Following a series of unilateral approaches by LGU in the LTE market (i.e., early LTE network rollout and more aggressive voice tariff plans) and its superior subscriber net adds during the suspension period, it is becoming more clear that the LTE market is growing on the side of LGU—this is being played out at the expense of telecoms sector’s profitability.
Until the LTE market share hits a mature stage which we expect to be happen in mid-2H13, we believe Korean telcos will continue to play a tug of war that increases the vulnerability of 2013 earnings.
All three telcos’ new voice tariff plans seem to have an upselling effect of W3,000-plus with a possible explanation that
subscribers now tend to focus more on ‘data’ rather than ‘voice’ (hence likely to opt for the higher price package); we believe while this may be the case in the longer term, telcos’ ARPU will be hurt to a certain extent as there seems to be more high-end subscribers who have chosen to opt for a higher tariff plan given their requirements for additional voice minutes. They are now expected to enjoy the benefits of a lower tariff plan with free voice.