The iPhone in Korea: Is SK Telecom Blowing It?

South Korea is on board. As of today, Apple (Nasdaq: AAPL  ) can resell the iPhone within its borders.

There's coverage aplenty of the news, including a feature story in this morning's edition of The Wall Street Journal. Reading it, I feel as if I've heard a collective head-slap -- as if this was some sort of global "well, duh!" moment because we all agree that South Korea just had to -- HAD TO -- do business with the iEmpire.

But did it really? Motley Fool Global Gains co-advisor Tim Hanson isn't so sure. "Generally speaking, investor excitement about the iPhone in Asia is overrated because mobile phone technology in those countries moves so much faster than here," Tim said when I asked him about this earlier.

"Companies like SK Telecom (NYSE: SKM  ) or China Mobile (NYSE: CHL  ) that already have significant market share probably don't need to worry about losing big chunks of it just because the competitor got the iPhone."

He's referring to KT Corp. (NYSE: KTC  ) , SK Telecom's chief rival on the Korean peninsula. The company has already said that it is in talks to distribute the iPhone and could strike a deal reminiscent of Apple's agreement with China Unicom (NYSE: CHU  ) . SK Telekom told the Journal it's willing to watch and wait to see how the iPhone catches on.

Tim's right that SK Telecom doesn't need to rush here. Asia's mobile networks are more advanced than our own. They're also more battle-tested when it comes to delivering data to smartphones already operating on the peninsula.

Even so, I find it curious that SK Telecom is taking a wait-and-see approach when it comes to the iPhone. Certainly there's no reason for the carrier to act rashly, but its customers are also well-known data consumers. Samsung phones rang up the third-most data requests worldwide in June, according to AdMob. SK opened its own applications store earlier this month, the Journal reports.

Samsung makes great phones. So does Research In Motion (Nasdaq: RIMM  ) , whose BlackBerry is offered by SK Telecom to its business customers. But there's never been a mobile data delivery mechanism like the iPhone. South Korea is ready for it, even if SK Telecom isn't.

Apple is a Stock Advisor selection. SK Telecom is a Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is boycotting number 2 pencils today. Soft lead is for wimps.


Read/Post Comments (9) | Recommend This Article (5)

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  • Report this Comment On September 23, 2009, at 6:15 PM, dudemonkey wrote:

    It will be difficult for Apple to compete with the Korean brands in Korea. There is a very strong sense of protectionism among consumers there, or at least there was a couple years ago when I lived there. Apple was trying unsuccessfully to sell iPods in Seoul at the time.

  • Report this Comment On September 25, 2009, at 9:40 PM, KOREANGUY wrote:

    Your right. Iam here in korea and the iphone issue is big. But i think that iphone will be useless in korea. In here they are better phones than the iphone. And many korean people are not familiar with the apple brand. Most of the people buys a Samsung Yepp(Mp3) than a ipod touch. And though the iphone comes here to korea there would be many problems to solve. Its only a BIG MESS!!

  • Report this Comment On September 27, 2009, at 6:12 AM, achkorea wrote:

    I am also currently living in Korea and I think it will be successful, I see the ipod touch EVERYWHERE! Even young kids have them. Young Koreans are famous for wanting and buying the latest gadgets and I think the iPhone will be no exception, there are Apple resellers all over the place. In major shopping areas like Myeong Dong (for those unfamiliar, is a shopping area in Seoul) there are 3 or 4 Apple Resellers within seconds of each other and they are always packed with people. Apple is definitely here and young Koreans are loving that fact.

    I think there are serious misconceptions when it comes to the Korean market, the young people don't have the same loyalty to LG and Samsung that the older generations have. When discussing this loyalty, people always cite Nokia as an example of a company that has tried unsuccessfully in the Korean marketplace, but come on...Nokia? Really?! It isn't a company that is really on the cutting edge now, is it? I haven't seen an interesting Nokia phone in over 10 years.

