South Korea Telecoms Industry Report - 2023-2030

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Executive Summary

South Korea Telecoms Industry Report at a Glance

Globally, the telecommunications sector is proving to be a core and essential infrastructure service to national economies, with data infrastructure becoming critical in a connected world and will likely increasingly attract a new class of investors such as large infrastructure funds. The publisher anticipates the telecommunications industry in South Korea to maintain stability owing to its resilient characteristics, even amidst political turmoil and economic unpredictability spurred by inflationary pressure.

The South Korean telecommunications market is the third-largest market in the world by revenue with three large fixed and mobile network operators that invested heavily in towers and fibre infrastructure over the past two decades despite an overall market underpinned by low economic and population growth.

To support the government’s Korean New Deal (K-New Deal) objectives, the three operators agreed to invest a combined US$2.1 billion in the period to 2022, initially rolling out 5G in the capital, Seoul, and six other metropolitan areas, before moving on to extending coverage nationwide.

Growing mobile phone penetration and high fixed broadband take-up among households will fuel future growth over the next seven years.

Following the market expansion over the last 5 years, the publisher forecasts sustained revenue growth growing to 2030, with the inflationary pressure, the diminishing impact of declining legacy voice and SMS revenue and population decline since 2022.

The market landscape from 2016-2022 witnessed a revenue share shift towards LG Uplus at SK Telecom’s expense, while KT maintained stability. Predictions indicate market growth resurgence in 2022, tapering off as the forecast period concludes, with anticipated population decline in South Korea impacting forecasts.

The strategic and economic competition between South Korea and China is at the centre of advanced technology competition and the future of global data and communications. For most developed countries in the region, gaining strategic and economic power depends heavily on having technological ascendancy, especially in data and communications.

Capex Investments

The Capex from South Korean operators is cyclical with mobile rollout leading to investments in line with the operators’ top-line growth. Capex investments peaked between 2012 and 2014 while all three operators built their respective 4G mobile network. Capex investments increased again in 2019 and will continue through to 2030, as mobile operators invest in 5G. South Korea sees 5G as the backbone of a wide range of technological advances including autonomous vehicles, smart cities and Internet of Things. All three mobile operators launched 5G services in 2019 and as of June 2023, over 40% of mobile users are already using 5G. The Capex to GDP ratio spiked in 20219 and started to slide downwards and growing from 2023 onwards with heavy investments in AI by three operators.

Operator Profiles

The South Korean three-player mobile market is a remarkably stable market, however with mobile revenue pressure, all operators are broadening their range of services from e-commerce (SK Telecom), smart home (LG Uplus) to real estate (KT) and digital payments.

Between 2016 and 2022, both SK Telecom lost revenue and EBITDA share to LG Uplus over the last six years, KT held its revenue share steady but lost some share from the telecom market EBITDA pool.

Mobile Subscribers and Revenue

Average annual mobile revenue growth was lower (-0.2%) than mobile service subscriptions growth (3.7%) during the period 2016-2022, highlighting the structural challenges faced by mobile operators. Initial 5G ARPU uplift is now tapering off and heavy completion from MVNOs is putting pressure on ARPU, compounded by bundling discounts to stem churn.

IoT connections is a major growth driver for mobile operators, a slowdown in mobile subscriptions growth will put long term pressure, dialling up competition for the three mobile operators fighting for fewer new customers.

According to our benchmark study of mobile data pricing, South Korea had among the biggest cost reduction per GB over the last 3 years, while India has the lowest rate in the world with just a few cents per GB.

The South Korean mobile market rapidly transformed from a voice and SMS to a mobile Internet-dominated market. With a continued drive to convert smartphones users to digital shoppers and therefore increasing mobile operators’ consumers share of wallet. Mobile operators are increasing market segmentation and deliver innovative offerings targeting households with digital services such as music, video streaming, digital payments and bundles of other services such as home automation, IPTV and fixed broadband.

Broadband Subscribers - FTTH Push to Gigabit Speeds

After over 20 years of investments in fibre infrastructure, South Korea boasts one of the highest FTTH penetration in the world as well as one of the most advanced, consumer broadband products offering speeds up to 10Gbps. Most people use above 100Mbps packages which are mostly bundled with mobile services by the three dominant players, KT, SK Telecom and LG Uplus.

Fixed broadband penetration is forecasted to grow modestly as South Korea’s investments in full-fibre networks are now reaching maturity with affordable packages and increased broadband household penetration growing towards saturation.

Thematics - Telecoms Infrastructure/5G/M&A/Infrastructure

Infrastructure funds, pension funds and government funds are assigning high valuation multiples to telecommunications infrastructure assets such as mobile towers, data centres, submarine cable and fibre infrastructure.

Investment funds are assigning high valuation multiples to telecommunications infrastructure assets such as mobile towers, data centres, submarine cable and fibre infrastructure. This report outlines some real market examples of how investors view and value these investments with real industry examples and EV/EBITDA comparatives and benchmarks.

Our South Korea Telecoms Industry Report transactions database analysis highlights the dearth of inbound (domestic) transactions in the South Korea telecommunications services market, with the largest transactions from SK Telcom and LG Uplus bulking up their fixed broadband and IPTV business units and consolidating their position by acquiring smaller operators. Most other transactions are expected in the data centre, IoT and cloud computing sector with SK Telcom and LG Uplus investing in e-Commerce and enterprise services.

The arrival of 4G moved the Internet off our desktops into our palms and pockets, 5G could transform the network from something we carry around to something taking us around either virtually (augmented reality or virtual reality) or in reality (autonomous vehicles), the 5G outcome and benefits beyond fast connectivity remain largely unknown in terms of business models, investments required and timeline.

Companies Mentioned

• CMB
• Dreamline
• D’Live
• Hyundai CNS
• KT
• LG Uplus
• SK Telecom

Methodology

The publisher uses primary and secondary research as well as proprietary information sources to generate market analysis and forecasts for fixed and mobile services in terms of both subscribers and revenue. Interviews are conducted with key service providers in the region to determine current and potential market sizing as well as future service offerings. Information gathered through interviews is further cross-checked to validate the total market size.

The primary research is supplemented with a range of secondary source material, including related research, press releases, securities filings, media, Web-based materials, and trade publications.

Industry and population statistics are also leveraged for reference and to ensure consistency in the data collection. Extensive service provider primary and secondary research, together with the publisher's end-user research database, provides a strong basis for sizing and forecasting the market. The multiple reference points allow for validation of information provided by the service providers compared with that gathered from alternative sources.

Note: Forecasts are made in local currency, and no allowance is made for inflation. All numbers in this document may not be exact due to rounding.