This report analyzes potential price plans for the iPhone if introduced in Korea by mobile carriers SK Telecom and KT. It examines pricing strategies in other countries where the iPhone has launched. Based on average revenue per user (ARPU) and subsidies paid to Apple, the report estimates monthly plans for SKT could be $56-67,200 won and KT $53-63,600 won. These prices position the iPhone user's ARPU between USA and Japan levels relative to GDP and are considered feasible for the Korean market.

1. VisionArena Insight Report, Sept 2009 1
VisionArena Insight Report 2009
The Economics of Apple
iPhone Introduction (2)
- What will be an iPhone Package
Price Plan of mobile operators in
Korea?
By Brad Cho
For more information visit site
http://www.visionarena.net
Recently there are many rumors about iPhone release in Korea. It is due to the fact that
Korea is the calm latitude from iPhone, as distinct from other major mobile leading
countries.
The mobile operators like KT (Korea Telecom) and SKT (SK Telecom) don’t provide
enough information about iPhone release for their customers. And moreover, they
hesitate its way to introduce iPhone to Korean market because they have a concern
about its explosiveness and impact on traditional ecosystem and profitability in Korea.
In this report, we scan the real cases of mobile operators’ price plan combined with
Apple iPhone. And you will get basic forecast for iPhone package price plan of mobile
operators in Korea.
Some assumptions used in this report are
that
- The forecasted price plan assumes
that mobile operators include all
expected amount of ARPU in one
price plan.
- The target model for calculation is
iPhone 3G, 16GB once sold at
$320 in Japan.
- The partners should give an
amount of $800 to Apple as
supplying cost of one iPhone
device.
- ARPU is equal to profit. So we
don’t take into account about the
real cost mobile operators ought
to pay.
- It doesn’t separate Voice and Data
ARPU. So the number means the
total ARPU per month.
Some constraints of report are that
- The number and fact I referenced
sometimes different for different
sources. So the real number might
be slightly different with the
number used in this report.
- The forecasted number assumes
some direction of mobile operators’
action. But in real world they can
act more aggressively or
conservatively.
iPhone cases in other countries

2. VisionArena Insight Report, Sept 2009 2
VisionArena Insight Report 2009
Then we will look at the cases of other
countries in which iPhone were released
from now on.
AT&T (USA)
AT&T is the first mobile operator that sold
the Apple iPhone and its exclusive
agreement with Apple will be end next
year.
There are some rumors that Apple sits on
the negotiation table with Verizon these
days. So it is uncertain that AT&T can
extend the exclusive agreement with
Apple to 2011.
 iPhone selling price with 2yrs
binding and subsidies
 3G 8GB/16GB, each $99/$149
 3Gs 16GB/32GB, each
$199/$299
 ARPU comparison between iPhone
users and non-iPhone users
 iPhone user: $95 / month
 non-iPhone user: $59 / month
Softbank Mobile (Japan)
Softbank is the first mobile operator that
sold the Apple iPhone in Japan and
Mr.Son, Chief Officer led the negotiation
with Apple to catch up with NTT Docomo.
When iPhone was released by Softbank in
July 2008, the market record was not as
good as market analysts expected. It
might be due to some reasons like
content coverage relatively inferior to
Docomo’s i-Mode, non-English native
countries’ pain point and slow device
problem.
After iPhone 3Gs was released recently in
Japan, customers want iPhone more than
ever because of its fast performance and
enriched functionality. A survey from
Kakaku.com tells the interesting fact that
iPhone sales account for 55% of total
smart phone market in Japan.
 iPhone selling price with 2yrs
binding and subsidies
 3G 8GB/16GB, each
$213/$320
 3Gs 16GB/32GB, each
$126/$252 (11,520
yen/23,040 yen)
 *ARPU comparison between
iPhone users and non-iPhone users
 iPhone user: $128 / month
(11,694 yen / month)
 non-iPhone user: $46 / month
(4,273 yen / month)
*There is no public announcement to
reference for iPhone user ARPU. So the
number was made by estimation with
below data.
- Softbank’s ARPU = 4663 yen
- Softbank’s subscription users = 19
million users
- The number of iPhone sold = 1
million
- Data ARPU change before and
after iPhone: before = 1,490 yen,
after = 1,880 yen
If we believe that iPhone user’s ARPU
include monthly iPhone device
installments, then it should be decreased
by $10~$15 per month.
China Unicom (China)
China Unicom will be the first mobile
operator that sells the Apple iPhone in
China in October this year.
It is said that iPhone 3G (8GB) will be sold
at $365 with 2yrs binding agreement.
The number of China Unicom’s
subscription users is about 141 million
recently.

