SK Telecom: forming multiple partnerships to boost revenue diversification

SK Telecom: forming multiple

partnerships to boost
revenue diversification

Michela Venturelli and Caroline Gabriel

SK Telecom: forming multiple partnerships to boost revenue diversification 2

SK Telecom is co-investing in new areas and geographies to target new growth

opportunities and to be more competitive in the mature South Korean market

STATE OF THE BUSINESS FOCUS OF THIS EFFORT PROJECT APPROACH

USD150
45.5% 2019 3 New TCO Synergies 131 3
million

Market share All three MNOs Main carriers in Business areas Reduced for From combining Rural locations Recently Uber’s
of mobile launched 5G South Korea and markets network roll-out assets and covered by shared announced investment
connections services and services expertise 5G network joint ventures

BUSINESS DRIVERS STRATEGY ANALYSIS

▪ The South Korean market is mature and
highly competitive. SK Telecom needs to
differentiate itself from the competition.
▪ SK Telecom wants to pursue revenue
growth by focusing on new business areas
where there is potential to supplement the
revenue from its core mobile business.
▪ It aims to maximise the use of 5G, AI and
big data technologies across its portfolio.
▪ SK Telecom aims to share assets and
establish co-investment partnerships to
decrease the TCO for new ventures and
maximise returns on previous investments.
▪ It wants to expand its sharing and co-
investment strategies beyond the network
layer and include services and products.
▪ It is seeking new revenue streams from
other geographies beyond South Korea.
▪ SK Telecom, KT and LG Uplus established a
5G network sharing agreement that covers
remote areas and rural towns in South
Korea.
▪ SK Telecom has signed agreements to
establish a 5G technology joint venture (JV)
in Germany with Deutsche Telekom, a JV
with Sinclair Broadcast Group and a JV with
Uber.

BENEFITS
Accelerate the deployment of new services Grow business in new areas and diversify the Minimise risks and reduce TCO for network
revenue stream deployments and new service launches
Source: Analysys Mason
SK Telecom: forming multiple partnerships to boost revenue diversification 3

Business challenges and key drivers of the project

SK Telecom (SKT) wants to establish partnerships to tap into Figure 1: Business factors that are driving the transformation
new business opportunities and grow revenue beyond its core project
business.
SKT is the leading mobile operator in South Korea and ranks NEW
second in the country in terms of the number of fixed broadband EFFICIENCY AGILITY SERVICES
connections. There are three players both in the mobile and fixed
markets and all of them launched 5G services on the same day in
30% 30% 40%
2019. The mobile market in South Korea is extremely advanced:
South Korean consumers are eager adopters of new technologies
and operators are ramping up their efforts to deliver them a full
5G experience. All three operators are testing 5G standalone
technology and have invested heavily in network upgrades and
densification. All three operators also offer nationwide LTE
coverage. As a result, there is little potential for differentiation in
Reduced capex and Improved network Ability to use
the core connectivity business. opex in 5G network in coverage and partners’ well-
areas with low ROI service quality in rural established ecosystems
SKT is therefore seeking to differentiate by launching new potential areas and services
services beyond connectivity and by investing in new revenue
growth areas. The operator also wants to maximise its potential to Shorter time to market
Accelerated launch of
Launch of new business
new services through
grow its customer base and strengthen its core by driving the for new solutions by
the integration of SKT
areas for horizontal
reusing technology diversification
rapid adoption of 5G. Its approach is based on forming multiple AI technologies
partnerships and co-investing; this involves both partners from
other sectors and direct competitors, plus internal restructuring. Possibility of new
Expansion to new
SKT is also investing in new technologies such as AI and IoT, and revenue with limited
geographies
capex and risks
plans to use these to enhance the 5G experiences throughout its
portfolio. Source: Analysys Mason
SK Telecom: forming multiple partnerships to boost revenue diversification 4

