In this quarter’s update, BMI has focused on the fixed-line and broadband markets of South Korea, expanding our content to include a number of new services offered by the country’s operators.

The fixed-line market ended 2008 with a total of 22.252mn lines, down by 3.8% in the year, and then falling further in the first quarter of 2009 to reach 22.003mn. This represented a turning point, as 2007 had witnessed an increase of 4.4% in the year. Aside from the overall maturity of the sector, the decline of fixed line represented the rise in demand for VoIP services. There were just over 3mn VoIP subscribers at the end of February 2009, up from 2.5mn in 2008. This represented an increase of 20% in just two months. In addition to this, mobile continued to represent an attractive alternative service to fixed line.

We have revised our outlook for the fixed-line market, after the decline in 2008 was smaller than we had anticipated. By the end of 2009, we estimate a total of 21.1mn fixed lines, representing a penetration rate of 43.6%, and that this will fall below 40% by 2013, to reach 39%. Over this period between 2009 and 2013, BMI forecasts an average annual decline of -2.5%.

The decline of the fixed-line market on account of the rising interest in VoIP, has meant that fixed-line operators such KT, SK Broadband and LG Dacom, have been able to offset the decline in traditional voice telephony revenues they would have suffered by expanding their broadband products. Aside from VoIP, these same three wireline operators have been heavily involved in IPTV. This allows operators to bundle their services of fixed line, internet and TV into a single package, with the possibility of also adding mobile, for a single monthly price.

However, according to IPTV News, citing The Korea Times as its source, at the beginning of 2009, the three operators had signed up a total of over 400,000 subscribers. The apparent slow subscription rate has been due to customer complaints, as customers are less than happy with the ‘dull and patchy’ service, while a lack of content remains another gripe. To this end, operators have announced their intentions to raise the number of available channels.

Neither has the home-grown wireless broadband platform WiBro been a resounding success. Roughly three years after launching in June 2006, KT and SK Broadband announced that they had just 220,000 subscribers as of May 2009. Again, poor coverage has been to blame. The Korea Communications Commission (KCC) has promised that WiBro mobile services will be available by the end of 2009, as part of efforts to provide a boost to the technology.

Meanwhile, we have, with the exception of forecasts, retained our mobile market analysis, which will be fully updated in the next quarterly report.