lte strategy

1. Korean Mobile Ultra Broadband
- KT’s Strategies for the Era of Mobile Data Explosion -
2011. 10. 14
Hee-Su Kim, Ph.D.
Senior VP
Economics & Management Research Lab
KT

2. 1
1. Data Explosion
(MB)
Introduction of
unlimited data
plans
Increase by 8%
per month
Increase by 14%
per month
Global average of
smartphone traffic in
2010 = 75 MB*
Korean Mobile Traffic Forecast KT iPhone Users’ Monthly Data Usage Trend
Mobile traffic in Korea is expected to grow by 103% each year, increasing 35-fold from 2010 to 2015.
In 2010, the average monthly traffic among KT iPhone users was 360MB, 5 times more than the average traffic of
75 MB among smartphone users worldwide.
For KT, iPhone traffic increased over two-fold, and call quality has decreased since the introduction of
unlimited data plans.
Before the plan: average traffic = 250MB (monthly increase = 8%) → After the plan: average traffic = 630MB
(monthly increase = 14%)
Call success rate drops to 97.2% during data use (98.3% during voice calls only). * Source: KCC (04/2011)
※ QoS: call success rate = 95%
Status
*Cisco Global Mobile Data Traffic Forecast, 2010-2015
CAGR
(PB/mon.)

3. 2
Facing the Data Explosion, KT has implemented the 3W N/W strategy for offloading.
Combination of WCDMA(3G), WiFi , WiBro(WiMax)
Offloading smartphone traffic to WiFi and WiBro
Relative ease of implementing 3W N/W due to the superiority of Korea’s fixed high-speed internet
network. ※ 50,000 Hotspots(03/2011) + WiBro (82 Cities & Expressways)
2. KT’s 3W Network Strategy WCDMA+WiFi+WiBro
WCDMA(3G)
• Upgrade to HSPA+ in Oct. 2010
*Portable WiBro+WiFi Router c
WiFi
WiBro
• 50,000 Hotspots(2011.3)  100,000 Hotspots in
2011
• Expanding WiBro coverage (82 Cities &
Expressways)
Public Egg*
KT WiBro Network KT 3W Network
*WiBro(Wireless Broadband): Korean version of Mobile WiMAX

4. 3
3. KT’s 3G Strategy for D/E
Existing Network Structure CCC Network Structure
KT tried to manage the Data Explosion by increasing network capacity through the adoption of
the CCC technology, but the outcome was limited.
Separates the DU and the RU that were combined in the base stations.
Centralizes the DU, installs the RU in service areas, and interconnects them through an optic cable.
Allows for capacity expansion by splitting cells  KT plans to establish CCC networks in 90% of the
Seoul region (10/2011)
CCC(Cloud Communication Center)
* DU: Digital Unit, RU: Radio Unit

5. 4
LTE SpectrumAuction
As a response to the D/E, KT participated in an LTE spectrum auction to secure frequency bands.
Traffic is expected to exceed the maximum capacity of 3G and WiBro in 2012.
LTE services exceeding 100 Mbps are unlikely in the near future due to the results of this auction.
Continuous frequency spectrum of mobile operators for LTE usage is 2x10MHz, enabling a speed of
75Mbps at maximum.
LTE services exceeding 150Mbps is unlikely until the commercialization of the LTE advanced technology
sometime after 2014.
KT SKT LGU+
800MHz 10MHz 10MHz 20MHz
900MHz 20MHz
1800MHz 20MHz 20MHz
2100MHz 20MHz
4. Securing 4G Frequency Bands
LTE Spectrum Allocation in Korean Market
3G + WiBro Capacity
Mobile Traffic
Mobile Traffic to Exceed the capacity of 3G+WiBro
※ auction spectrum(paired)