SK Telecom is experimenting with new partnership models to extend its business

beyond the network and into new markets in order to diversify its revenue streams
SKT has established a wide variety of partnerships to expand
its business in new areas and geographies.
SKT and Deutsche Telekom (DT) have agreed to establish a 5G
technology JV. The agreement was announced in November 2020
and each operator will have a 50% stake. The aim of the new
entity, which will be headquartered in Germany, is to develop
advanced, 5G in-building solutions, such as a distributed antenna
system (DAS). The two operators will target the European market
and expect to expand their partnership in the future to cover
augmented reality and virtual reality services, mobile edge
computing (MEC) and the app market. The creation of the JV is
still subject to mandatory regulatory approval.
SKT has also created a JV with Sinclair Broadcast Group to
develop and commercialise broadcasting solutions based on
ATSC 3.01 in the USA and worldwide. The JV was launched in
January 2020. The new entity, which is jointly funded and
managed by the two organisations, is named Cast.era and is
based in Virginia, USA. Cast.era started to provide ATSC 3.0
broadcast solutions to Sinclair stations at the beginning of 2020
and will focus on three main business areas: cloud infrastructure,
ultra-low latency OTT broadcasting and personalised advertising.
SKT established a third JV in April 2021, between its mobility
subsidiary (established as a separate entity in October 2020 and
named T Map Mobility) and Uber. The JV is named UT and will
combine Uber’s ride hailing technology with T Map Mobility’s
capabilities. T Map Mobility offers navigation and mapping
technology run by SKT’s mobile group and enabled by its AI
technology service Nugu.2 Uber will own 51% of the new entity
and is expected to invest a total of USD150 million:
USD100 million in the new entity and USD50 million in T Map
Mobility.
SKT and the other two major carriers in South Korea will share
5G networks to extend rural coverage and reduce TCO for
deployments with low ROI potential.
SKT has signed a network sharing agreement with KT and LG
Uplus to facilitate access to 5G networks in rural regions. The
agreement, announced in April 2021, will enable 5G users to
access any operator’s network, regardless of the carrier they are
subscribed to. As part of the deal, the three operators will share
their 5G networks in 131 remote coastal and farm towns across
the country. The South Korean government believes that the
network sharing system will be ready for commercialisation by
2024. SKT can use this initiative to maximise its coverage while
improving ROI in regions where it would otherwise be limited.

1 ATSC 3.0 is a bundle of television broadcasting standards, designed to support new technologies and enhance user experience
(improved video quality and audio, targeted advertising and advanced emergency alerting). ATSC 3.0 can be combined with mobile
networks to support two-way data communication and offer a more interactive experience to end users. 2 Developed in-house by SKT.
SK Telecom: forming multiple partnerships to boost revenue diversification 5

Key benefits

1 2 3
Accelerate the deployment of Grow business in new areas and Minimise risks and reduce TCO
new services diversify the revenue stream for network deployments and
new service launches

SKT expects to achieve synergies with
partners by combining its own
technologies (such as AI and cloud
technologies) with third parties’
expertise and assets. Such synergies
can accelerate the development of new
services and products and speed up
the entry into new markets. Selecting
partners with complementary assets
and capabilities (such as Sinclair
Broadcast Group and Uber) can further
enhance the benefits for SKT.
SKT has started on a journey to
restructure its business portfolio and
transform itself into a broad tech
company by adding new business
areas. It has started to establish
partnerships to diversify its business,
expand its geographical reach and
mitigate stagnation of revenue from its
mobile business. SKT also expects to
maximise 5G monetisation and
generate synergies with its other
businesses.
SKT is considering alternative asset and
business ownership models in order to
reduce both capital outlay and
investment risk. It is optimising its
investments in new areas and its
traditional business. SKT is
safeguarding its new investments by
carefully selecting external
stakeholders that have unique
expertise (such as an understanding of
the local market) that can contribute to
the success of the partnerships.
SK Telecom: forming multiple partnerships to boost revenue diversification 6

About the authors

Michela Venturelli (Analyst) is a member of the Infrastructure Investments research team in London, and contributes to various research
programmes, focusing on Operator Investment Strategies and Wireless Infrastructure. She previously worked with the Telecoms Software and
Networks research team. Michela holds a PhD and an MSc in Physics from University College London and Statale di Milano university,
respectively.

Caroline Gabriel (Research Director) leads Analysys Mason’s Networks research practice, as well as leading many 5G-related research activities
across multiple programmes. She is responsible for building and running Analysys Mason's unique research base of mobile and converged
operators worldwide. She works directly with Analysys Mason's research clients to advise them on wireless network trends and market
developments. She has been engaged in technology analysis, research and consulting for 30 years, and has focused entirely on mobile and
wireless since 2002. Her focus is on critical issues and trends related to mobile and wireless infrastructure, particularly operator deployment
intentions for 4G, 5G, cloud-RAN and other technologies. She has led research and consulting projects with a wide range of clients, including
mobile infrastructure vendors, large and start-up operators, regulators, trade bodies, government agencies and financial institutions.
SK Telecom: forming multiple partnerships to boost revenue diversification 7

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SK Telecom: forming multiple partnerships to boost revenue diversification 8

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SK Telecom: forming multiple partnerships to boost revenue diversification

PUBLISHED BY ANALYSYS MASON LIMITED IN JUNE 2021

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