The story behind 2.5 million 5G users in 5 months

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South Korea's 5G development speed has once again exceeded industry expectations.

On June 12, the number of 5G users in South Korea exceeded one million.

On August 8, the number of 5G users in South Korea exceeded 2 million.

On August 24, SKT announced that its 5G user base exceeded 1 million.

Since the large-scale commercial use of 5G on April 3, the number of 5G users in South Korea is estimated to have exceeded 2.5 million in just five months. It should be noted that compared with the first commercial use of 4G in 2011, the growth rate of 5G users in South Korea has doubled.

There is no doubt that as the world's first country to commercialize 5G on a large scale, South Korea has proved to the world that its 5G commercialization has achieved initial success.

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▲South Korea 5G coverage map (KT)

Why is South Korea's 5G development so fast? What experiences and lessons are worth learning behind the glamorous numbers? Today we will talk about South Korea's 5G.

Competition landscape and development status before 5G commercialization

The competitive landscape of South Korea's telecommunications market is mainly composed of the three major mobile operators, SKT, KT and LG U+, and virtual mobile operators (MVNOs).

As of December 2018, the three major operators in South Korea, SKT, KT and LG U+, accounted for 42%, 26% and 20% of mobile users respectively. This is a competitive landscape dominated by SKT, which is somewhat similar to the landscape of the three major operators in my country.

In addition, about 12% of mobile users in South Korea are in the hands of virtual mobile operators.

Competition among Korean operators is fierce, but competition among Korean virtual mobile operators is even more intense. It is no exaggeration to say that their survival situation is in dire straits.

Because there are nearly 40 mobile virtual operators in South Korea, large and small. Among them, CJ Hello, the largest cable TV network operator in South Korea, ranks first, and SK Telink ranks second.

In June 2019, South Korea revised its telecommunications law to further relax access to the telecommunications industry, which may lead to further intensified competition among operators. As a result, there has been a consolidation phenomenon in the market, such as operators intending to acquire cable TV network operators.

Driven by the South Korean government's fee reduction policy, in the context of fierce market competition and the current situation of market saturation, before 5G commercialization, the profit margins of South Korea's three major operators were between 5.4% and 9%, lower than China Mobile and far lower than Japanese operators.

Compared with the financial data in 2017, the profit margins of South Korea's three major operators in 2018 fell by an average of 15% year-on-year, which is even more disastrous. One of the important reasons for this is the increased investment in 5G.

Obviously, South Korea's eagerness to launch 5G is driven by the operators themselves. In the predicament of stagnant performance, South Korean operators hope to launch new 5G services as soon as possible to reverse the downward trend.

South Korea’s 5G+ Strategy

In addition to the needs of operators themselves, the rapid development of 5G in South Korea also benefits from the strong promotion and support of the government.

In April 2019, the South Korean government officially released the 5G+ strategy, announcing that it will cultivate emerging industries and markets based on 5G, build the world's best 5G ecosystem, and plan to create a 5G market of 180 trillion won (about US$157.4 billion) by 2026, creating 600,000 jobs and US$73 billion in exports.

South Korea's 5G+ strategy mainly includes five core services and ten core industries.

Five core services:

① Immersive content

Including 360-degree VR live broadcast, holographic video conferencing, VR shopping, VR education, AR factory, AR farm and other applications.

② Smart Factory

Including applications such as 5G-connected robots, AR on-site maintenance and remote technical support, it is planned to introduce 5G solutions in 1,000 small and medium-sized enterprise factories by 2022.

③ Self-driving cars

Including the deployment of 5G autonomous shuttle buses, remote driving and other applications.

④ Smart City

This includes the nationwide use of 5G wireless surveillance cameras, real-time monitoring of aging infrastructure such as tunnels, bridges, and buildings, and 5G-based emergency rescue services at fire scenes.

⑤ Digital healthcare

Including 5G ambulances, 5G hospitals, etc.

Ten core industries:

• ① Network equipment
• ② 5G smartphones
• ③ VR/AR
• ④ Wearable devices
• ⑤ Smart surveillance camera
• ⑥ Networked drones
• ⑦ Networked Robots
• ⑧ 5G V2X vehicle networking
• ⑨ Information Security
• ⑩ Edge computing

Cultivating five core services and ten core industries is South Korea's long-term strategy for 5G+. However, a building starts from the ground up. To strengthen the 5G ecosystem, early 5G infrastructure investment and application incubation are indispensable. To this end, the South Korean government has formulated the first phase of the 5G promotion plan from 2018 to 2022, which mainly includes two parts:

① Tax relief

Before the end of 2020, companies purchasing 5G network equipment (including transmission, switching, power supply and other equipment) can enjoy a tax credit of up to 3% to promote the early deployment of 5G networks across the country.

② The government will invest 30 trillion won to drive new growth in the 5G industry

Including 10 trillion won to support industrial structure upgrading (2019-2021), more than 1.2 trillion won of KP Inno Fund (2019-2022), more than 300 billion won of smart factory fund (2019-2021), etc.

Make full use of policy support to develop 2B business

It is worth mentioning that although Korean operators have rapidly developed 2.5 million 5G users within 5 months, the highlight of 5G in the eyes of Korean operators is not the 2C market, but the 2B/2G market.

South Korea’s 5G applications are aimed at two major markets: 2B/2G and 2C.

• 2B/2G

Make full use of policy support to expand 5G applications to vertical fields such as smart factories, media, smart cities, and smart healthcare.

• 2C

In the early stage of 5G commercialization, 2C services mainly include VR live broadcast, VR/AR games, etc.

Korean operators attach great importance to the development of 2B/2G services.

For example, KT has launched a 5G enterprise private network service that is completely "isolated" from the public network to the smart factories and logistics distribution companies under Hyundai Heavy Industries Group.

For example, SKT provides 5G smart factory services to small and medium-sized enterprises. It uses 5G's low-latency, large-bandwidth network to transmit high-definition images and videos on the production line to the cloud for AI analysis, and uses "5G+AI machine vision" to check whether the product has defects, thereby improving the quality and efficiency of the production line.

The 2B market is a new market explosion point for operators in the 5G era. With the strong support of the government, Korean operators are continuously expanding 5G services to manufacturing, medical care, media, schools, hospitals, parks, shopping malls and other fields. For example, they plan to build the first 5G smart office in Seoul, cooperate with Yonsei Medical Center to build a 5G hospital, cooperate with the Korean Army Academy to carry out VR/AR combat training, and cooperate with shopping malls to promote 5G VR shopping.

In short, the rapid development of 5G in South Korea is due to the operators' own need to reverse the downward trend and the government's strong promotion and support. At the same time, behind the rapid growth of the number of 5G users in South Korea, what is more worthy of attention is the expansion of South Korean operators in the 2B/2G market.