Future Netwoks: Challenges & Opportunities - Jaehyun YEO, Senior Researcher, KISDI - DigiWorld Summit 2014

1. 0 Future Networks : Challenges & Opportunities
Nov.19, 2014
Jaehyun YEO KISDI

2. 1
1. Telecommunication Market Status
(‘14.3Q)
Fixed Internet Mobile
Subscribers Market Share Subscribers Market Share
KT 8,106,821 42.4% 17,184,013 30.3%
SKT & SK BB 4,741,382 24.8% 28,403,097 50.0%
LG U+ 3,010,347 15.8% 11,158,666 19.7%
Others 3,257,903 17.0% * MVNO’s subs. are included in Operator’s subs.
Total 19,116,453 100.0% 56,745,776 100.0%
LTE
61.1%
WCDMA
27.3%
CDMA
11.6%
LAN
37.8%
FTTH
29.3%
HFC
24.0%
xDSL
8.8%
< Fixed internet
Subs. by
Technology >
< Mobile Subs.
by Technology >

3. 2
Fixed Internet Market
Fixed internet Subs. : 19.1 million (3Q 2014), 104% penetration ratio to household
 VoIP Users: 12.5 million (3Q 2014), 65.1% of Subs.
2,428 2,156
1,851 1,774 1,726 1,691
5,031 4,931 4,784 4,725 4,656 4,593
6,355 6,610 6,995 7,054 7,133 7,234
4,045
4,555
5,107 5,300 5,445 5,597
-
2,000
4,000
6,000
8,000
11.4Q 12.4Q 13.4Q 14.1Q 14.2Q 14.3Q
xDSL HFC LAN FTTH
Transition from xDSL & HFC to LAN & FTTH
(unit: ‘000)
1. Telecommunication Market Status

4. 3
Mobile Market
Mobile subscribers : 56.7 million (3Q 2014), 113% penetration ratio to population
MNO : 52.6 million, MVNO : 4.1 million
Smartphone Users: 40.1 million (3Q 2014), 70.6% of Subs.
15,815
10,753
7,742 7,204 6,946 6,599
35,500
27,060
18,489 17,088 16,124 15,506
1,191
15,811
28,449 30,870 32,602
34,641
-
10,000
20,000
30,000
40,000
11.4Q 12.4Q 13.4Q 14.1Q 14.2Q 14.3Q
2G 3G LTE
Rapid transition from 2G/3G to LTE since 4Q 2011
(unit: ‘000)
1. Telecommunication Market Status

5. 4
Mobile & Fixed Networks Preparing to transit to 5G & Giga internet from 4G & BcN
Service
+ New Technology
Time
1980s
1990s
2000s
2010s
2020s
2. Network Evolution in Korea
Dial-up (2.4~9.6kbps)
(1.5~10Mbps)
(50~100Mbps)
(~Gbps)
AMPS
CDMA/CDMA2000
WCDMA/LTE
LTE-Advanced

6. 5
Mobile : LTE-Advanced Since 2013, LTE-Advanced service has been provided in Korea
LTE
LTE-Advanced
Bandwidth (DL)
10MHz
20 MHz (10+10)
20MHz
30 MHz (20+10)
40 MHz
(20+10+10)
40 MHz
(20+20)
Carrier Aggregation
-
2 band CA
-
2 band CA
3 band CA
2 band CA
Max. Throughput
(DL)
75Mbps
150Mbps
150Mbps
225Mbps
300Mbps
300Mbps
Commercialize
July ‘11
June ‘13
Sep. ‘13
June ‘14
Early of ‘15
End of ‘15 2nd 20MHz bandwidth spectrum plan to be provided to Mobile Operators in mid-2015 50MHz CA (20+20+10) would be possible in 2016 R&D for 5G technology
2. Network Evolution in Korea

7. 6
Fixed : BcN & Giga internet BcN Construction Plan (2004~2010)
BcN coverage : over 90%
Coverage expansion in rural area Giga Internet Construction Plan (2009~2017)
FTTH & LAN base
Pre-Commercial service in major 23 cities : 1 Gbps wired internet, 400 Mbps Wi-Fi
<Network Comparison>
Data Rate
Service
Feature
BcN
50~100Mbps
Video Telephony, IPTV
Telecommunication- Broadcasting Convergence
Giga Internet
100Mbps~1Gbps
UHDTV, 3DTV
High quality & Realistic service
2. Network Evolution in Korea

