KT Freetel [KTFTF.PK] (KTF), the mobile subsidiary of South Korea’s former monopoly fixed line operator Korea Telecom Corporation [KRCMF.PK ] (KT), said at the weekend that its board of directors has agreed to the merger with KT ICOM, the third-generation mobile unit of KT, and that the new company will open for business from 1 March 2003. The merger is geared towards improving synergies between the two sister companies and avoiding the duplication of marketing and infrastructure investments. KTF’s shareholders will meet on 29 January 2003 to decide whether to approve the plan.
In recent years KTF has been losing ground in South Korea’s cellular market to SK Telecom (SKT). The bitter rivalry between the two intensified in the year to June 2002 as market leader SKT pulled further away from its rivals and consolidated its position as the country’s most popular cellco. By mid year it had over 16.4 million subscribers, up from 10.9 million twelve months previously, pushing its market share from 38.8% to 53.3%. During the same period KTF’s customer base rose by just 532,000 to 10.13 million, whilst its share of the market fell from 34.2% to 32.8%.
Source: CIT’s Yearbook of Asia-Pacific Telecommunications
SK Telecom attributes much of its success to the popularity of its wireless internet service NATE; by the start of 2002 it claimed to serve 78% of the 4.2 million Koreans using 2.5G data transmission services. It upgraded to IS-95B during 2000, increasing network transmission rates to 114kbps. SKT plans to concentrate on generating revenue from its 2.5G services before making heavy investments in the rollout of 3G. Its 3G offerings will be spearheaded by its SK IMT unit. The company plans to introduce a test level version of the service in the second quarter of 2003, followed by commercial launch in the third.
KT Freetel took part in South Korea’s 3G licensing process in 2001 via parent company Korea Telecom, which subsequently established KT ICOM to run its next-generation services. It launched commercial services in May and June 2002 under the banner EV-DO in conjunction with network supplier LG Electronics. EV-DO is based on the cdma2000 standard and can theoretically deliver speeds of up to 2.4Mbps, although these have yet to be realised due to the unavailability of compatible handsets and also a number of technical glitches. It currently offers multimedia messaging, videoconferencing, and a range of other data services such as mobile payment and music downloads to around 80 cities nationwide. By the end of September the company claimed 50,000 EV-DO subscribers. It spent approximately KRW500 billion on 3G rollout in 2002 alone and plans to invest KRW2.5 trillion by 2005.