Based on various web sources Iskander Business Partner has developed a case study about the successful LTE adoption in South Korea. The case study aims to show how Korean MNO have realized an ARPU growth with LTE and outlines specific circumstances in Korea as well as success factors.

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20140822 Exchange Day Korea LTE JSK.pptx
Case Study
LTE in Korea –Mobile World Champion

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20140822 Exchange Day Korea LTE JSK.pptx
South Korea Country Facts
South Korea since 1960 is one of the fastest growing countries worldwide and has become the 12thlargest economy worldwide
•Country area size: 99.392 km² (Germany: 357.168 km²)
•Population size: Approx. 50 million
•Population density: 489 people per km² (Germany: 226 people per km²)
•Largest cities:
•Seoul (10 mil.)
•Pusan (3.6 mil.)
•Incheon (2.5 mil.)
•1/3 of total population
•GDP: USD 1.6 trillion (12thlargest worldwide)
•Gross salary avg.: USD 37k per year (Germany: USD 42k per year)

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20140822 Exchange Day Korea LTE JSK.pptx
Mobile Network Development in Korea (1/2)
South Korea was the first country to reach 100% coverage of LTE and also introduced the first commercial offer of LTE-A worldwide in July 2013
•Market consists of 3 MNOs (1. SK Telecom, 2. Korea Telecom, 3. LGU+)
•Started LTE network building in 07/11 and reached 100% country-coverage within 9 months
•First country to commercialize LTE-A in 07/13 and increased LTE-A capacity in 06/14 to 225Mbps from 150Mbps (3x faster than LTE, 15x faster than 3G)
•Currently SKT working on commercialization of 3-band carrier aggregation LTE-A (450Mbps)
•Started research partnership with EU in 06/14 for 5G network development
2013

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20140822 Exchange Day Korea LTE JSK.pptx
Mobile Network Development in Korea (2/2)
Nationwide coverage ensures being connected at high speed anywhere in Korea and 3-band carrier aggregation available end of 2014 with devices

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20140822 Exchange Day Korea LTE JSK.pptx
OEMs / Carriers Value Chain
LTE penetration surpassed 50% of mobile users end of 2013 just within one year after introduction, a target penetration of 70% is estimated by 2015
•Data usage of LTE subscribers increased to an average of 2.1GB per month compared to 1.1GB for 3G users (Germany average 2013: 200MB)

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20140822 Exchange Day Korea LTE JSK.pptx
Impact of LTE Roll-Out on Operators Financial Figures
LTE roll-out period heavily increased CAPEX investments of all carriers due to network costs as well as strong handset subsidization
•CAPEX investments increased heavily from 12-15% to 20-30% during LTE roll-out period starting in 2011
•Carriers also heavily subsidized LTE handsets to guarantee a large LTE-enabled base of smartphones to foster service adoption (USD 200-250 per device), which also negatively impacted EBITDA (SKT margin dropped from 34% in 2010 to 27% in 2012)
•This resulted in cash-flow decrease in 2011-2012, but 2013 showed signs of stabilization (also regulator intervention by capping handset subsidies to USD 240 max. per device)

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20140822 Exchange Day Korea LTE JSK.pptx
ARPU Development Trend
As a contrast to other developed telcomarkets, Korea has achieved a top- line growth of 2% CAGR since 2012 influenced by LTE market introduction
Insights
•According to consulting firm Delta Partner, a ARPU growth of USD 3-4 is required to compensate for LTE investments
•All carriers were able to realize a strong increase in ARPU, Q1/14:
•SKT: EUR 30.70
•KT: EUR 25.57
•LG U+: EUR 27.39
•GER Avg.: EUR 25.00
•CQGR (Q1/12-Q2/13): 1-3%
•Carriers managed to upsell LTE packages, in SKT case LTE users spend 1.4x more than a non-LTE user

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20140822 Exchange Day Korea LTE JSK.pptx
Korean Consumer Mobile Usage Behaviour
xxx
#1 Smartphone penetration 73% (#27 Germany: 40%)
59% of people are likely to subscribe to LTE in the next 12 months, compared to 17% in Germany (Deloitte, 2013)
15% regularly stream video on their phone compared to 3% in Germany (Deloitte, 2013)
51% use their smartphone for mobile banking (Nielsen, 2013)
43% use their smartphone for mobile shopping (Nielsen, 2013)
Kakaotalkaccounts for 20% of total smartphone airtime becoming an ubiquitous part of Korean life (avg. 156 msg. per person per day)
10 million IPTV subscribers in Q2/14 (Netmania)
The Korean Mobile User…

