South Korean operators have a similar set of advantages to those of their counterparts in China. On one hand, they receive significant financial and infrastructure support from their government to help achieve national 5G ambitions; and they have a close relationship with key suppliers such as Samsung, whose 5G R&D has been heavily geared to the needs of these early-moving MNOs.
But on the other hand, unlike the Chinese MNOs, they are competing in a small and saturated market where additional revenues will be hard to find. So the three players – KT, SK Telecom and LG U+ – are eyeing enterprise services for the second phase of their deployments.
According to KT, it expects to sign more than 100 enterprises once it completes the second, coverage-oriented stage of its roll-out, which will use 8 GHz spectrum. It plans to connect 85 cities and achieve 85% coverage by 2022.
Analysts at Bernstein Research expect South Korea to end 2019 with the second largest installed base of 5G base stations after China, with 75,000 units, well ahead of the USA, whose tally will be constrained by its lack of midband spectrum. It will have about 10,000 base stations, Bernstein believes. Although the millimeter wave bands which three of the US MNOs (AT&T, Verizon and T-Mobile) are using require large numbers of cells because of their short range, the economic challenges of deploying over wide areas in these high frequencies mean the roll-outs are likely to stay very localized. T-Mobile is starting to deploy a coverage network in 600 MHz (which has very large range), while Sprint, the best-placed in terms of midband spectrum, is using some of its 2.5 GHz 4G airwaves for 5G.
The first stage of KT’s roll-out saw 5G activated in capital Seoul and five other major cities. Sang-Hoon Park, head of regional network operations and management, told last week’s Total Telecom conference in London that KT had focused first on population hotspots, major transportation routes and “strategic spots” such as 464 universities (on the basis that students are likely to be early adopters, and will innovate in applications and services).
“Needless to say, population is most important when designing mobile coverage, while transportation routes are also important as the demand for urgent communications is high,” he said. “65% of network traffic comes from Seoul and five other metropolitan cities so the first phase of the deployment concentrated on these major areas.”
Another vital element of phase two will be lower latency, both to support new use cases such as autonomous driving, and to improve effective data rates and response times for mobile broadband. Latency will be improved with the deployment of the more IoT-focused Release 16 and 17 of the 3GPP standards, and by the 5G core. Increasingly, operators believe edge computing will be critical to their 5G business cases, further improving latency rates by processing some data close to the user. Some providers will use partners’ edge infrastructure but many are looking to deploy their own in data centers, central offices and even cell sites. KT has started to deploy edge data centers to reduce its average network latency by 10ms.
The enterprise will be important to all the MNOs, but as elsewhere, the early 5G battles are being fought in the familiar consumer bases. Here, LG U+ made some early market share gains after the simultaneous launch in April. And market leader SK Telecom showed some modest signs of hope in the challenging mobile broadband model in its most recent quarterly results.
In its third quarter, it announced an increase in ARPU of 1.3% compared to Q2, and 1.7% since the launch of 5G. These are small numbers, but more encouraging than the static or falling ARPUs that some operators – including some in Korea – saw in the early stages of 4G. SK Telecom said brisk uptake of 5G has halted its slide in revenues – after four consecutive quarters of falling mobile services revenue, it saw growth of 0.1% year-on-year, and 2.1% sequentially, in Q3. This was down to a combination of winning new subscribers, and increased data consumption by many existing ones.
And with 5G accounting for only 5% of its total base, there is still room for growth, especially as advanced services enabled by AR/VR and other technologies are still in their early stages, said SK Telecom’s management.
The MNO reached the one million 5G subscriber mark in August, and as of September 30, had 1.54m 5G users.
However, having to launch on the same day as its rivals means that no MNO had first mover advantage, and all three have had to spend heavily on marketing to win over subscribers. SK Telecom’s marketing costs rose 7% year-on-year in the quarter to reach over 27% of revenues.
The operator also reported a 17.5% year-on-year rise in EBITDA profits, and a 9% rise in total revenues, though the biggest driver of these figures was not 5G, but the media and IPTV business, with the security division also being a strong contributor. The biggest negative for the bottom line was a 90% fall in the contribution from SK Telecom’s 20% stakeholding in SK Hynix, the world’s second largest memory chip maker. This dragged the operator’s net earnings down by 73% to KRW274.4bn ($230m), on operating revenues of KRW4.56 trillion ($3.9bn).