| SK Telecom Struggles Overseas
| Poster : UFINE
Date : 08-12-12 10:57
Hit : 19104
SK Telecom, Korea's primary wireless carrier, is failing to duplicate its huge success on the global scene with its overseas operations failing to reap tangible results.
The Seoul-based company is the runaway leader in the local mobile telephony service market with a 21 million-user pool. Based on this rich customer base, it netted 1.45 trillion won in profits last year.
However, the firm's growth has slowed to a snail's pace over the past few years because the local mobile market has reached saturation point with 41 million people out of the total 49 million population carrying phones.
To chalk up seamless growth, SK Telecom has avidly tapped foreign countries such as the United States, Vietnam and China rather than dwelling on the saturated domestic market.
Such a strategy prompted the company to shell out big bucks but it has yet to come up with impressive results.
On a more negative note, SK Telecom faces big challenges here regarding the third-generation (3G) leadership and the pressure to cut mobile rates while the company is busy making inroads internationally.
Operations in US, Vietnam
SK Telecom joined hands with EarthLink, the Atlanta-headquartered Internet service provider, in 2006 through a 3G network leased from Sprint Nextel.
The two outfits launched mobile offerings under the name Helio, and they have made every effort to boost services by agreeing to spend $220 million each for the start-up.
They projected that the big investment would attract 3.3 million users by 2009 but its performance has been disappointing with its user pool remaining at a mere 100,000 a year after its debut.
In this climate, SK Telecom President Kim Shin-base said in a press conference last month that the firm is ready to underpin Helio by spending more than the expected investment.
Kim said EarthLink would join the move and originally EarthLink also said it could channel $50 million more for the joint venture.
However, things are not certain after EarthLink named Rolla P. Huff, who is famous for scrapping unprofitable business segments, as its new CEO.
An SK Telecom spokesperson predicted EarthLink will continue its commitment to Helio in line with the agreement reached in early 2005.
Yet, observers projected the Helio project might be a target for Huff because the costly joint venture accounted for most of the losses EarthLink posted of late.
``To be sure, uncertainty lies in front of Helio. Should Helio fail to take off, it is a bad sign for SK Telecom's other foreign businesses such as those in Vietnam,'' said Kim Kyung-mo, an economist at Mirae Asset.
SK Telecom formed an alliance with two other Korean companies _ LG Electronics and Dong-Ah Elecomm _ to form a joint venture named SLD in 2000.
In partnership with Vietnam-based fixed-line telecom carrier, Sigong Post and Telecommunication, SLD ushered in Vietnam's first CDMA services in 2003 under the banner of ``S-Fone.''
Short for code division multiple access, CDMA refers to one of the world's two major platforms enabling mobile telephony, alongside the global systems for mobile communications (GSM).
S-Fone has attracted two million users and its subscriber pool is projected to top three million later this year and four million next year. But the figures are just a single-digit fraction of the overall user pool of 27 million.
S-Fone is struggling to stay afloat with three Vietnamese players _ Viettel, MobiFone and VinaPhone _ carving out most of the market there.
Double Challenge in Korea
Domestically, SK Telecom faces two challenges _ the runner-up player KTF leads in the 3G sector of the market and society is going all out in calling for a reduction in mobile rates.
KTF launched the 3G services, called high-speed downlink packet access (HSDPA), midway through last year and expanded the service range across the country in March.
HSDPA enables people on the road to remain hooked up to the Internet at the speed of the current fixed-line broadband via their mobile handsets.
SK Telecom followed up in the nationwide network in late May but KTF enjoys a first-comer advantage.
Figures talk much _ KTF has attracted roughly 600,000 customers to HSDPA since March while SK Telecom drew roughly 100,000 subscribers over the same period.
However, the company said it was not wise to make a big investment into 3G services, which have yet to take a firm root.
``HSDPA services lack a killer application although KTF promotes video calls. KTF seems to evaluate the potential of video calls too high,'' SK Telecom Senior Vice President Bae Joon-dong said.
``I think the shift to the 3G market will happen some time later. We will further sharpen the state-of-the-art 2G networks of the present before the shift happens,'' he said.
However, experts point out SK Telecom may lose its hard-earned leadership in the local mobile telephony market if KTF continues to take the driver's seat in the 3G market.
In addition, SK Telecom is suffering an uphill struggle against the demands to dramatically reduce rates for mobile services.
Such movements have always plagued SK Telecom and other two wireless operators _ KTF and LG Telecom _ over the past several years.
But this time around, things seem to be more serious since many influential players ranging from lawmakers to civic group activists are vowing to impose a rate reduction.
Should SK Telecom succumb, its impressive bottom line, which stood at 1.45 trillion won last year, will be seriously dented.