Mobile internet ready for take-off in Korea

Korea has touted itself as "an IT powerhouse" with its internet and mobile penetration rates nearing 100 percent.

But when it comes to mobile internet, the country fails to live up to its reputation, with only 10 percent of mobile phone users having access to the Web.

However, industry officials say the time is ripe for mobile internet to take off in Korea, with mobile operators set to lower their notoriously high mobile data charges and introduce the iPhone and other competitive smartphones. Carriers also plan to open applications stores to allow users to download diverse content and software on their mobiles.

"All conditions are ripe for the expansion of mobile internet services in Korea," Engene Securities analyst Denny Kim said.

"Stimulating mobile internet services is key to alleviating concerns about the stalled growth of the local telecommunications industry."



The government also backs carriers` moves to boost mobile internet services, vowing last week to up the number of users on fixed-rate plans for mobile internet to 40 percent in 2013 from the current 10 percent. The Korea Communications Commission also aims to increase the number of smartphones to 4 million units in Korea, which would account for 20 percent of total handsets that year. Currently, smartphones make up a meager 1 percent of total handset sales. The regulator also looks to boost the content industry to 3 trillion won ($2.5 billion) in 2013, from the current 1 trillion won.



iPhone effect

"People increasingly want to search the internet and use other internet service anywhere and anytime," said Lee Sung-eung, an analyst at Eugene Securities. But expensive data rates and difficult user interface of phones have hampered mobile internet adoption, he said.

But the iPhone, which is expected to be rolled out in Korea as early as October via KT, will serve as a catalyst for sluggish wireless internet services - a core function of the mobile device, analysts said.

"The iPhone will create a breakthrough for Korea`s wireless internet services," Lee said.

It remains to be seen how many iPhones will be sold in Korea, whose handset market is dominated by Korean firms Samsung and LG, but the device has rattled the local mobile industry even before its introduction. Local wireless operators plan to introduce a slew of smartphones and application stores to stave off challenge from the iPhone. SK Telecom and KT also plan to introduce competitive data plans to boost their smartphone sales.

"The most important thing is a paradigm shift to be brought about by the iPhone introduction rather than its sales volume," said Hyundai Securities analyst Kim Im-kwon.

"These phenomena will surely create a better telecommunications environment for consumers than before. ... The launch of the iPhone will be the starting point for the revitalization of Korea`s mobile internet," he said.

The iPhone, one of the hottest selling smartphones, gives consumers a rich mobile internet experience. Its user-friendly interface makes it easy and convenient for users to surf the internet on the touchscreen device. Its online App Store also offers 85,000 applications, allowing users to download a wide range of content such as shopping applications, music and games.

"The arrival of the iPhone will pave the way for the increase of smartphone sales in Korea," said Korea Investment & Securities analyst Yang Jong-in.

Mobile carriers also plan to roll out a series of smartphones this year to compete in the growing market. KT looks to introduce two Windows Mobile phones this year - Samsung`s Prism which supports three wireless internet networks - WCDMA, Wi-Fi and mobile WiMax - and LG`s Lilac which is powered by WCDMA and Wi-Fi networks. KT also plans to roll out the Android phone next year and allow sales of Android applications at its forthcoming application mall. SK Telecom also plans to launch Samsung`s smartphone Omnia 2 and LG`s Lilac this year, among others.

SK Telecom launched an application store for not only Windows-based smartphones but other phones. KT also plans to open an app store in November for Window-based smartphones.



No more `bill shock`

The increased adoption of smartphones will also enable users to browse the Web and download applications without data transfer charges via Wi-Fi networks.

Mobile carriers also plan to make it cheaper to access mobile internet via their 3G networks, as expensive data rates are cited as the biggest hurdle for mobile internet adoption.

According to a June poll by local research firm MarketingInsight, 28.7 percent of respondents said they do not use mobile internet because of expensive data transfer rates, while 25.2 percent pointed to expensive data usage fees.

Late September, the country`s three operators announced their planned reduction in wireless data rates. KT, the No. 2 wireless operator, announced the most aggressive cuts, promising an 88 percent cut in data transfer charges. KT also looks to launch more affordable bundle plans for smartphones this month.

"We plan to offer affordable data plans to alleviate the burdens customers face," said senior vice president Lee Kyeong-soo.



Opportunity or threat?

The increased use of mobile internet and smartphones are expected to boost carriers` data revenues and offer new income sources to mobile carriers as more conventional revenue growth slows.

Korean mobile carriers generated 17.4 percent of their revenue from mobile data services as of the end of 2008, according to the KCC. This compares with 41 percent in Japan; 32.4 percent in Australia; 27.8 percent in the United Kingdom; 27.2 percent in China; 26.7 percent in Hong Kong; and 25.5 percent in the Untied States,

However, the expected iPhone launch is expected to trigger competition in the smartphone market, threatening to increase operators` marketing expenses, analysts said.

"The iPhone would give a burden of subsides to operators in the short term. But in the long-term, the iPhone would significantly boost data services," Yang said.

(hjjin@heraldm.com)



By Jin Hyun-joo