6. 5
LTE Market
SKT and LGU+ started their LTE services in the latter half of 2011, and KT will launch in 11/2011.
SKT and LGU+ launched their LTE dongles in 07/2011  Released LTE smartphone payment plans in 10/2011.
KT launched its 4G WiBro service in 03/2011  Plans to launch its LTE service in 11/2011.
It will take time for LTE services to be fully activated.
Potential obstacles include an end to unlimited data plans, low demand for pads, and limited coverage.
5. Commercialization of LTE Services
SKT’s LTE Price Plans
3G + WiBro 수용용량
Mobile traffic
LTE Service Plans by Mobile Operators
Mobile
Operators
4G Service Status
SKT
07/2011. Launched LTE services
09/2011. Launched LTE smartphone services
2012. Plans to build LTE networks in 25
major cities
LGU+
07/2011. Launched LTE services
10/2011. Launched LTE smartphone
services
By the end of 2012. Plans to build LTE
networks in 82 cities and towns
KT
03/2011. Launched WiBro 4G services
11/2011. Plans to launch LTE services
Plans Costs
Monthly Allowances
Voice(min.) SMS DATA
LTE 34 $ 29 120 200 350 MB
LTE 42 $ 36 180 200 700 MB
LTE 52 $ 44 250 250 1.2GB
LTE 62 $ 53 350 350 3 GB
LTE 72 $ 61 450 450 5 GB
LTE 85 $ 72 650 650 7 GB
LTE 100 $ 85 1,050 1,050 10 GB
* Exchange rate: 1,179 won per dollar
* Unlimited data plans are unavailable in LTE.

7. 7
3G vs. LTE
Being in the early stage of LTE services, mobile operators emphasize the fast speed of LTE in their
advertisements and services.
Mobile operators promote LTE by emphasizing its speed advantage, 5 times faster than 3G.
Killer App will allow HD Video Calls, N-Screen Video Streaming Services, and Mobile Network Game.
6. Characteristics of LTE
Price Plan Comparison
Differences between 3G and 4G
3G 4G
Devices -
• Bigger display size
• High performance CPU
Plans
• Unlimited
data plan
• Unlimited data plan
unavailable.
• Reduction in monthly prices
(vs. 3G)
Speed
•28.8Mbps
(HSPA+)
• 5 times faster, compared to
3G
Killer
App.
•Mobile
Instant
Messenger
•mVoIP
• HD Video calls
•N-Screen HD Video
Streaming
•Mobile Network Game
• Video Messenger
Plans
(3G vs. LTE)
Monthly Cost Data allowance
3G LTE 3G LTE
All-in-one 34
vs.
LTE 34
$ 29 $ 29 100 MB 350 MB
All-in-one 44
vs.
LTE 42
$37 $ 36 500 MB 700 MB
All-in-one 54
vs.
LTE 52
$ 46 $ 44 unlimited 1.2GB
All-in-one 64
vs.
LTE 62
$ 54 $ 53 unlimited 3 GB
* Exchange rate: 1,179 won per dollar
* Comparison of 3G and LTE services with similar plans
6

8. 7
MBB is expanding in some countries, including Sweden and Germany, by substituting for FBB.
In Sweden, one person households and people under 30 are leading the replacement of FBB with MBB.
In Germany, MBB is expanding in out-of-service areas with limited FBB infrastructure, and its price is at a competitive
level. ※ Germany’s FBB data usage per user is 11GB/month, similar to MBB data usage.
Current Status of Swedish BB Services (%)
7. LTE vs. Fixed Broadband Complementary or Substitution?
In Korea, mobile broadband (MBB) is still a complementary service to fixed broadband (FBB),
but there is a high possibility that MBB could substitute for FBB.
100Mbps high speed and national coverage are distinctive conditions, not comparable with other countries.
If the price gap between MBB and FBB is reduced, MBB could replace FBB.
※ SKT eliminated its unlimited data plans in concern of LTE replacing the fixed high-speed internet.
Age DSL Cable LAN/
Fiber
MBB
10s 63.44 6.45 16.13 12.90
20s 35.11 16.03 29.01 19.08
30s 44.33 14.00 22.67 15.67
40s 56.23 13.74 18.21 10.54
50s 58.41 10.03 16.22 11.80
60s 50.55 13.93 11.48 15.57
HH size DSL Cable LAN/
Fiber
MBB
1 28.99 16.61 28.34 23.13
2 52.22 13.30 15.59 13.88
3 56.63 12.90 16.85 11.83
4 61.79 10.57 18.29 7.72
5 61.54 7.69 12.09 14.29
6 or
more
45.10 9.80 27.45 11.76
Comparison of Vodafone LTE vs. DSL in Germany
[By age] [By household size]
*Source : EUI working paper survey results, n=2083, 2011 *Source : Vodafone, UniCredit Research (Mbps)
(€/mo)

