1. A UK Trade & Investment Mission to China and Korea Wireless Telecomms in China & Korea Wireless in S Korea Mike Fitch Research & Venturing, BT Group

2. A UK Trade & Investment Mission to China and Korea S Korea’s IT 8-3-9 Plan Started in 2003 to boost PCI to $20,000 with ICT exports at $110bn by 2007, achieved one year early in 2006

3. A UK Trade & Investment Mission to China and Korea Wireless Communications Services Three of the ‘8 New Services’: Digital Multimedia Broadcasting - mobile TV DMB - 2 variants - Terrestrial and Satellite W-CDMA (3G) WiBro Service

4. A UK Trade & Investment Mission to China and Korea DMB S-DMB Commercial launch May 2005, operators TU-media (33% owned by SKT) 1m subscription-paying customers ($13.5 per month for 12 video and 36 audio channels) – users are watching 62 minutes a day on average Coverage extensions use terrestrial repeaters into buildings and trains Greater investment in infrastructure and program quality is paying off, with premium channels being introduced in 2007 and profitability is expected in 2008

5. A UK Trade & Investment Mission to China and Korea DMB T-DMB Commercial launch December 2005, operators KBS (Korea Broadcasting System) and SBS (Seoul Broadcasting System) 3.2 million customers, with Free to Air business model and revenue from advertising Revenue is only 4% of operating costs Uncertain future in Korea and little uptake abroad despite extensive trials (regulatory problems are partly to blame) Success in terms of handset industry - LG and Samsung are principal vendors

6. A UK Trade & Investment Mission to China and Korea Impact Assessment A Downside.. Current T-DMB business model seems weak and uncertain Commercial adoption is weak outside S Korea, despite many trials. Regulation and availability of spectrum are factors However A new market for mobile TV handsets has been created internally (4m to date) A substantial DMB broadcasting service market is being created Handset manufacturers have branched into DVB-H / UMTS dual mode handsets into Europe. Korean handset manufacturers are well-positioned whichever standard prevails Korean profile as global industry player in telecoms has been strengthened

7. A UK Trade & Investment Mission to China and Korea W-CDMA and Mobile Evolution Paths CDMA-2000 (2G) (One of IMT-2000) 1xEV-DO / EV-DV upgrade (2.5G) W-CDMA (3G) HSDPA / HSUPA upgrade (3.5G) LTE (4G) Towards convergence with WiFi / WiMAX ? (OFDM, broadband..) GSM (2G) (One of IMT-2000) GPRS / EDGE upgrade (2.5G)

8. A UK Trade & Investment Mission to China and Korea Mobile Operator Market 2/2.5G market is almost saturated (total handsets = 40m, pop = 48m) With the Korean mobile market approaching saturation even 5 years ago, the business case for WCDMA infrastructure investments was highly questionable, given that similar services could be implemented more cost- effectively by enhancing existing networks [to EV-DO] It is this fundamental issue that delayed the early promotion and subsequent take up of WCDMA in Korea.

9. A UK Trade & Investment Mission to China and Korea 3G Rollout The Government decided to take the bolder path of awarding new spectrum for W-CDMA (3G) services to KTF and SKT in January 2000, LGT failed to win new spectrum New spectrum was then awarded to LGT in August 2001 to offer 3G services using CDMA2000 technology LGT subsequently defaulted and this new spectrum was revoked in July 2006 Launch of W-CDMA (3G) services by KTF and SKT in January 2004 May 2004 = 1,300 subscribers March 2007 = 500,000 subscribers Government placed obligations to roll out the networks but not to market them Nevertheless, operators are upgrading from 3 to 3.5G…. Roaming revenues will be a significant factor

10. A UK Trade & Investment Mission to China and Korea Upgrades… KTF and SKT CDMA-2000 networks are upgraded to EV-DO LGT plan to upgrade to EV-DO in 2007 KTF - HSDPA in all Korea in 2006 SKT - HSDPA in all Korea by mid 2007 HSUPA in 2009

11. A UK Trade & Investment Mission to China and Korea Take-up of Upgrades… Market Share CDMA2000 subs...of which EVDO subs WCDMA subs SKT (Apr/May 07) 50.5%20,733k8,700k237k KTF (Apr 07) 32.2%12,632k5,786k396k LGT (Apr 07) 17.4%7,261kService not available Number of 3.5G subscribers is now 1.3m (June 07) – fast growth spurt due to ‘enthusiastic’ take-up of HSDPA Source: 2007 Telecoms, Mobile and Broadband in Asia report North and South Korea

12. A UK Trade & Investment Mission to China and Korea Impact Assessment Downside MIC’s WCDMA rollout requirements were met, but commercial promotion was lacking and subscriber numbers have remained low. Mobile operators have yet to see return on their WCDMA investments It could be argued that the costs involved may have restrained the operators’ potential for alternative investments (such as overseas expansion)

