Maravedis: South Korean trio set aggressive LTE subscriber targets

Basharat ashai, APAC analyst Maravedis

Basharat Ashai

South Korea has become the world's first  country to offer LTE service through all of its mobile operators (SK Telecom, Korea Telecom and LGU+). In July 2011, both SK Telecom and LG U+ launched LTE starting in Seoul, and Korea Telecom launched its commercial LTE service on January 3rd, 2012. Korea Telecom has developed a new cloud communication technology called "LTE Warp," which it claims improves the speed and reliability of LTE service. This technology brings together 144 cell sites under one virtual station and has been designed tο assign data capacities based οn thе Internet traffic around specific areas.

The three South Korean mobile operators, SK Telecom, KT and LG U+, had previously announced plans to launch LTE in 2013. However, the explosive consumer adoption of smartphones (as per South Korean regulator KCC, the country passed 20 million smartphone subscribers in October 2011) and other high-bandwidth-consuming devices coupled with the dramatic increase in data usage over the last few years have forced operators to accelerate their LTE deployment plans.

SK Telecom has revealed that its data traffic recorded in June 2011 was 19 times that of August 2010 and predicts that the increase in data traffic will continue with the spread of smart devices. To address the resulting problem of network congestion, SK Telecom plans to provide what it calls a "data freeway," which can be summarized as dedicating a part of its 3G spectrum to handle only data, with the rest of the capacity used for voice.

As per SKT, this differentiation (dedicating a part of its 3G spectrum to handle only data, with the rest of the capacity used for voice) will allow the company to handle a volume of data six times larger than the current level. SK Telecom has shifted one of its four carriers to data-only for better data management. It will use two more carriers for data processing by using WCDMA frequencies allocated by the Korean government in April 2010. SK Telecom also believes that LTE technology is essential to support this traffic growth. It predicts that around 65% of its total data traffic will be handled by its LTE network by the end of 2014.

On the other hand, competitor Korea Telecom has witnessed an average monthly data usage of 900Mbyte~1000Mbyte per subscriber.  KT's 10% users are creating more than 70% of data traffic. The company's data traffic has increased over 700% between 2010 and 2011. KT expects data traffic to further explode going forward and is currently offloading the data traffic by utilizing all of its network, including WiBro, Wi-Fi and 3G network.

As per KT, the LTE network will also play important role in offloading the total wireless traffic. Since South Korea is the world's most data-hungry country, KT has ruled out unlimited-data plans for its LTE service. All the three mobile operators have designed higher pricing plans for LTE service, hoping more LTE usage would improve ARPU and thus wireless revenue.

All the three mobile operators have set aggressive LTE subscriber targets. SK Telecom projects that its LTE service will attract 5 million subscribers by 2012, 11 million subscribers by 2013, and around 15 million subscribers by 2014. The operator expects LTE subscriber uptake to be bolstered by the availability of a range of LTE devices (mainly through LTE smartphones) during 2012 and rapid advances in LTE coverage. 

KT has set an ambitious target of 4 million LTE subscribers by the end of 2012. South Korea's LG U+, which launched in 2.1GHz, is targeting 10 million LTE subscribers within three years (2014).  To us, this target sounds too aggressive, given that LG U+ is the smallest mobile operator in South Korea. However, the target might be achieved if the right mix of devices are in place and there are attractive pricing plans for users.

Taking into account the three South Korea Mobile Operator projections, the country will reach an estimated 38 million LTE subscribers by the end of 2014. Maravedis believes that this target is reachable if all the three mobile operators are able to fulfill their LTE coverage commitments. SKT initially planned to secure national coverage (82 cities) by the end of 2013. The operator is now planning to offer the 4G LTE service across the country from April 2012, moving up its original schedule by eight months.  LG U+ looks to have its LTE coverage go nationwide by July 2012.

Despite KT's late offering of LTE service, it plans to have more than 90% of South Korean citizens covered under its LTE network by April 2012. Such an ambitious goal does not come without sacrifices, which in this case is to switch off its 2G network. Korea Telecom has obtained approval from the courts to shut off its 2G network, much to the disappointment of the group of more than 1,000 customers who filed a lawsuit hoping to keep the service alive. The freed-up 1.8GHz band will now be dedicated entirely to the 4G LTE deployment, and KT's nationwide 2G service will be terminated by March 19th, 2012.   

Basharat Ashai is a market analyst, APAC & MEA, for Maravedis.

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