9. 8
Dual 4G – Offer an optimum service environment through the harmonization of LTE and WiBro.
WiBro  Focus on high traffic devices, including notebooks, tablet PCs (Pad), and netbooks (Data use only)
LTE + WCDMA  Focus on smartphones (Voice+Data)
8. KT’s 4G Network Strategy Premium 4G Networks
WiBro + LTE Dual Network Composition
City/Expressway Whole country
Mobile WiFi service
High traffic devices
National service with
WCDMA
Smartphone devices

10. Amount of Private Investments for Fixed and Mobile Ultra Broadband(trillion won)
Mobile operators establish network plans to prevent the dumb pipe phenomenon, while the
government does the same in order to expand the infrastructure.
Mobile operators plan to establish intelligence networks to boost their profits.
The government aims to expand the infrastructure to boost investments in the Smart Era, rather than
planning to expand profit of network providers.
※ Plans to facilitate private sector investment of 38 trillion won to build a 1Gbps fixed-line network and a 100
Mbps wireless network by 2012.
The government’s role is limited, compared to its effort in the high speed internet during the 2000s.
※ Has limited plans for securing frequency bands and devising demand/supply management policies.
9. Government’s Future Network Vision Ultra Broadband Roadmap
9
2008 2009 2010 2011(P) 2012(P) 2013(P) 2014(P) 2015(P)
6.9 6.5 6.4 7.2 7.3 7.7 7.7 7.7
Fixed and Mobile Ultra Broadband Roadmap
2011 2012
2013~
2015
2016~
2020
Network Establishment
Advancement of Fixed
Broadband Network
Advancement of Mobile
Broadband Network
Virtualization and
Intelligence Network
Efficient Content
Distribution
Expansion of
smartnode-based
Content N/W
Open Platform and
Integration
~1Tbps transmission links, 1Gbps network '12)
A dozen Tbps
transmission links,
1Gbps network
Several dozen Tbps transmission
links, 10 Gbps network
600Mbps WiFi, 3.9G(100Mbps)
1Gbps ~ WiFi,
4G (600Mbps)
Several dozen Gbps ~
Expansion of WiFi,, 4G, or B4G
Establishment of Virtualization Research
Network and Quality Assurance N/W
Introduction of
Virtualization, Establishment
of Custom N/W
Establishment of Overlay-based Content
N/W
Introduction of
Smartnode- based
Content N/W
Expansion of Virtualization,
Establishment of Cognitive N/W
Standardization of Open API,
Establishment of Standard Platform
Trial Application of
Open API and
standard platform
Expansion of Open API
and standard platform
*Source : KCC(06/2011)
*Source : KCC(06/2011)

11. 10. KT’s Future Challenges
10
The Data Explosion leads to an MBB demand increase, but not to an increase in operators’ profit.
Rather, there is a loss of investment drives.
① Oversaturation of mobile phone market ② Lack of Killer Application
③ Collapse of Legacy BM ④ Diminishing ARPU
Collapse of
Legacy BM
Fall in ARPU
Lack of new
Killer
Application
Oversaturation
of customers
• Mobile phone penetration rate
in 08/2011 = 102.6%
Crisis of loss
of investment
drives
• 4Q 09’ ARPU $30.8  2Q 11’ $29.1
• Reasons:
1) Unlimited data plan
- Move from high-end to lower-end plans
- Use of Kakao Talk, instead of text/voice
messages
2) Intensification of competition for
combined product discounts
3) Pressure to lower rates by the
government, congress, and NGOs
• Popularity of Kakao Talk is replacing SMS/voice messages.
- 73% of Kakao Talk users reduce their use of SMS.
- 41% of Kakao Talk users reduce their use of voice messages.
• Concern for the replacement of PSTN and VoIP from the
expansion of mVoIP
• Dominant
Application:
Nothing but
Kakao Talk