Smartphone Wars

Zoom in on a group of young people sitting around a table: the subject turns to mobile phones, and comments turn enthusiastic. “I have an Omnia smartphone, but I’m getting the new 4G iPhone as soon as it comes out. I have to change my mobile service provider from SKT to KT, but it’s worth it,” says one. “As an Apple fan, I know what you mean,” another chimes in. The last person moans at having gotten her current phone just three months before iPhone’s launch in Korea. “If I change my service provider from SKT to KT, I’ll be charged 700,000 won ($560) in cancellation fees.” Still, she is considering it.

This innocuous scene represents, in reality, the battlefield for Korea’s telecommunication giants KT and SKT in the race to best one another within the smartphone market. The two mobile service providers have been engaged in a protracted war over market share ever since the belated introduction of the iPhone in Korea last November caused a splash and set off a major trend.

KT vs. SKT

In the first quarter of the year, the telecommunications sector has been dominated by the ever-developing competition between KT and SKT in the smartphone sector. Constant new product launches, widespread marketing pushes and seductive service offers have swamped the public in a series of bids to garner a larger market share.

The entire campaign began when KT, Korea’s No. 2 mobile service provider, preempted the smartphone market by launching Apple’s iPhone in Korea in November 2009. The iPhone has sold shockingly well, surpassing the half-million mark in early April. Meanwhile, SKT, the current mobile service leader, was galvanized into action to retain its control over the already saturated market. In late April, SKT formally announced a blitz, with twelve new smartphones to be launched over the next two months.

Incremental developments in the smartphone war are mirrored in the company’s profit margins. For example, SKT’s net profit for the first quarter of this year missed forecasts due to burgeoning marketing costs in the latest smartphone push.

Although the iPhone hit international markets back in 2007, local telecommunications regulations barred the device from making its debut in Korea until late last year. The regulations have since been sharply criticized as ‘protectionist’ and blamed for causing Korea’s telecommunications technology to lag behind that of other countries.

One may ask why the battle for dominance of the smartphone market is raging between major telecommunications companies instead of mobile phone manufacturers such as Apple and Samsung. The answer is that traditionally, Korean consumers have chosen their cell phones according to the products offered by their mobile service providers. Aggressive strategies to retain current customers, such as incentives for loyal users and high cancellation fees also discourage consumers from switching telecommunications service providers, even if a rival company offers a desired model.

A smartphone generation

The conflict is especially heated because the market is brand new - it’s been just a few months since the iPhone’s arrival, but Korea’s smartphone population now numbers more than a million. However, such a steep rise isn’t surprising. In industrial circles, Korea is known as a nation of early adopters, sensitive to trends and covetous of cutting-edge hardware.

As a result, there has been a rapid domino effect in many related sectors since the advent of smartphones a mere six months ago. Among the list of fields forever changed by smartphones, obvious candidates include wireless internet, software and application development and mobile banking.

Furthermore, because 90 percent of smartphone users are in their 20s to 30s - an age demographic highly coveted by industries for their spending prowess - many companies have employed smartphones in their marketing strategy. Korea is joining the wave of international firms using social networking services such as Twitter in their public relations undertakings in order to enhance their corporate image.