market similarly fell. The operator reported a decline in its 2007 profits of 22% to a four-year low, but has sought to counter this by promoting its web-based television services and wireless broadband. A target of 1.5mn internet-based TV subscribers has been set for 2008, a five-fold increase over the year. As for its wireless broadband subscriber target, this has been set at 400,000, against 100,000 at the end of 2007.

Growth across the internet and broadband sectors continues to slowdown, with South Korea retaining one of the most mature markets in Asia. Diverging into alternative internet-based services should provide KT with some support, although providing a more rounded service in terms of offering mobile with its fixedline and broadband, should boost revenues. At the end of 2007, mobile penetration rates stood at 90.4%, in line with our earlier forecasts. BMI projects that over the next five years ended 2012, penetration will have reached 104%, by which time 57% of the total mobile market are expected to be subscribers of 3G services.

The maturity across its markets of fixed-line, broadband and mobile has propelled South Korea up our latest Business Environment Ratings to fourth place. This places the country ahead of Malaysia and Taiwan, but behind Australia, Japan and Singapore. A newly elected president focussed on economic improvement will see the country retain a strong stand in the first half of our ratings table. South Korea scores the second highest for Country Risk, just behind Taiwan on 77.