In the telecommunications industry, new subscribers for services have been a key feature in determining market conditions. As penetration rates for major telecommunications services such as fixed phone, high-speed Internet, and mobile phone are in excess of 95% and the market in terms of the new subscribers is exhaustively saturated, low level of increase in the new subscribers is expected to remain.
This is the main reason why the growth of the industry in scope that drastic increase of new subscription has been directly connected to the revenue surge is topping the peak point of growth. The ARPU service (Average Revenue Per User) as a base of growth in quality also has had a tendency to decrease continuously due to price-cut pressure from the government, a highly competitive market, and an increasing defectiveness in services. The industry as a whole, therefore, shows high possibility to reiterate the gloomy outlook in 2010.
In the case of wired communications, such as fixed phone lines, this deterioration will be small in comparison to mobile communications due to the number of subscribers of PSTN (Public Switched Telephone Network) falling, penetration of Internet phone with low costs, and a clogging increase of new subscribers for the high speed Internet service hooked up through telephone lines. Still, the downsized scale and reduced profit in the industry might be offset by the new penetration of IPTV subscribers and Internet phone. By substituting the fixed phone market, Internet phone is also expected to provide an opportunity for new growth for starters like LG Dacom.
The IPTV market has been gradually swelling since the second half of 2009 by virtue of variable contents and the availability of retransmitting terrestrial channels. This market is also evaluated to have a huge opportunity to grow thanks to the increasing number of new subscribers since the ratio of subscribers in the IPTV market to that of high-speed Internet is still only around 15%. Moreover, as former subscribers of VOD service are transferring to the real-time service and new subscribers are being lured to register, industry revenue is anticipated to be sanguine.
The expected time-consumption for the market evolution of the IPTV, by the way, will be a minor problem to accomplish a successful settlement for the IPTV market because of complex infrastructure of IPTV market and the existence of tenacious substitutions like CATV. Nevertheless, the long-term outlook for the IPTV market, especially in terms of productivity of the revenue by settling firm subscriber-based market structure is to be exultant in accordance with the government’s willingness to raise the IPTV market and network integration project based on IPv4.
In the case of the mobile phone market, companies will be canvassing ways out of sluggish market condition based on the 98% of penetration rate of mobile phones through coalition with the wireless Internet market, especially considering the government’s ongoing policy to vitalize the wireless Internet market, and expected amplification of the demand base in the market.
The competition picture in the entire telecommunication market is becoming very complex. The main field of competition no longer remains the individual service sector, but has developed cross-sectional mainly in terms of cable and wireless communication services, mainly as a result of the M&A between KT and KTF and represents a new trend of companies striving to compensate their weakness by seizing the comparative advantages through the merge.
In the field of cable communications, the second and third position holders in the market took advantage of the deteriorated sales force of KT, the No.1 market leader, after having acquired KTF in the first half of 2009. However, the entire market hereafter may become extremely competitive as KT has begun to defend vested subscribers aggressively after the third quarter.
Competition in the mobile phone market has been ferocious since the second quarter of 2009 following the M&A between KT and KTF. Furthermore, the introduction of smart phones, and the merger of LG’s three communication-related corporations could trigger an exaggeration of competitiveness in marketing. At the same time, however, low profit woes combined with high marketing costs are expected to alleviate the level of competition.