Majority of South Koreans using LTE networks by 2014 - South Korea on track to hit 40 million LTE connections within four years

South Korea is set to be the world’s first major mobile market to migrate the majority of its subscribers to LTE networks - with over half of the country’s users forecast to be using the next-generation networks within two years.

Based on analysis of earlier technology migrations in the country, GSMA Intelligence forecasts that it will take around 35 months on average for the three South Korean operators to migrate at least 50 percent of their respective subscribers to LTE. Market-leader SK Telecom and third-placed LG UPlus launched LTE in July 2011, while second-placed KT switched on LTE last week. All three operators should achieve nationwide LTE coverage by mid-2012 with Voice-over-LTE (VoLTE) expected to be introduced in the second half of the year.

SK hit 500,000 LTE connections just four months after launch, while KT has set an ambitious target of 4 million LTE subscribers by the end of this year. GSMA Intelligence predicts that South Korea will cross the 40 million LTE connections mark by mid-2016.

The pace of LTE migration in South Korea will surpass neighbouring Japan, and could occur twice as fast as in Western Europe, the firm says, following the trends previously seen when operators migrated to 2G and 3G technologies.

According to GSMA Intelligence, it took SK and KT just 18 months to migrate at least 50 percent of their customers to HSPA. It had previously taken the two operators 21 months and 39 months, respectively, to migrate at least half of customers to CDMA2000 1x – which operators are now looking to shut down to free up spectrum for LTE use. In the case of LG UPlus, it took 30 months to migrate half of its IS-95 base to CDMA2000 1x, while next generation EV-DO (Rev. A/B) currently represents about 40 percent of the operator’s total connections.

Subscriber migration onto these new network technologies was significantly slower at the Japanese operators. It took Docomo and SoftBank 57 months and 54 months, respectively, to move half of their subscribers onto HSPA, while CDMA-based KDDI took 39 months to migrate half its base to EV-DO.

By contrast to the two highly advanced Asian markets, it has taken Western European operators almost a decade to achieve 50 percent 3G penetration, a milestone not expected to be reached until Q3 this year.

GSMA Intelligence points to a number of factors that has expedited technology migrations in South Korea, including a predominantly contract (rather than prepaid) customer base, high smartphone penetration, fast handset replacement cycles and the widespread adoption of NFC and vertical mobile services such as financial services and health.

Rapidly rising smartphone penetration was a key trend identified in the market in 2011. The KCC, the South Korean regulator, said recently that the country passed 20 million smartphone subscribers in Ocotober 2011. According to GSMA Intelligence, this would give the country a total smartphone penetration rate of close to 40 percent. The KCC also noted last year that Wireless Internet Connections (defined as any cellular device capable of accessing data – not just smartphones) accounted for 92 percent of the country’s total connections base in Q2 2011.

Joss Gillet, Senior Analyst, GSMA Intelligence:

With a compelling LTE smartphone portfolio and nationwide coverage set to be in place less than 12 months after launch, the South Korean operators are true LTE pioneers. The expected introduction of VoLTE-capable devices in H2 2012 is further proof that the country’s operators are ahead of the technology curve globally; VoLTE will enable full IP capabilities for voice and data and sets the tone for global LTE smartphone availability and interoperability. Yet LTE does not represent a complete technology shift like the earlier migration from CDMA to HSPA. Instead, the speed of adoption of LTE services will depend on the co-existence of the new technology with legacy networks (EV-DO, HSPA), which has fostered the introduction of tiered pricing for mobile broadband services (based on either data consumption or download speeds) thereby helping operators to manage network capacity challenges. South Korea (and Japan) are therefore set to lead and shape the development of LTE in the Asia-Pacific region, particularly with regards to spectrum fragmentation. At a regional level, South Korean operators will play an important role in supporting economies of scale in the 1800 MHz and 800 MHz bands, while Japan’s NTT Docomo will be influential in supporting LTE devices in the 2100 MHz band.

% of connections, WCDMA/HSPA
Source: GSMA Intelligence