    Koreans are also well known for changing their phones ever year and forking out the equivalent of $800-$1200 to do it, without even thinking twice. When I see several 7 or 8 years old walking around with the latest models of Samsung and LG phones, it is abdundantly clear that the marketplace is dying for something different.

    Koreans have been buying the latest touchscreen phones by LG and Samsung, but I think they want the original phone that started off the craze. When countless people are on the subway with their ipod touch in one hand and their touchscreen phones in the other, it seems very clear to me that the iPhone may prove to be more successful than any other phone introduced to the Korean market. Sure they might get bored of it quickly, but everyone will want it when it becomes available and next year, it will be something different.

  • Report this Comment On September 29, 2009, at 5:48 PM, TMFEdyboom223 wrote:

    Achkorea, are you living in Seoul? I'm in Daegu, but I can tell you that it is slightly different down here. Apple's presence is little to none here (for those that don't know, Korea's 3rd largest city with around 2.5 million). I agree with about everything else that you said, but some of my students arent even familiar with the brand Apple.

    All of the phones I see are LG and Samsung. I have only seen a few Ipods among my students. Yes, they are always looking to improve and entire families have phones that are ridiculously expensive.

    I am not sure if your statement about Korean loyalty holds true in Daegu or not. Remember, Daegu is a very conservative, traditional city in comparison to other large cities in Korea. However, I wonder if it even matters that the children are not loyal to their Korean brands. In the end, it's the parents buying the phones for them, so if the parents are loyal to Korean products (to me it seems they are) then the student will get a Korean product as well as the adults.

  • Report this Comment On October 04, 2009, at 8:43 PM, Quasimobile wrote:

    Quite ready to get and use an iPhone in Korea. While Samsung et al, have been a leader in phone gadgetry they are nowhere near the thousands of apps available on the iPhone. They make some pretty lame iPhone wannabe models that tells me there is a consumer market here for the real thing. I see the iPod touch here. That also tells me there is a definite market for the whole package.

  • Report this Comment On October 28, 2009, at 3:32 PM, iphoneinkorea wrote:

    Will the iPhone be successful in Korea? Yes. No question about it. If it ever gets here.

    The iPhone has been awaited for 3 years in Korea. The iPod Touch is now the most popular MP3 player in Korea, also the most expensive, with more than 250,000 units sold.

    Does the iPhone have competition? Yes, but Koreans will realize that the imitations aren't even close to what the iPhone offers. iPhoneinKorea.com offers updates on the progress of the iPhone's long awaited arrival in Korea.

  • Report this Comment On November 25, 2009, at 12:14 AM, nyc2seoul wrote:

    i currently live in seoul and i have no doubt that the iphone will be successful with the initial launch. the sales numbers are already staggering for those that have registered for it among my friends whom are both expats and koreans in their early to late 20's. i don't see any brand loyalty and actually korea covets foreign brands.

    i think the concerns for whether the popularity will be able to be sustained is in the quality of service and loss of some functionality that both makes iphone great and competing korean phones great.

    the first issue is lack of DMB, which is incredibly popular here. just take a ride on the subway and look at how many of the younger generation (apple generation) is sitting there and playing games or watching television on their phone. the fact that game apps are not accessible and the lack of DMB will be prohibitive for many koreans to jump on the bandwagon.

    the second issue is that the older generation that use their phone for banking purposes might have issues as well since the majority of korean banking websites require active-x, which is not supported by the iphone and never will. this means that the banks will need to re-write their sites and with backwards standards in this country, people have been asking for this for years and there has been little progress.

    the third issue is that many of the korean websites use an back-end architecture that doesn't get indexed by Google, Safari, Firefox, etc. and why most Koreans continue to use IE. one of the reasons why naver and daum continue to dominate the search business here. maybe koreans won't "search" on their phone, but for those that do, i think their search results will be subpar and an annoyance.

    but....regardless of these issues, i have no doubt that the phone will be a success and locking people into a 24 month contract with zero "cancellation" policy is going to determine the success of the phone. if these issues don't really become an issue and there are happy users, i expect sk telecom to jump on board as well and sell the iphone like hot-cakes to the "wait and see" crowd, (a.k.a. - me). the expectations are so high for the iphone there is little room for failure and koreans are a very impatient culture, so it will be boom or bust for kt on this one and quite risky. if it doesn't meet expectations, then people are going to be pissed about a 24 month contract with an expensive usage plan that limits games, lacks DMB and provides subpar search results.

    i also know that some people have been using the iphone on jailbroken phones already and have reported a ton of dropped calls, missed calls and poor reception. i don't know if this will all change now that it's officially supported or not, nor do i know the technical reasons for why this occurred.

    my two cents

  • Report this Comment On December 02, 2009, at 4:11 PM, jelpernw wrote:

    @edyboom223 Metropolitan Seoul is where half of South Korea and even more of its money, so I don't think anyone is concerned about iPhone penetration in Daegu. It's a bit like saying that Twitter hasn't caught on in Sioux City, Iowa, therefore it isn't a success.

    @achkorea is on to something. Nokia is the world leader in total phone sales, but it mostly sells lower-end "feature phones." While Korea, to date, has mostly been a feature phone market - see this article from the JoonAngDaily about the iPhone: http://bit.ly/6faQax, which says that only 1% of Korean cell phone users have smartphones - Koreans' feature phones are super high-end.

    It's worth reading that statistic again: in a country with one of the highest rate of cell-phone turnover in the world, only one percent of Korea’s cell phone users have smartphones. Compare that to the US where 31% of new phones sold in 3Q 2009 were smartphones (http://bit.ly/6N253u). The reality is that the South Korean mobile internet is backwards and underdeveloped, despite its world leading infrastructure, due to carrier restrictions in third-party content. I interned with SKT last summer and they were deathly afraid of a mobile internet beyond their control. When LG Telecom offered unrestricted mobile web browsing in 2008 this was considered a revolution in the South Korean market. Meanwhile in the US the iPhone was already a year old and the mobile internet had been around for almost a decade. The true impact of the iPhone on the South Korean market will be to open South Koreans up to the idea of a mobile internet, and I have no doubt that once they see what they have been missing they will take to it like they have taken to every piece of technology that has come their way in the last thirty years.

  • Report this Comment On December 02, 2009, at 4:12 PM, jelpernw wrote:

    @edyboom223 Metropolitan Seoul is where half of South Korea and even more of its money, so I don't think anyone is concerned about iPhone penetration in Daegu. It's a bit like saying that Twitter hasn't caught on in Sioux City, Iowa, therefore it isn't a success.

    @achkorea is on to something. Nokia is the world leader in total phone sales, but it mostly sells lower-end "feature phones." While Korea, to date, has mostly been a feature phone market - see this article from the JoonAngDaily about the iPhone: http://bit.ly/6faQax, which says that only 1% of Korean cell phone users have smartphones - Koreans' feature phones are super high-end.

    It's worth reading that statistic again: in a country with one of the highest rate of cell-phone turnover in the world, only one percent of Korea’s cell phone users have smartphones. Compare that to the US where 31% of new phones sold in 3Q 2009 were smartphones (http://bit.ly/6N253u). The reality is that the South Korean mobile internet is backwards and underdeveloped, despite its world leading infrastructure, due to carrier restrictions in third-party content. I interned with SKT last summer and they were deathly afraid of a mobile internet beyond their control. When LG Telecom offered unrestricted mobile web browsing in 2008 this was considered a revolution in the South Korean market. Meanwhile in the US the iPhone was already a year old and the mobile internet had been around for almost a decade. The true impact of the iPhone on the South Korean market will be to open South Koreans up to the idea of a mobile internet, and I have no doubt that once they see what they have been missing they will take to it like they have taken to every piece of technology that has come their way in the last thirty years.

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