Big, significant news in my mind.
It's about time SK Telecom did something in the U.S. It's the #1 player in Korea, probably the most advanced cell phone market in the world - the only real competition is Japan. If you've been to Korea, you know exactly what I mean. I've been waiting for them to make their move for at least 3 years.
Issue with SKT has always been that they're in a small market, one which they've dominated and continue to dominate - i.e. they own 50%+ of the Korean market for a long, long time. They've continually stayed at the forefront of new technologies and services for their customers that capitalize on their leading position in the cell-phone space. For example, they've recently launched a satellite-based digital multimedia broadcast (DMB) service through a satellite broadcast operator, TU Media (which is 30% owned by SKT). They've also recently launched a mobile bookstore service and just acquired a WiBro (basically, WiMax) license from the Korean government. However, it is painfully clear that their only real opportunity for growth is in new markets (which is simialr to the position that my current company is in).
They've dabbled in some activities overseas - but nothing on this scale. And, I think it's a move that they: 1) had to make; and 2) must ensure succeeds. If they can't make this successful, they have no shot at being a global player, which is what they're shooting for by doing something here on American soil. They've got a number of angles in China but the U.S. is the market that will determine what happens to them...
Doing it via MVNO with a solid marketing and execution partner like Earthlink was a shrewd move, although it's questionable whether the combined entity will have enough LOCAL telecom & 3G knowledge to make it work. Execution risk is fairly high here. I think this is particularly relevant as the real majic to SKT's success in Korea has been their uncanny marketing and execution ability - 2 things that they're going to have to rely on Earthlink for here in the U.S. However, SKT's relationship with Verizon and the use of both Verizon and Sprint's network should help alleviate it to some extent.
Pssstt - if SKT & Earthlink are smart, they'll angle for and get the help of both carriers, which would desperately like to accelerate the adoption of 3G services.
A few additional thoughts on this -
1. SK Teletech will be the exclusive device supplier for the service until further notice - so RIM won't work with the service. SK Teletech generally builds high-end handsets for SKT due to government restrictions owing to their relationship with SKT (SK Teletech is a subsidiary). I believe SK Teletech's revenues are approximately $600 million so there shouldn't be any problems with supply. For SKT, they make money even if the service doesn't take-off (from the handsets).
2. SKT is supposed to invest approximately $220 million over 3 years, at which point the operation is supposed to be self-sufficient. My understanding is that SKT is expecting that it will spend approximately $100 million in CAPEX and the rest will be marketing expenditures.
3. SKT is expecting returns in excess over 30% IRR over the time horizon by 2009, I believe. This is only doable with an IPO IF the horizon is right.
4. Although it's an equal partnership (50/50), SKT got it's name in front, which is a very big deal to a Korean company so I'm assuming they gave something up for that.
5. 50/50 partnership with a Korean company, especially one that is used to being #1 (like SKT) will be difficult in implementing. In my mind, SKT is the best technology company in Korea, after Samsung Electronics, no question.
6. SKT is betting their entire international efforts on this one. They're betting that this will help them build a global reputation for wireless services, one that they can leverage to vault them into the global game like Samsung did a few years back. If they can't execute here, the most that they can hope for is to be a strong regional player in Asia. Expect SKT's stock price to be unduly influenced by SK-Earthlink's performance going forward. This is their growth story.
7. Seems that the service will also take advantage of WiFi, where appropriate. Hmmm...
8. This will open the door for innovative services / offerings currently in Korea / Asia to enter the U.S. Look for those types of services. For example, ring-back tones, notification SMS services, payment services, among other more obvious services such as music, video, mobile gaming, etc. Their Nate offering in Korea is hugely popular.
This is personally very exciting for me as I've been preaching that handsets will ultimately win-out in the portable / mobile space. Additionally, SKT has been very astute in rolling out innovative new services and being able to execute the operations necessary to make it work. The question is whether that will be transferrable enough here in the U.S. without the local knowledge that will be needed, which is what Earthlink will be providing. SKT is a company that already has 4G on its roadmap.
I would also be concerned that there are some fundamental differences between Korea and the U.S. that will have an impact on how successful they will be such as: population density (although their strategy is to concentrate on relatively urban areas), use of public transportation (which directly translates into idle time, which drives incremental entertainment value of handsets), lack of operating control (as an MVNO in the U.S.), lack of a mobile content / services ecosystem (relative to Korea / Asia), etc.
Having said the above, I believe SKT has a good chance of being successful here - they're desperate enough to know that they have no choice and they do have significant operating, marketing, and technology know-how that could differentiate them in the U.S. market. There seems to be a bubbling desire for advanced services and solutions that the timing for this may be spot-on.
We'll see how it goes.
Question - How long until NTT DoCoMo enters into the fray? If DoCoMo does not enter soon, this could be analogous to Sony not taking Samsung & LG seriously when the 2 upstarts started making headway here in the U.S. In other words, this is make or break in the global game for NTT DoCoMo, if you ask me.
Now, if I can only figure out a way to get my company to make some serious plays overseas, I'd be happy -
