Asia Business Channel

South Korean mobile carriers struggle with 5G business models

South Korea telecom carriers are planning for the launch of the world’s first commercial 5G services on December 1st, but according to media reports, SK Telecom, KT and LG Uplus are struggling to find profit models that will make up for their enormous investments into the construction of the high-end fifth-generation (5G).

The telecom firms plan to provide 5G services on Dec. 1, using mobile routers first, rather than smartphones. The smartphone services will be available in March next year as initially planned. Mobile routers are devices providing mobile connections for Wi-Fi devices.

When long-term evolution (LTE), or 4G, networks, were commercialized, video calls and high-definition video streaming services were highlighted as "killer" services that were going to reap profits. YouTube is an example of a company that developed its global video streaming service because of 4G.

But things appear to be different ahead of the launch of 5G. The mobile carriers have come up with ideas to create revenue through services related to self-driving cars, virtual reality (VR) and augmented reality (AR) in the 5G era but most of the services are still in the experimental stage.

An executive of one of the telecom companies said: "We have been carrying out diverse pilot projects related to Virtual Reality and Augmented Reality as well as Artificial Intelligence, but most of these services have yet to be visualized and we don’t know whether we can generate profit from them.”

SK Telecom, KT and LG Uplus will spend $6 ~ $8 billion USD on the development of their 5G networks with most of the costs incurred in the first 24-months of development and service. Advertising and marketing experts point out that each company needs to define its service and their differentiating factors over competitors in order to attract users.

The Global System for Mobile Communication Association (GSMA) forecasts that: "the number of 5G connections globally will reach 1.3 billion by 2025, covering 40 percent of the world's population or approximately 2.7 billion people." But the GSMA notes that these projections are based on mobile carriers gaining access to sufficient spectrum and releasing the right services.

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