New 3G Services New 3G Services Strategy Toward Growth Strategy Toward Growth May 24, 2006 May 24, 2006 3G CDMA Latin America Regional Conference 3G CDMA Latin America Regional Conference 0
Table of Contents Table of Contents Wireless Industry in Korea Wireless Industry in Korea Strategy toward Growth Strategy toward Growth What’s Next? What’s Next? 1
Korean Wireless Market Korean Wireless Market SK Telecom Remains the Undisputed Leader Market Share by Subscribers by Subscribers Revenue Market Share Revenue (US$mn) (‘000s, %) B Co 10,161 17.0% 6,510 5,008 SKT 19,530 2,675 50.9% 12,302 A Co 32.1% SKT A Co B Co Marketing Expense to Sales to Sales EBITDA (Margin) Marketing Expense EBITDA (Margin) (US$mn) (%) 4,288 % of 17.2% 19.1% 21.8% Revenue 1,945 (42.2%) 719 (38.8%) (26.9%) SKT A Co B Co SKT A Co B Co As of 2005 End 2 Source: MIC, Earnings release
Wireless Data Service Wireless Data Service SKT has higher data revenue portion than most global peers. It also leads data service in Korean market including EV-DO service Global Leadership in Data Services Comparison to Domestic Peers Global Leadership in Data Services Comparison to Domestic Peers 15% 8% 26% 26.7% 25.1% 24.8% 92% 85% 74% SKT A Co B Co Peer Avg.: 16.1% Voice Revenue Data Revenue Source: 2Q ’05 earnings release for the companies, respectively 12.2% 8.4% 8.3% EVDO Subscribers EVDO Subscribers A Co 34% SKT Verizon Sprint Telefonica Vodafone Docomo SKT SKT 66% 66% 3 Source: 2Q ’05 earnings release for the companies, respectively Source: Global Mobile, As of 3Q ’05
Maturing Korean Wireless Market Maturing Korean Wireless Market Limited Potential for Growth in the Conventional Voice Market Korean Wireless Market Trend Market Trend SK Telecom’ ’s Revenue Growth s Revenue Growth Korean Wireless SK Telecom 10,500 (‘000s, %) (US$mn) 10,161 9,704 9,520 8,634 79.1% 38.7% 75.9% 6,227 70.1% 67.9% 38,342 36,586 10.3% 61.2% 33,592 32,342 4.7% 3.3% 1.9% 29,047 2001 2002 2003 2004 2005 2006E Revenue Annual Growth SK Telecom’ ’s ARPU Trend s ARPU Trend SK Telecom (US$) 44.5 44.2 43.9 43.5 2001 2002 2003 2004 2005 Subscribers Penetration Source: MIC, NSO 2002 2003 2004 2005 4
Strategy toward Growth Strategy toward Growth
SK Telecom’s Growth Strategy SK Telecom’s Growth Strategy Domestic Business Complemented by New Business to Enhance Growth Data Business Domestic Domestic Convergence GXG MNO MNO Business Business Satellite DMB Cyworld Melon Telematics Global Business New Business New Business Digital Home US & Vietnam Reinforce Domestic MNO Business through Introduction of New Services under a Reinforce Domestic MNO Business through Introduction of New Serv ices under a Convergence Environment and Enhance Global Business Initiatives to Create New Convergence Environment and Enhance Global Business Initiatives to Create New Business Opportunities Business Opportunities 6
Strengthening Data Business Strengthening Data Business Data Business to Fuel Top-line Growth SK Telecom’ SK Telecom ’s Major Brands for Its Wireless Data Services s Major Brands for Its Wireless Data Services Online & Mobile Integrated Services Telematics Music Portal Cinema Portal Game Portal Financial Services Service 3G Multimedia Messaging Security Service Mobile Blogging Smart UI Service Service Service Color Mail SK Telecom’s Terminal Platform 7
Leading Data Services Leading Data Services MelOn is Korea’s Number One Paid Music Site in Terms of Revenue and Subscriber Base PC PC Mobile Phone Mobile Phone MP3 Player MP3 Player st Convergent Music Portal World 1 st Convergent Music Portal Innovative Business Model Performance Update (’ ’05) 05) World 1 Innovative Business Model Performance Update ( Monthly flat rate for unlimited 4.2M members with 600K Over-the-air music download paying subscribers service Real-time music listening Partnership with Intel to Revenue of US$45 million Music playable on mobile integrate with Intel’s Digital 2006 Target: 8 mn members, handset, PC and MP3 player Home Platform “Vive,” 900K paying subscribers and enabling access from TV revenue of ~US$70 million 8