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20140822 Exchange Day Korea LTE JSK.pptx
Market Leader Profile: SK Telecom –LTE-A Data Plans & Options
In Q2 2014 SK Telecom has introduced the first unlimited data LTE-A plans into the market –2 years after initial LTE introduction
Plan Name
Price per month(24m)
IncludedLTE-A Data
Voice Flat
SMS/MMS
T&All75
USD 60
8GB
Unlimitedintra+ inter
Unlimited
T&All85
USD 65
12GB
Unlimitedintra+ inter+ fixed
Unlimited
T&All100
USD 76
16GB
Unlimitedintra+ inter+ fixed
Unlimited
•After usage of included LTE-A data volume, users will be provided 2GB of data per day at LTE speed
•If extra volume is exceeded during a day, users will be offered data at an optimal speed as allowed in the network status
•All plans also include a range of services to further enrich customer’s mobile experience such as multimedia contents services for free including ‘B tvmobile’ and ‘Melon Mobile Streaming Club’ (largest music streaming service in Korea)
Additional options launched catering towards customer demand:
•Unlimited data option for commuters (USD 9/month): Between 7-9AM and 6-8PM users enjoy unlimited data (up to 2GB per day). Average work travelling time for Koreans is 55 minutes and SKT analyzed that up to 20% of daily data volume is used in these peak times.
•24h data option (USD 3.50/day): During 24hrs of usage only 50% of regular data usage is deducted from monthly volume, useful when watching sport events in UHD or need for large file downloads

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20140822 Exchange Day Korea LTE JSK.pptx
Market Leader Profile: SK Telecom –Additional Services ( )
In addition to standard MNO services, SKT successfully operates platforms that drive usage of high speed mobile Internet under SK Planet brand
Angles –Social Multimedia Service
HD video files filmed from different angles by up to four users can be edited into single file in the cloud then to be viewed and shared via mobile
SK Cloud Game
•Cloud Game allows smartphone users to access the cloud server and play the game without installing the game file individually.
•SK Telecom also introduced two tariff plans, dubbed ‘Cloud game pack’ and ‘Cloud game double pack’. The packs offer up to 1 GB and 2 GB, respectively, of data traffic per day. Subscribers will be charged KRW 5,000 for the 1GB pack and KRW 9,000 for the 2GB pack.
B tvmobile –UHD video service
11thStreet –M-Commerce
40% M/S –11 mil. app downloads –doubled Gross Merchandise Value in 2012 (EUR 60 mil)
T-Store
•Digital content marketplace with 17 mil. Users (2012)
•Focus on mobile games (60%), but also video, music and e-books
•Global expansion planned

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20140822 Exchange Day Korea LTE JSK.pptx
Lessons Learned from Korea for Positive ARPU Development with LTE Launch
Fast roll-out combined with attractive LTE-content creating higher consumer willingness to pay achieved overall ARPU growth
GET THE PRICING RIGHT –REASONABLE AND ATTRACTIVE
DIFFERENTIATE THROUGH CONTENT –DRIVE USE CASES & CAPITALISE CONTENT
CONTROL DEVICE SUBSIDIES
LEVERAGE LTE AS COMPETITIVE DIFFERENTIATOR
•LTE proposition should be clearly differentiated from 3G data offering
•Objective is to upsell to customers who are willing to pay for better experience & access to broader value proposition (HD video, VOD, shared data plan)
•SKT priced top-selling LTE plan USD 7 higher than 3G selling plan, but initiated shift from unlimited data in 3G plans to capped plans to control traffic evolution and upsell higher data volume packages
•Important that consumers understand the value behind having a faster mobile connection by promoting use cases
•All operators define their value propositions with unique content differentiators with video being key (generating on top ARPU of approx. USD 10/month)
•With exclusive mobile broadcast rights on sports SKT strongly pushes its mobile IPTV offer
•Clear example of strong correlation between availability and price of LTE devices and LTE adoption
•Even though Korean carriers spent almost as much in device subsidies as in network CAPEX
•Early mover advantage of LGU+ (smallest carrier) allowed to capture a larger share of higher-value customers and gain revenue share

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20140822 Exchange Day Korea LTE JSK.pptx
Jong-Seo Kim
IskanderBusiness Partner GmbH
Paulstr. 19 l 85737 Ismaning/Munich l Germany
mobile:+49.176.1057 4736
phone:+49.89.99 650 86-1
fax:+49.89.99 650 86-2
e-mail: jong-seo.kim@i-b-partner.com www.i-b-partner.com