KTF Blazes Trail into 3G Future

At a time when other parts of the world are still waiting to begin third-generation (3G) mobile telephone services because of its high infrastructure costs and technical glitches, South Korea has emerged as the world's hottest 3G market.

The picture shows 2 SK Telecom staff demonstrating the 3G service at the time of launch.

With the commercial introduction of CDMA2000 1X EV-DO (evolution data optimized) services last May, KTF, the nation's second-largest mobile carrier, is working across a number of fronts to achieve its mission toward fully-fledged 3G mobile Internet applications.

Dubbed FIMM meaning First in Mobile Multimedia, the EV-DO service can theoretically deliver data at speeds of up to 2.4 megabits per second to Internet-equipped phones.

Strictly speaking, the high data transfer speeds have not been fully realized yet because of the inability of mobile handsets and several technical glitches. However, KTF aims to attract more than 250,000 new customers for its EV-DO service by the end of this year.

``Our EV-DO service is faster and richer than current 2.5-generation services, mainly known as 1X network, and compares favorably with Japan's NTT DoCoMo's 384 kilobits per second,'' said Lee Byung-moo, a spokesman at KTF.

At the end of September, KTF said it had 10.4 million mobile users or 32.5 percent of the 32 million market. By the end of this year , the company hopes to expand its customer base to 11.2 million people.

Of them, KTF had some 50,000 subscribers to its EV-DO service, which allows multimedia messaging, videoconferencing and other data communications such as mobile payment and music downloads while on the move.

KTF began commercial EV-DO services in Seoul and its 20 satellite cities before later expanding the coverage to 80 cities nationwide.

At the launch of the service, KTF distributed two types of mobile phones, manufactured by Samsung Electronics and LG Electronics respectively, comprising a high-speed version of its wireless Internet service and a data-transmission model.

In mid-November, KTF is scheduled to release a new EV-DO phone manufactured by Samsung Electronics named the SPH V-3000. With a 260,000-color screen and 40-polypony ring tones, the phone supports wireless video streaming technology that enables a user to seamlessly watch video clips.

To stimulate interest in the mobile phones, KTF has focused on mobile multimedia messaging (MMS) services. Known as a ``killer application'' among industrial specialists, MMS could well prove to be the Holy Grail for wireless carriers.

As short messaging services became a runaway success in existing 2G networks, KTF plans to continue enjoying the popularity as young customers move across to EV-DO telephone services.

``We are currently engaging in developing various MMS services both in our laboratories and in conjunction with other technology start-ups,'' Lee said.

In a recent report, international technology research house International Data Corp. (IDC) said the success of the mobile Internet is closely tied with consumers' lifestyle needs and wants.

``Industry players should identify hot market segments delineated by demographics and lifestyles, and target them aggressively with personalized solutions,'' the report said.

As mobile handsets are first and foremost a voice-centric device, a user's first instinct is to extend the concept of communication to new services such as instant messaging and email. In the near term, communication applications will come closest to being a killer application of the wireless world, the survey said.

As part of the plans to strengthen mobile Internet applications, KTF has signed alliance agreements with the Internet arms of three terrestrial broadcasters _ KBS, MBC and SBS.

The alliances with the broadcasters are helping KTF provide more attractable wireless programs for its customers.

Merger With KT ICOM

On Sept. 16, KTF senior managing executive Hong Young-do said the company's board endorsed a plan to buy a 15 percent stake in KT ICOM, another 3G unit of the KT group.

In an investor relation session, Hong said KTF could additionally acquire KT ICOM shares to help buffer any negative impact on the company's shares.

Since early this year, shares of KTF have been under pressure partly by concerns that the planned merger would dilute the value of the company's stock.

Under the plan, KTF would buy some 280 billion won worth of KT ICOM stocks, or 15 million shares, between October 23 and November 5.

``The price is set at 18,227 won per share and the value is likely to be lowered,'' Hong was quoted as saying at the meeting.

``In the early stages, KTF incurred massive losses due to a huge initial infrastructure spending, and KT ICOM is expected to experience the same difficulties given the nature of a telecom service operator,'' he said.

Its parent KT owns 47 percent of KT ICOM, which was launched as a 3G unit when the parent company was awarded one of three 3G licenses in December 2000.

At that time, the government required each bidder to create a new company to get the license, based on the wideband CDMA technology, in an effort to equally distribute the economic benefits of 3G mobile phones.

KTF holds a 15 percent stake in KT ICOM, while another 28 percent of the stock is held by 500-odd small-and medium-sized equipment vendors and upstart wireless software companies.

However, the attempt at garnering wide support from the industry could prove to be a failure. KT's rival SK Telecom is also preparing to consolidate its 3G unit SK IMT.

Yang Jong-in, an analyst at Dongwon Securities, said he expected the merger would be completed by early next year, as most of the partnership companies have expressed their intention to sell their KT ICOM stake.

``KTF felt a need to finalize the acquisition with KT ICOM to avoid duplicate investment on 3G networks,'' Yang said.

He added the procedure for the share purchase is expected to be easier because the price reasonably represents its corporate value.

For the fiscal year of 2001, KTF reported record net profits of 433 billion won, offsetting the accumulated losses of four years since the company started operations in 1997.

Its sales rose 62 percent to 4.49 trillion won year-on-year, and operating profits also jumped 197 percent to 745.5 billion won.

For the first six months ending June 30 this year, KTF reported record net profits of 307.8 billion won on sales of some 2.5 trillion won.

Analysts said wireless data services were among the Korean carriers' key revenue sources, driving up their monthly average revenue per user (ARPU), a feat many other markets have had difficulty duplicating.

KTF said its wireless Internet ARPU for the first half of the year rose 55 percent year-on-year to 2,564 won, pushing data service revenues to 132.6 billion won, up 68 percent from 68.8 billion won in the first half of last year.