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Mobile carriers diversifying to find growth

5G may offer phone companies business and opportunities

Nov 06,2019
Mobile carriers are investing outside of the telecommunications field into a wide range of sectors, including artificial intelligence (AI), autonomous driving and media.

The introduction of the super-fast 5G network is seen as having opened new possibilities.

SK Telecom vowed to become an information and communications technology (ICT) firm, while KT last week announced it will transform into an AI company. LG U+, the smallest of the three, has been investing heavily in games and content that utilize 5G speeds and low latency.

Last week, SK Telecom said 45 percent of its sales in the third quarter were derived from businesses outside wireless communication, like media, security and commerce. The mobile carrier is “going beyond a telecommunications company to rapidly transform into a new ICT corporation,” it said in a statement.

The company’s sales in the third quarter were 4.56 trillion won ($4.08 billion), up 9 percent on year.

SK Telecom started the Wavve over-the-top media service in September by merging its Oksusu mobile video streaming app and Pooq, a joint video-on-demand platform formed by Korea’s three terrestrial broadcasters.

Its goal is to secure 5 million paid subscribers by 2023. As of June, Netflix has 1.84 million paid subscribers in Korea, according to application analysis firm WiseApp.

SK Telecom said it acquired 200 billion won in funding for Wavve to be able to release four to five original programs a year.

The company is also currently seeking government approval to merge SK Broadband and No. 2 cable TV operator t-broad. SK Telecom last year acquired security service provider ADT Caps to achieve synergy with its SK Infosec subsidiary.

Its recent agreement to swap stock with Kakao and broadly cooperate in the development of business offerings also highlights the mobile carrier’s ambitions in technologies like AI and the Internet of Things.

On Oct. 29, the wireless carrier announced each company would buy the equivalent of 300 billion won worth of shares in the other, leaving SK Telecom with a 2.5 percent stake in Kakao and Kakao with a 1.6 percent stake in SK Telecom.

KT last week vowed to become an AI company.

It said it will invest 300 billion won in AI and nurture 1,000 AI specialists over the next four years with the goal of expanding the technology to cars, hotels and apartments.

KT plans to use AI at factories, as well as in security, customer service and the IPTV businesses. It will expand partnerships with construction firms and hotels to enable residents or guests to control devices without physically interacting with them using the GiGA Genie, its AI-powered smart speaker system. It plans to export the service abroad.

“KT believes AI is a critical call in this era,” said Lee Pil-jae, vice president of KT, at a press event Wednesday. “AI could function as a crucial stepping stone for KT to rise once again and expand globally.”

KT on Tuesday said it has teamed with locomotive maker Hyundai Rotem to develop unmanned ground vehicles that run on 5G and related technologies. KT said it will expand the cooperation to the defense industry.

LG U+ argues it has been at the forefront of transforming into an ICT company since it emerged as LG U+ from the merger of LG Telecom, LG Dacom and LG Powercom in 2010.

Its focus has been on 5G content and games. LG U+ introduced 5G content involving K-pop groups, like offering a virtual dating experience with popular celebrities, and enabling users to dance alongside images of pop stars on their smartphone screens via AI.

The company formed the GeForce Now Alliance with Nvidia to offer its cloud-based streaming service. Games can be streamed directly from servers, enabling players without powerful graphics processing units to play intensive games.

Reduced profits from the telecommunications business has driven mobile operators to diversify.

The government in 2017 raised the discount rate for monthly mobile payment plans from 20 percent to 25 percent. Phone buyers can choose to receive subsidies from mobile operators for purchasing a phone or receive a discount on monthly payments.

The synergy effect 5G could bring with other industries also made it easier for mobile carriers to enter other industries.

“Although our key business is telecommunications, there are businesses we could expand to through the 5G network,” said a spokesperson for SK Telecom.

“AT&T, for instance, started as a telecom company but has become a media giant. The global trend demonstrates telecom companies are expanding their business portfolios to find new growth for the future.”

WarnerMedia, which owns CNN, is one of the media companies AT&T owns.

“Until more 5G handsets are released, 5G business opportunities will be centered on B2B [business-to-business], like smart factories and autonomous vehicles instead of from just offering the network to consumers.”

BY JIN MIN-JI [jin.minji@joongang.co.kr]


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