BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications sector of South Korea

Non-voice revenues have become an increasingly important source of growth for South Korean mobile operators, as they face a saturated mobile market and diminishing voice revenues. This is despite our own decision to marginally downgrade our forecast for the mobile market (including 3G), with most recently available figures for the total mobile market stating that there were 40.036mn users as of November 2006. With previous quarterly net additions over the first nine months of 2006 averaging 454,000 users, we expect a total subscriber base of 40.236mn users, as penetration rates reach 84% by YE06. Indeed, only the 3G market offers any real room for growth, with the broadband market similarly saturated. 3G users accounted for 37.4% of the total mobile market, compared to Japan, which has over half of its population using 3G. To this end, both KTF and SK Telecom have raised their capex budgets for further HSDPA deployments in 2007, in the hope of encouraging further use of music, video and other data-rich services, while also launching HSDPA-enabled handsets during the year. KTF will spend an additional KRW400bn over 2007, while SKT has an HSDPA budget of KRW810bn. Meanwhile, LG Telecom is keen to operate a 3G network, beginning sometime in H107, although this is pending approval from the MIC.

While we have retained our existing forecasts for the broadband market, much like the mobile market it has suffered from saturation, leading operators to diversify into advanced technologies such as IPTV and WiBro, or, like Hanaro Telecom, to seek to develop a triple-play competitive advantage. Although Hanaro managed to report a fall in its broadband subscriber base, for VDSL, ADSL and cable modem subscribers, this, we believe, was due to its attention on developing a hanaTV service, launched in July 2006, and forming a vital part of its triple-play services. Of its hanaTV subscriber base of 44,362 users for Q306, 85% were existing broadband subscribers, with the remaining 15% new. Furthermore, the operator plans to commence IPTV services in 2007 with a consortium including KT and 50 other companies under the brand name of C-cube. KT has said that it will spend KRW140bn of its capex total of KRW2.8trn for 2007 on IPTV, while WiBro will also receive some KRW240bn of the capex total. Meanwhile, SK Telecom’s WiBro service has attracted some 110,000 users as of November 2006.

South Korea suffered a one point drop in its composite scoring in our latest Business Environment Rankings table, placing it joint third with Taiwan as it totalled 42 points. Lying behind its inability to improve its score is the dampening growth in the NGN market. Unlike Taiwan and Singapore, there is relatively little potential for next-generation growth.

Contents

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Chapter 1 - Executive Summary

Business Environment

Asia

South Korea

SWOT

South Korea Telecoms Business Environment Industry SWOT

Chapter 2 - Industry Forecast Scenario

Fixed-Line

Table: South Korea Telecoms Sector – Fixed-line – Historical Data & Forecasts

Internet

Table: South Korea Telecoms Sector – Internet – Historical Data & Forecasts

Mobile

Table: South Korea Telecoms Sector – Mobiles – Historical Data & Forecasts

Chapter 3 - Macroeconomic Forecast Scenario

Table: GDP, Output & Population

Chapter 4 - Country Snapshot: South Korea Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 5 - Competitive Landscape

Competitor Analysis

Table: Key Players: South Korea Telecoms Sector

Table: Selected Operators Financial Indicators

Market Structure

Key Players

Fixed-Line Overview

Table: Regional Fixed-Line Penetration Overview

Internet Overview

Table: Regional Internet Penetration Overview

Mobile Overview

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Table: South Korean Local Access Market Q306

South Korea Fixed-Line Net Additions Market

Broadband

Table: South Korean Broadband Market Q306

South Korea Broadband Net Additions Market (September 2006)

Mobile

Table: South Korean Mobile Market November 2006

Table: South Korean Mobile Market Q306

South Korea Mobile Net Additions (September 2006)

3G

Table: KTF, Voice/Data ARPU Split, By Network, Q306 (KRW)

Table: South Korean Mobile Operators: Monthly ARPU, 2003-06 (KRW)

Table: South Korean Mobile Operators: Monthly Outgoing Minutes of Use (MOU) Q105-Q106

Industry Developments

Chapter 6 - Company Profiles

Regional Case Study – Motorola

Table: Motorola Net Sales by Region (US$mn)

Table: Motorola Market Sales by Locality of End Customer

Table: Leading Mobile Phone Handset Sales (mn) – Q306

Operators

KT Corporation

Hanaro Telecom

SK Telecom

Chapter 7 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Chapter 8 - Appendix: Regional Demographic Data

Table- Manufacturing Wages (ave per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Asia Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of Asian Telecommunications Sources

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BMI's Asian Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include: