Transforming SK Telecom - Today Korea, Tomorrow the World - Leveraging Home Market Advantage

SK Telecom, a strong player in Asian telecommunications, wants to take its operations global. Though it is a technological leader, the firm nevertheless faces serious financial and strategic obstacles. In this in-depth case, Professor Peter Williamson and Sarah Meegan take you step-by-step through SKT’s history and challenge you to find the best way forward for the Korean firm.

by Peter Williamson, Sarah Meegan
Last Updated: 23 Jul 2013

In 2001, SK Telecom (SKT), South Korea’s largest mobile telecommunications company had a strong regional presence in wireless data despite its limited finances and small market base. It launched a new network in 2000 that offered some of the most competitive mobile services worldwide. Nevertheless, SKT had limited experience outside its home market and wanted to change.

We want our revenues from overseas to be raised substantially,” said Dr. Shin Cho, VP for Strategy Development. However, he noted, SK Telecom had “certain clear limitations which prevent us from mimicking the strategies of global competitors such as Vodafone or NTT DoCoMo.” SKT had to find its own path to global success.

Dr. Cho was challenged to consider how SKT could exploit its strengths and the advantages of its home market as a base for international expansion, as are you in this case by Peter Williamson (Professor of International Management and Asian Business, INSEAD) and Sarah Meegan (Research Fellow, INSEAD). What’s more, you must examine the complexities of 3G (third generation) technology, which is central to SK Telecom’s strategy decisions.

In Asia, mobile data services (from messaging to location mapping) were being provided through advanced 2G (second generation) phones, but it was clear that the future was in 3G even though this technology was already plagued with problems. International operators would have to choose between two competing and incompatible networks—cdma2000 and W-CDMA. Korea had been using a cdma service (for which the natural migration to 3G was cdma2000) since the mid-1990s, but was becoming increasingly isolated, as Japan and other Asian countries, as well as Europe, used the more dominant GSM standard, for which the natural migration path was W-cdma.

In 2000, SKT began offering a new network (CDMA 1X) that met industry standards for 3G phones. They did not, however, choose to market 1X as a 3G service, calling it instead 2.5G. Jae Byun, VP of Networks, explained that SKT had to keep in mind other considerations, such as technological and market uncertainties and, in particular, the Korean government’s launch of 3G licenses.

In December 2000, SKT became the proud possessor of a W-CDMA 3G license and soon after launched SK IMT Corporation. Meanwhile, a fierce battle of standards flared: although W-CDMA seemed to be the superior technology, it now faltered as cdma-2000 gained ground. SK Telecom remained firm in its loyalty to W-CDMA but did not close off options on the alternative technology standard.

Worldwide, the mobile phone industry was facing huge uncertainty. SKT countered this by drawing up “Vision 2010,” a plan for restructuring the firm to refocus on emerging trends. After all, if SKT wanted to maintain its growth record, it had to build a new engine for doing so.

Dr. Yoo Hyun-Oh, VP of the Wireless Internet Division, envisioned a platform strategy (linking the wired and the wireless Internet) and a financial services strategy (providing mobile credit, e-cash, and other payment tools). He also affirmed the importance of a range of strategic alliances, including content and hardware partnerships. Finally, he formed a global taskforce, to enable SKT to venture into international markets.

Even with a superior technology, the firm could not match the financial resources of other regional players and hadn’t been able to develop more than “a handful of small, separate projects.” You are asked to consider the way forward for SK Telecom. How can it improve its global strategy? What is the best way for SKT to exploit its strengths and the advantages of the Korean market as a base for internationalization? Having studied the strategies adopted by other overseas operators, what would you recommend to SKT?

INSEAD-EAC, 2002

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