8. 7
Future Network Visions of SKT
Source: SKT, SK Telecom 5G white paper (2014.10)
2. Network Evolution in Korea

9. 8
Future Network Visions of KT
Source: KT, Gigatopia (2014.8)
2. Network Evolution in Korea

10. 9
Future Network Visions of LGU+
Source: LGU+, Innovation and Migration toward 5G (2014.10)
2. Network Evolution in Korea

11. 10
Fixed Network Operators M&A among operators for preparing convergence
3. Preparing Convergence by M&A
~
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
’10~’14.3Q
SMP in fixed voice
services
KT (42.4%)
New Entrant
Hanaro Telecom
SK Broadband
(24.8%)
(SKT’s subsidiary)
New Entrant
Thrunet
Long Distance
Onse Telecom
KEPCO's Division
Powercomm (KEPCO's subsidiary)
LG Powercomm
LG U+
(15.8%)
Long Distance
LG Dacom
Cable TV SO's
(Local Franchisees)
T-Broad, C&M, CJ, CMB, HCN etc. (16.6%)
Others
Dreamline, Constructors (0.5%)

12. 11
Mobile Network Operators # of Mobile Operators: 5 -> 3
‘84
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10-’14.3Q
Cellular
KMT
SK Telecom
SK Telecom (50%)
Shinsegi
SK Shinsegi
PCS
KTF
KTF
KT (19%)
Hansol PCS
M.COM
LG Telecom
LG U+ (31%)
3. Preparing Convergence by M&A

13. 12
Line-up by operators
Fixed Broadband
Mobile
Broadcasting
(IPTV or CATV)
KT Group
KT
KT
KT
SK Group
SK Broadband
SKT
SK Broadband
LG Group
LG U+
LG U+
LG U+
Cable TVs
T-Broad, C&M, ….
MVNOs
T-Broad, C&M, ….
Other Important Players Internet Platforms : Naver, Kakao & Daum, Nate, Google, Facebook, etc. Terrestrial Broadcasting : KBS, MBC, SBS, etc. Device Manufacturer: Samsung, LG, Apple, etc. Traditional Industries: Banks, Hospitals, Utilities, Automobiles, etc.
3. Preparing Convergence by M&A

14. 13 Market Saturation, Slowdown of Growth Increasing Network Investment Cost for advancing network infrastructure Increasing Customer Attraction Cost for severe competition in saturated market Price cutting by commoditization of service
→ Degradation of Profitability, Decreasing Network Investment incentives
Challenges: Service Commoditization & Profit Degradation
4. Challenges & Opportunities
자료: Merrill Lynch 『Global Wireless Matrix』('14.2Q)
< EBIDTA margin of major mobile operators (%) >

15. 14
Challenges: Platform-led Ecosystem
Platform-led Ecosystem
 Pre-Smart Phone: MNO controlled the closed value chain
 Post-Smart Phone: OS controls the C-P-N-D alliances
Telcos: Traffic Explosion without returns Dumb Pipes ?
< Aggregate Market Value (Oct. ’14, billion US$) >
4.7
8.1
21.6
8.8
26.3
- 10.0 20.0 30.0
LGU+
KT
SKT
Daum
Naver
4. Challenges & Opportunities
Source: Shin Cho (2014.6)

16. 15
Opportunities How to Overcome Profit Degradation
 Cost Minimization by Economy of Scales
•Sharing: Network Sharing, Co-construction, Resource Sharing
•Structural Changes: M&A , Cooperation with other operators
 Searching for New Growth Engine & Cash Cow
•IoT, cloud, etc. New growth opportunities for telcos
•Telcos can provide connections, manage platforms, and control overall system
•Competition using network as a leverage in Platform, S/W, Device market
•Cooperation with Strong Players in Platform, S/W, Device market
4. Challenges & Opportunities

17. 16
Thank you.