3. VisionArena Insight Report, Sept 2009 3
VisionArena Insight Report 2009
 iPhone selling price with 2yrs
binding
 3G 8GB/16GB, each
$365/Unknown
 ARPU
 Non-iPhone user: $6.1 /
month (41.7 Yuan / month)
Price estimation and Korea facts
To remind again, some assumed numbers
will be used as below.
- Apple provides iPhone to mobile
operators at $800/device.
- User must pay $320 for iPhone 3G
(16GB).
- Mobile operators should give $480
subsidies to their each iPhone
buyer.
- The iPhone user should pay more
than $20/month to recover the
subsidies. ($20 = $480 subsidies /
24 month)
The mobile operators will not want
migrating to iPhone decrease their
already-been customers’ Average Profit
per User.
The mobile operators will want to make
not-yet customers to their own customer
even if profit is zero at early years.
SKT/KT (Korea)
In Korea, there are two candidates, SKT
and KT, to introduce iPhone to Korean
market among three mobile operators.
 ARPU (All)
 2008/4Q: SKT $36 (43,665
won), KT $33 (39,721 won)
 ARPU (Data Only)
 2008/3Q: SKT $7.5 (9,050
won), KT $5.8 (7,036)
 Data Revenue to Total Service
Revenue
 2007: SKT 27%, KT 14%
Forecasting iPhone package price in
Korea
As described previous section, the iPhone
user should pay more than $20/month for
2 years to recover the subsidies,
marketing cost of mobile operators.
So mobile operators’ iPhone package price
for already-been customers could be
current ARPU plus $20 per month.
 Monthly package price of SKT
= $56 (67,200 won)
 Monthly package price of KT =
$53 (63,600 won)
The device installments are not included
in package price above.
The package price for not-yet customers
can be the same as already-been
customers.
But aggressive operator can minimize the
profit for increase market share in Korea.
For example, new customers can get free
iPhone with $33, monthly fee and 2 years
binding agreement. (Monthly fee $33 =
iPhone device cost $800 / 24 month)
In real situation, the monthly fee for new
customers can range from $33 to $56.
And the monthly fee for old customers
can be more than $53/$56.
Is it feasible price in Korea?
We can also have more analysis about
whether Korean customers would like to
accept the iPhone package price.
The simplest approach is to compare
some indicators among countries.

4. VisionArena Insight Report, Sept 2009 4
VisionArena Insight Report 2009
In the perspective of ARPU-to-GDP and
ARPU increasing ratio, the analysis data is
as below
<Source: VisionArena 2009>
The relative high ARPU ratio between
iPhone user and non-iPhone user is
 USA: 61.0%
 Japan: 178.3%
 SKT: 55.6%
 KT: 60.6%
The relative iPhone user’s ARPU to GDP is
 USA: 1.0 (base line)
 Japan: 1.8
 SKT: 1.4
 KT: 1.3
The estimated numbers are usually
located between USA case and Japan case.
So the package price could be accepted to
customers in Korea.
The prices in this report assume including
all the cost that customers should pay. No
invisible cost will be an important
marketing issue in Korea.
All the estimation of package price plan
can be differ in real world. But you can
reference it as a expected iPhone package
price to customers in the future.
<End>
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Criteria USA Japan SKT KT
1) GDP per person 45845 34312 19751 19751
2) ARPU (iPhone User) $95 $128 $56 $53
3) ARPU (non-iPhone User) $59 $46 $36 $33
4) ARPU ratio 61.0% 178.3% 55.6% 60.6%
5) iPhone ARPU per GDP 1.0 1.8 1.4 1.3
4) = { 2) / 3) } - 1
5) = USA is the base point 2072.2