South Korea’s 5G market is booming, and not just because it was the first market in the world to launch commercial 5G services. The country’s three major operators – KT, LG UPlus and SK Telecom – launched 5G in April 2019. One year later, by the end of May 2020, they had signed on 7 million 5G customers, according to South Korea’s Ministry of Science and ICT, which accounted for 10% of total mobile subscriptions.
But while all three operators are successfully riding the 5G wave, it’s interesting to note that 5G has been especially good to LG UPlus, which has always been the plucky underdog of South Korea’s mobile market. While the operator still ranks a distant third in terms of total subscriber numbers, it’s currently raking in more money than the competition.
In early August, KT, LG UPlus and SK Telecom released their Q2 earnings, and in terms of wireless revenues, LG UPlus had the best quarter of the bunch, registering 3.7% growth year on year (or 4.9% if you don’t count interconnection usage charges). That’s slightly ahead of SK Telecom (3.5% year on year) and incumbent KT (0.6%).
Meanwhile, LG UPlus has also been narrowing the subscriber gap in the 5G era. Before the launch of 5G, LG UPlus’ market share was around 20%. Post-5G, it’s now up to 25%.
Network quality is great …
How are they doing it?
Traditionally, telecoms players like to point to network superiority in terms of metrics like speed, performance and coverage. And that’s certainly a factor here, although technically it’s a factor for everyone. As of June 2020, all three operators had deployed 115,000 base stations (with 240,000 AAU modules). Basic 5G services available in the top 85 cities in the country, while 5G modules have been deployed on top of 75% of LTE sites, covering 93% of the population.
So while network quality and performance is essential to the 5G user experience, it’s not much of a differentiator when the competition is deploying similar network technologies. And simply having the best network is not a guarantee of revenue growth.
For that, you need compelling content – and this is where LG UPlus appears to have an edge.
… But content is still king
While initial deployments of 5G around the world were essentially marketed as “faster 4G”, it’s been long understood in the mobile industry that this is not much of a value proposition in terms of monetization. Faster speeds are always welcome, but the true value of 5G is its ability to enable content and services that 4G simply cannot deliver.
One such content category is augmented and virtual reality (AR/VR), which the mobile industry in general have seen as an early “killer” consumer app for 5G. All three South Korean operators are pursuing AR/VR content to sweeten their 5G offerings, but LG UPlus has been strikingly successful at it.
LG UPlus has been active in creating its own AR/VR content – its AR/VR assets have increased from 600 at the early stage of 5G to more than 4,000 today, and users are reportedly spending more time consuming that content.
And there are a lot of users – LG UPlus says it has around 600,000 AR/VR subscribers, which accounts for 50% of its 5G subscriber base. That’s not a coincidence – separate reports published last year by Strategy Analytics and Kantar Korea credited LG Uplus’ AR/VR offering as a key hook to not only attract new 5G users but also convince existing 4G users to upgrade to 5G.
One secret to its AR/VR success is that LG UPlus isn’t sticking to the local market, but monetizing its AR/VR content overseas – a move that makes sense at a time when K-Pop and K-Dramas are enjoying global popularity. Last October, LG UPlus signed contracts worth a combined $10 million with China Telecom, PCCW and KDDI to provide AR/VR content. In June, LG UPlus added Chunghwa Telecom to its AR/VR customer list, and is currently negotiating similar deals with over 30 other operators worldwide.
And LG UPlus is already gearing up for the next wave of 5G-powered services – it’s cloud VR gaming service was officially launched commercially in July 2020. Meanwhile, the operator is already making plans to pursue the other potentially lucrative 5G revenue opportunity – B2B – via joint development and incubation of services such as private 5G services, smart ports, and smart factories.