Leading Data Services Leading Data Services “Cyworld” is a popular wired & wireless community & blog service which became the trademark of ubiquitous and convergence service among Korean youths 메뉴 Mobile Cyworld Access Mini Homepage http://www.cyworld.com & Mini Homepage Main page with mobile phone Web- Web -based Community & based Community & Evolution to Convergence by Evolution to Convergence by Performance Update (’ Performance Update ( ’05) 05) Personal Blog Personal Blog Service Service Mobile Integration Mobile Integration 1.2M cumulative mobile Decoration of Mini Homepage Access to the same online Cyworld users with photos, music and avatar service thru mobile phones Revenue of US$50 million Successful item sales model Ubiquitous features such as 2006 Target: 1.9mn cumulative updating Mini Homepage Easy to navigate friends’ Mini mobile Cyworld users and anytime anywhere Homepages revenue of US$55 million 9
Leading Data Services Leading Data Services SKT’s premium game service portal, GXG, allows game manias to experience the extreme in mobile 3D games through various GXG- enabled mobile handsets GXG Game Phone Models 3D game portal site launched in April 2005 Expect increased use in line with Popular PC, arcade & console aggressive expansion of HSDPA in 2006 games enjoyed any time, any where via mobile phone! 10
Convergence/Ubiquitous Businesses Convergence/Ubiquitous Businesses Satellite DMB & Other New Businesses to Provide Platform for Growth 11
Mobile Convergence Service Mobile Convergence Service Satellite DMB to Provide Platform for Growth Satellite DMB 2005 Performance Service Feature Overview Satellite DMB 2005 Performance Service Feature Overview Commercialized in May 2005 to Price Plan strengthen top line growth via rental, Subscription Monthly US$20 US$13 monthly and activation fees Fee Fee 2005 Operating Performance Channel Lineup ► Subscriber: 400,000 Subscribers Movie, Music, Drama, Video 11ch Sports, Game, News, ► Revenue: US$21.5 million Education, Business, Etc. 2006 Subscriber Target: 1.2 million Music, News, Education 26ch (Non-stop Music, DJ Music, Audio Subscribers Variety, Etc.) Satellite DMB has many advantages as; 25 Terminal Line-up by the End of 2005 ► It provides more extensive contents ► Numerous handsets facilitate Satellite DMB ► Provides a wider geographical coverage 12
Mobile Convergence Service Mobile Convergence Service Financial Services Take out the chip from the Take out the chip from the credit card credit card Insert the chip into the back of Insert the chip into the back of handset handset “Multi-purpose Card” It is ready to use now It is ready to use now • Credit card, e-cash, bus & subway card • Membership: TTL, OK Cashbag™, etc. Multi- • Future: ID, medical insurance card, feature In partnership with In partnership with banking, etc. Credit Cards E-cash • 0.9% of every credit card transaction Mileage - Visa Cash - LG Point amount is put into mileage - Samsung All-channel • Off-line, online, mobile payment - Korea Payment Exchange Bank - Koram Bank - Hana Bank 13
Mobile Convergence Service Mobile Convergence Service Telematics - NATE Drive Personalized Navigation Service • Finds shortest route based on real time traffic information - traffic jam, emergency • Voice-activated navigation • Launched in Mar 2002 - 300,000 subscribers (June 2005) • Launched telematics service in Jeju island (Dec 2004) 14
Data Business Performance Data Business Performance Revenue from Wireless Data Services Showing Robust Growth Wireless Data Revenue* (US$mn) Wireless Data Revenue as % of Cellular Revenue 27.7% 27.6% 26.0% 25.0% 23.9% 661.5 653.0 597.0 547.7 544.2 '04 4Q '05 1Q '05 2Q '05 3Q '05 4Q * Excluding revenues from connection fees 15
Data Business Performance Data Business Performance SKT’s Data Service Revenue Comes Mostly from Rich Contents 100% 14% 10% Data ARPU Portion* Data ARPU Portion* Sub-total: 86% 8% 8% 10% 4% 18% 8% 28% 3% 5% 9% 31% 90% 82% 72% SKT KTF LGT y g t Picture n Others Voice Revenue c e o i Data Revenue t S n l i i m e u g s u B SMS d u d a a m L i s M G A V m s * As of 2005 4Q e o M C Data ARPU by Handset Type Data ARPU by Handset Type (Million Subs) 19.5 18.8 18.3 50 (US$) EV-DO 41.6% 34.5% 18 36% of Total ARPU 19.5% 59.3% 56.2% 53.4% 35 1X 8 22.3% of Total ARPU 21.2% 1xEV-DO / June 5.0% 9.3% 1X 2003 2004 2005 (4Q 05) Total ARPU Data ARPU IS-95A 16
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