Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

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Equity Bottom-Up

This is an analysis of the MVNO (mobile virtual network operator) market in Korea. The following are the three key highlights we would like to emphasize regarding the future of MVNO market in Korea:<ul><li>Market share - Currently, the MVNOs possess about 10.7% market share in the Korean mobile sector. We think that the MVNOs could gain nearly 15% market share in the mobile sector by 2019/2020.</li><li>Fate of merger between <a href="https://www.smartkarma.com/entities/1111" target="_blank" data-smartkarma-citation="entities:1111:1">Cj Hellovision Co Ltd</a> and <a href="https://www.smartkarma.com/entities/394" target="_blank" data-smartkarma-citation="entities:394:1">Sk Broadband Co Ltd</a> - The final outcome of this merger is yet to be decided. After seven months of delay, the Korea Fair Trade Commission (KFTC) tentatively disapproved this merger due to jeopardizing competition. We think that there is a 80-90% probability that this merger is cancelled, mainly due to disapproval from the government. </li><li>Timing of IoT Explosive Growth and Decline in MVNO Growth - One of the biggest growth stories that will impact the global telcos include the massive roll-out of 5G services and explosive growth of IoT services. The IoT will likely become a key revenue generator for the global telcos. However, the cost of rolling out 5G remains a big hurdle and in terms of timing, we still have nearly 3-4 years before they become significant revenue generator for the telcos in Korea. Interesting, MVNOs are also likely to continue to grow in subscribers until around 2019/2020 when its market share reaches around 15%. With the large demand for IoT services in 2019/2020, the MVNOs could struggle to maintain call/data service quality and its market share could flatten out. Which leaves a very interesting scenario for the three major telcos in Korea in the 2019-2020 period. Our best guess scenario is that the Korean telcos continue to trade sideways for a couple of more years but sometime in 2018/2019, "Mr. Market" could realize the tremendous opportunity of the telcos benefiting from IoT growth and reduced competition from MVNOs. </li></ul>

This is an analysis of the MVNO (mobile virtual network operator) market in Korea. The following are the three key highlights we would like to emphasize regarding the future of MVNO market in Korea:Market share - Currently, the MVNOs possess about 10.7% market share in the Korean mobile sector. We think that the MVNOs could gain nearly 15% market share in the mobile sector by 2019/2020.Fate of merger between Cj Hellovision Co Ltd and Sk Broadband Co Ltd - The final outcome of this merger is yet to be decided. After seven months of delay, the Korea Fair Trade Commission (KFTC) tentatively disapproved this merger due to jeopardizing competition. We think that there is a 80-90% probability that this merger is cancelled, mainly due to disapproval from the government. Timing of IoT Explosive Growth and Decline in MVNO Growth - One of the biggest growth stories that will impact the global telcos include the massive roll-out of 5G services and explosive growth of IoT services. The IoT will likely become a key revenue generator for the global telcos. However, the cost of rolling out 5G remains a big hurdle and in terms of timing, we still have nearly 3-4 years before they become significant revenue generator for the telcos in Korea. Interesting, MVNOs are also likely to continue to grow in subscribers until around 2019/2020 when its market share reaches around 15%. With the large demand for IoT services in 2019/2020, the MVNOs could struggle to maintain call/data service quality and its market share could flatten out. Which leaves a very interesting scenario for the three major telcos in Korea in the 2019-2020 period. Our best guess scenario is that the Korean telcos continue to trade sideways for a couple of more years but sometime in 2018/2019, "Mr. Market" could realize the tremendous opportunity of the telcos benefiting from IoT growth and reduced competition from MVNOs. 

SK Telecom

Korea's MVNO Market Analysis