13. A UK Trade & Investment Mission to China and Korea Impact Assessment Upside Migration to HSDPA has been accompanied by a shift in operator priorities, with consequent service promotion over the past year Operators well positioned to secure new wireless broadband revenues Government boldness to award WCDMA licences resulted in the commitment of significant development resources and Korean manufacturers – notably Samsung and LG – are strongly positioned in the world WCDMA market, particularly: With standard WCDMA products With state of the art HSDPA handsets, and With strong involvement in WCDMA evolution (LTE) MIC action has probably resulted in stronger positioning of handset manufacturers

14. A UK Trade & Investment Mission to China and Korea WiBro Service WiBro is a WiMAX profile system to suit Korea’s spectrum allocations (2.3GHz with 8.75MHz channels). The UK allocation is likely to be 2.5–2.7GHz with 5 or 10MHz channels. It is ‘taking the broadband experience out-doors’ and has fixed and mobile variants. Most of the current commercial interest is in the mobile variant (IEEE 802.16e)

15. A UK Trade & Investment Mission to China and Korea WiBro Development Original Targets 2003 Development of the HPi prototype system and the HPi spec v1.0 (High speed Portable internet) 2004 TTA Standards v1.0, HPi Spec v2.1 and v3.0 (TTA = S Korea standards body) Q1 2005 Spectrum / licence awards by MIC Q2 2005 TTA Standards v2.0, HPi Spec v3.5 Q4 2005 WiBro commercial field trial Mid-2006 Commercial WiBro service launch …but – the decision to fold WiBro into the IEEE802.16 standardisation delayed chip and product development and some of these timescales

16. A UK Trade & Investment Mission to China and Korea What Happened What and Why KT, SKT and Hanaro were winners of spectrum at $110m each to deploy in January 2005. KT is a fixed network operator and sees the market for broadband on the move. SKT - a mobile operator – the case is less compelling as it could cannibalise their 3.5G market – but they need to compete with KT… Hanaro withdrew in April 2005 (becoming nervous about investing 1bn in infrastructure with uncertain pay-back) Damaged market confidence

17. A UK Trade & Investment Mission to China and Korea What Happened The Situation Today KT have 1000 base-station sites and SKT have 4000 in Seoul (re-use of their cell sites). Thus, the benefits of smart antenna technology (which can be exploited with WiBro) are much more attractive to KT. Both Companies however are planning to trial this technology on their Samsung base- stations during 2007. Total number of WiBro users today is still only around 2000. KT has a target to reach 100,000 and SKT to add at least another 1000 by the end of 2007. Market segments targeted are businessmen and students. Unspecified ‘stability issues’ were cited as part of the reason for the delays in commercialisation and promotion of the service.

18. A UK Trade & Investment Mission to China and Korea WiBro Industry - Infrastructure Key Players Samsung are the leading manufacturer of base-stations by a wide margin and have supplied nearly all the KT and SKT base-stations and networking equipment. However smaller Companies are providing peripheral equipment such as antennas and repeaters (examples are Posdata, KMW and SOLiD) Abroad, Samsung are responding to WiMAX RFIs but are up against stiff competition especially from Motorola, Nortel and Alcatel

19. A UK Trade & Investment Mission to China and Korea WiBro Industry - Terminals Key Players Samsung - producing triple-mode handsets capable of 2.5G, WiFi and WiMAX for the US market that SPRINT wish to sell into and are currently talking to European service providers like BT, Telecom Italia and France Telecom about opportunities for user terminals. Samsung - WiBro datacards and PDAs available since 2005 LG Electronics - has adopted a more cautious approach to WiBro. They showcased a WiBro-enabled PDA phone (the KC1) at ITU Telecom World (Hong Kong) December 2006 and at CES 2007. A tablet PC has also been promised for 2007, to coincide with service commercialisation in Korea. LG’s profile is lower than Samsung, but their LG-Nortel joint venture, announced in 2005, allows it to share costs in addressing the infrastructure market alongside one of the industry’s WiMAX leaders. LG-Nortel also trialled a WiMAX- enabled desktop videophone in April 2007.

20. A UK Trade & Investment Mission to China and Korea Impact Assessment - WiBro The decision to opt for international standardisation, uncertainty in the timing and size of the domestic WiBro and of the overseas WiMAX market, and the emergence of the WiMAX forum certification – have all contributed to product and service development delays Samsung are one of the lead players in the international WiMAX market, in part through the deal with Sprint Whilst many market forecasters predict large success for WiMAX, the real market size and the translation of this into tangible economic gains for Korea remain at present unclear. The verdict on WiBro at this time would seem to be that ‘the jury is still out’.

21. A UK Trade & Investment Mission to China and Korea

22. Companies visited… $63.4bn (electronics) £6.1bn £7.6bn $48.5bn (electronics) KT - Fixed line operator 21.5m landline and 6.1 broadband customers KTF - No 2 cellular operator, 12m customers No 1 cellular operator. 20m customers (about 50%) Mobile phones, flat screen TVs, DVD players WiBro infrastructure, mobile phones, flat screen TVs…. £3.5bn