SOUTH Korean telecom executives have a message for European cousins who have long looked on in envy at the highly connected Asian market: be careful what you wish for.
South Korea, the world's most wired country with 30 per cent of its 50 million mobile users on superfast networks, has inspired many European operators ahead of their own rollout of networks based on LTE, or fourth-generation technology.
But SK Telecom Co Ltd, the country's largest operator with more than half of the market, and second player KT Corp, said although the rollout of faster networks had been good for consumers, they were still struggling to make money on the technology 18 months after launch.
"Our European colleagues complain that the explosion in data has not fully happened for them," said Lee Suk-chae, the head of KT Corp, at the Mobile World Congress on Tuesday.
"In Korea, they are data crazy. We have unprecedented demand. We cannot handle it. But the issue is they are not willing to pay enough. So, the fundamental problem is, can we make any money out of it?"
South Korea is often held up by European governments as the model they would most like to replicate, with superfast networks enabling millions of people to shop online, communicate and become more productive.
The country has three operators which have been forced to fight for every consumer, spending heavily on marketing and handset subsidies and continually offering more for less to lure in and keep their subscribers.
"The traffic increases but the revenue does not necessarily follow," SK chief technology officer Byun Jae-woan said in an interview.
"We have seen about a US$13 (RM39.60) increase in average revenue per user compared with 3G. So, it is good money, but it may not be enough to justify the huge investment needed in LTE."
Byun added that the profitability of LTE would improve as SK expects the number of subscribers on the technology to grow to 60 per cent by the end of the year, from 30 per cent currently.
European operators, such as Telefonica SA and France Telecom SA, weighed down by regulation, competition and economic woes, are betting that the billions of dollars of investment needed for 4G networks will eventually be offset by an increase in customer prices.
Their optimism will be tested when 4G services reach more subscribers in Germany, France, Scandinavia and Britain this year.
In contrast, in the United States, AT&T Inc and Verizon Communications Inc are surfing the 4G wave to grow sales and profits, but that has much to do with the fact that they have a combined 70 per cent share of their home market.
The lessons from Korea are not all harsh, though.
Byun said rolling out faster networks could enable a mobile operator ranked number two or three to become market leader because the improvement to the consumer is so significant.
But he also noted that once one operator launched 4G, others had to follow quickly or face being left behind.
Customers of both firms on average consume 1.8 to 1.9 gigabytes of data per month, with users spending hours watching video on YouTube, browsing the web and social networking on smartphones and tablets.
According to research from Cisco, an average smartphone user on slower 3G networks consumes around 342 megabytes. South Korea's leap to 1.8 gigabytes followed an 80 per cent jump in mobile data traffic on 2G, 3G and 4G networks in 2012.
SK says it cannot predict when the network will break even because it depends on marketing costs. Reuters
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