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Same-Day Analysis

KT Freetel HSDPA Subscribers Reach 1 mil.

Published: 09 July 2007
KT Freetel (KTF), South Korea's second-largest mobile operator, said today that it has acquired more than one million subscribers to its high-speed downlink packet access (HSDPA) mobile services, four months after a nationwide launch.

Global Insight Perspective

 

Significance

KTF has acquired more than one million subscribers to its HSDPA mobile services, four months after a nationwide launch.

Implications

The second-ranked mobile operator in the voice-centred 2G communications market has been seeking to outperform market leader SK Telecom in the segment of advanced mobile services, which are emerging as a new growth engine.

Outlook

KTF aims to have at least 2.7 million subscribers to its HSDPA services by the end of this year. However, the limited functions of HSDPA handsets may create hurdles for rapid uptake.

As of Friday (6 July), KTF reported that its subscribers to its HSDPA mobile services reached the one million mark, according to Yonhap English News. The company launched nationwide HSDPA services, named Show, on 1 March, allowing its customers to use video calling, global roaming and other multimedia functions based on faster data-transfer speeds (see South Korea: 1 March 2007: KT Freetel Embarks on First Nationwide HSDPA Service in South Korea). The figure was achieved less than two months after KTF reported that the number of its HSDPA subscribers reached 500,000 in mid-May. "Our 3G customers use more data and voice services than 2G subscribers, generating more revenue, which shows the advanced services are settling as our new source of revenue," the company said in a statement. Its monthly 3G average revenue per user (ARPU) reached 43,019 won (US$46.8) in May, compared with an ARPU of 38,665 won for 2G services, the company said. Monthly minutes of use for 3G services stood at 213 in May, higher than the 173 minutes of 2G, it said.

Outlook and Implications

  • Competition on Advanced Mobile Services: KTF, which held approximately 31.9% of South Korea's mobile market in June, hopes HSDPA will eventually enable it to take over the market leadership currently held by SK Telecom, which has a market share of about 50.5%. KTF expects five million new subscribers to HSDPA services in South Korea this year and is targeting at least 2.7 million of that figure. SK Telecom started its own nationwide HSDPA service in late March and reported it had 380,000 customers as of the end of June (see South Korea: 28 March 2007: SK Telecom Launches Nationwide HSDPA Mobile Service). The two mobile service operators have been engaging in fierce competition to lure customers to their advanced wireless services, which are emerging as a new growth engine at a time when the 2G market has become highly penetrated. There were 42.3 million mobile subscribers in South Korea at the end of June, a penetration rate of 87.5%. KTF hopes a full start of HSDPA will boost its ARPU by 10%-15% compared with its ARPU from 2G services. However, the company has also said it expects its margins to weaken this year due to high marketing costs for the advanced mobile service, a large portion of which will be used to subsidise subscribers' purchase of still-expensive handsets designed for the HSDPA service.
  • Customer Dissatisfaction over HSDPA Handset Features: Despite the notable HSDPA subscriber growth, some mobile users have expressed their dissatisfaction regarding the gap between promises of 3G phones and their actual features, according to a local news agency, Korea Times. KTF has released several models since it expanded the HSDPA service area nationwide but these models so far offer limited advanced applications. For instance, some users have complained that some mobile-phones salesmen indicated that mobile payment and wireless banking services were available with HSDPA handsets, when such applications were not included on early 3G models. In response, KTF said it was not responsible since it did not pledge mobile payment offerings on early models. Yet the situation worsened after KTF unveiled a plan to introduce high-speed uplink packet access (HSUPA), which promises an upload speed about 15 times faster than that of HSDPA (see South Korea: 14 June 2007: KT Freetel Rolling Out HSUPA Network). The HSUPA service allows mobile phone users to upload an MP3 file or a high-definition picture in a fraction of a second. However, when the HSUPA service comes to town, people will have to buy a new phone specifically for it, KTF Senior Vice President Kim Yeon-hak said in a press conference last week. Current HSDPA handsets will not be compatible with HSUPA and those who want to enjoy the latter will have to purchase a dedicated phone, Kim confirmed. This means that HSDPA subscribers, who have snapped up new handsets mostly over the past few months, will need to change their models after just six months if they want to enjoy HSUPA later this year.
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