1. 1 Telecom Industries of Korea and Japan Brian Toll Greg Zelenka Aaron Cowen Jennifer Barker

2. 2 Outline Telecom Overview Korean Competitors Japanese Competitors Regulatory in Korea Regulatory in Japan Discussion of Korea Telecom Questions for Korea Telecom

3. 3 Technology Primer Land Line –Dial-up –ISDN Broadband –DSL –Cable –LMDS Wireless –1G, 2G, 2.5G, 3G

4. 4 Korean Competitors COMPANYLINES OF BUSINESS 2000 REVENUE NOTES SK TelecomWireless, ISP, broadband via CATV $5 Bn (5,760 bn W), up 34% from 1999 Primarily wireless provider with 54% market share. Korea Telecom (KT) Wireline, wireless, broadband via DSL $11 Bn (12,734 bn W), up 8% from 1999 Primary wireline, DSL provider. Leads broadband at 44% market share. KT Freetel, wireless subsidiary, is #2 with 31% market share. HanaroBroadband via DSL, LMDS, CATV $260 MM (300 bn W), up 29% from 1999. Second broadband market share at 27%.. Pursuing CDMA 2000 license for 3G. LG TelecomWireless$ 1.8 Bn (2,058 bn W) Speculation that loss of 3G license will lead to exit of wireless business via sale to KT. Currently #3 wireless carrier with 15% market share. British Telecom contemplation sale of investment.

5. 5 Japanese Competitors COMPANYLINES OF BUSINESS 2000 REVENUE NOTES NTTWireline, wireless, broadband via DSL $108 BnNTT maintains wireline domestic monopoly. Wireless division is called Docomo, with 59.1% market share, and is famous for I-mode service. NTT Docomo plans to be first company in world to launch 3G. KDDIInternational LD, wireless $30.2 BnOriginal provider of inter-country long distance. Launched wireless venture called “au”. Japan Telecom Wireless only$14 BnCalled J-phone. Former AT&T investment, sold to Vodafone.

6. 6 Active Regulation - Korea Multi-ministerial purview (FTC, MOFE, MIC, KCC) –Potential regulatory conflict –Excessive regulation ‘Dominant player’ regulation –Regulators control rates –Caps on wireless handset subsidies Other players –File tariffs, but no rate controls –In January 2000, banned handset subsidies

7. 7 Ramifications of Regulation Geographically –5 national players in wireless, no regional Technologically –CDMA standard nationally Competitively –For wireless, price competition is severe (over 33% drop in 3 years). –Similar technology, similar marketing strategies, no handset subsidies. –3G postponement announced by SK Telecom.

8. 8 Movement to Passive Regulation- Japan Ministry of Post and Telecom is single regulatory body in Japan. NTT Incumbent maintains wireline monopoly. Still very high new phone installation fees. Late 80’s deregulation with advent of wireless Increased wireless phone use by removing user deposit system and handset leasing fees (approx $2,700 per user) Since 1996, MPT exercises no pricing restrictions, which has increased price competition and caused wireless prices to decline by 56% in last 5 years.

9. 9 Ramifications of Regulation Geographically –NTT DoCoMo dominates, smaller players compete regionally Technologically –Newer technologies cultivated, or; –Multiple technological standards compete Competitively –Non-price differentiation based on technological differences and service quality and coverage. –NTT continues to dominate, but faces serious threats as competitors build infrastructure.

10. 10 Korea Telecom Korean incumbent - $11Bn in revenue. Local, domestic and int’l long distance, business & data communication services, DSL, cellular service Virtual monopoly in local services, 85%+ share domestic LD and 60%+ share Int’l LD Leads broadband at 44% market share. KT Freetel, wireless subsidiary, is #2 with 31% market share.

11. 11 KT – Responding to Competition Aggressive Restructuring Broadband in 92% Korean Households –KT developing new broadband services

12. 12 Questions for Korea Telecom What are revenue drivers for 3G in Korea? How much will you spend on 3G and how will you recover this investment? What marketing techniques are used to attract customers and reduce churn? How will CLEC industry develop in Korea? What are the three most important challenges you face in the next 5 years?