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First And Foremost

By Maurie Dobbin

With its high density population, it’s little surprise that CDMA has really taken off in Korea. SK Telecom is the country’s leading mobile communications carrier and the biggest CDMA carrier in the world. But will the company maintain service quality in the face of new PCS competition? Dr Jung Uck Seo, president of SK Telecom, offers some insight into the company’s strategies.

At the end of 1997, SK Telecom passed the milestone of three million CDMA subscribers. As a measure of SK Telecom’s new standing in the international community, the company has begun to take a higher profile and was much in evidence at the Pacific Telecommunications Council’s 20th Annual Pacific Telecommunications Conference in Hawaii. Leading the company’s delegation was the president, Dr Jung Uck Seo.

Dr Seo joined Korea Telecom in 1984 after a distinguished career in the defense industry, where he served on numerous technical advisory committees and special study groups of ROK government agencies. His initial responsibilities included the development of TDX (a digital switching system) and the TICOM computer system.

In December 1990, Dr Seo was appointed vice-minister of science and technology by the president of ROK. And in 1993 he was made chairman of the Commission for Radio Communications Development by ROK Ministry of Communications. His major responsibilities included project management in support of the development of the CDMA digital cellular system. Finally, in March 1995, Dr Seo joined SK Telecom (formerly Korea Mobile Telecom) as the President.

CDMAS: How do you see 1998 for SK Telecom in the Korean domestic market?

Dr Jung Uck Seo: There may be some slow-down in the market, principally with low-usage customers. Typically, these are customers who have received free or heavily subsidised handsets and may find it difficult to pay the airtime charges.

CDMAS: What has been the effect of the Asian currency crisis on SK Telecom so far? Will there be any long-term effects?

Dr Jung Uck Seo: I hope it will be a short-term phenomenon — the bubbles in the economy are the main factor. I believe it will be far more serious for our competitors. Our main investment is over, whereas they are still expanding the coverage of their networks and are committed to substantial contracts. We’re well established in the market with over three million digital customers generating substantial revenues.

CDMAS: What has been the impact of the entry of the PCS carriers into the Korean market?

Dr Jung Uck Seo: The first thing you must understand is that PCS is not a different service. Cellular is able to offer all of the same features. The three PCS carriers between them have only 300,000 customers. While those numbers may grow, they will be largely consumers generating lower profits than those of SK Telecom. I have already heard rumours in the market that some of the PCS carriers are in trouble due to their overestimation of the market share they expected to achieve.

The fact is that with lower revenues they’ll be unable to invest to achieve the same high quality of service we provide our customers. They’ve also been forced to subsidise handsets to attract customers, thereby increasing their operating costs. I hope they realise what they are doing isn’t right. The subsidising of customers hurts everyone and, while we would prefer not to subsidise, we’re forced to follow.

CDMAS: Do you believe you’ll be awarded a PCS license? If so, when do you expect this to happen?

Dr Jung Uck Seo: We don’t see this as a question of a new license; rather, it’s access to the spectrum we need to expand our business. We’re still in the process of converting our analog AMPS customers to digital. As we reduce their numbers we’ll be able to reclaim that spectrum for digital services, but this still won’t be sufficient to meet demand in high-density areas such as Seoul. We believe we are already providing a better quality of service than the PCS carriers. The 8kbit/s Enhanced Variable Rate Codec (EVRC) which we use is at least as good as — and, in certain environments, better than — the 13.2kbit/s Qualcomm Code Excited Linear Prediction (QCELP) vocoder used by the PCS operators. In the future we intend to reduce the vocoder bit rate to 4kbit/s, giving us still greater spectrum efficiencies. We liken our situation to the market that NTT DoCoMo addresses in Japan, where spectral efficiency is the key to delivering good quality services. We’re confident that the government will provide access to PCS spectrum when it becomes necessary for our continued growth.

CDMAS: How important has the role of the Korean industry been in your success?

Dr Jung Uck Seo: I’ve been involved in the development of CDMA technology since 1993 when the government appointed me project manager for the digitalization program. (This was before I became the President of SK Telecom.) At that time we were largely on our own with little support from the U.S. We considered using GSM but decided it didn’t offer us the spectral efficiencies demanded by our market. It then fell to our people to solve the problems developing a brand new technology into a successful commercial service.

The importance of this role should not be underestimated. I believe that the recent success of cdmaOne in Japan and China has been largely due to our pioneering efforts. If you like, Qualcomm developed a good engine but we produced the aircraft, built the runway and control tower, provided the test pilot and launched an airline service. Most people didn’t realize the difference between an engine and an airline service but we had the operating experience and the switching knowledge that was essential to the commercialization process. SK Telecom’s cellular systems are multi-vendor dual mode systems. The analog network comprised of Lucent and Motorola’s equipment is interconnected to the digital systems of LGIC, Samsung and Hyundai’s products.

CDMAS: How is SK Telecom contributing to the development of the cdmaOne standard?

Dr Jung Uck Seo: Although individual operators and manufacturers have been developing their own systems, services and standards in order to consolidate these development efforts, a consortium has recently been established. It includes the government, telecommunications operators, equipment manufacturers (including foreign companies Ericsson, Qualcomm, Motorola and Nokia) and ETRI, which takes the main development responsibility. The number of organizations in the consortium reached 105 at the end of November 1997 and it’s still welcoming more participants. Model systems based on this initiative will be developed and evaluated by 1999.
Another consortium for asynchronous inter-cell IMT-2000 system development was organized recently. SKT is actively participating in both of these consortiums and I’m responsible for this participation as chairman of a development commission.

In addition to this official activity, SK Telecom is pursuing its own approach to IMT-2000 development. This follows two streams: one that I would term IS-95B and which extends the transmission capacity of our existing standard; the other involving close cooperation with NTT DoCoMo. Our objective is to develop and evaluate both the U.S. system and the European-Japanese system and make a selection for our national standard.

CDMAS: What is your vision for the development of third-generation services and how will these benefit Koreans?

Dr Jung Uck Seo: I believe that it will provide a significantly higher quality service than second generation with a rich range of voice and non-voice services, including packet data and multimedia applications. It will accommodate a wide range of user densities and facilitate improved coverage using a flexible and open architecture. The challenge is to make sure that it isn’t another ISDN, which kept us waiting for 20 years while we developed the applications our customers wanted. We want to do this more realistically. While everyone has different ideas, I think we should look at third generation as simply a new addition to the family.

Look at the U.S. The majority of customers there are still using analog and are perfectly happy with reliable, simple, voice services. CDMA is growing slowly there because people are happy with analog and U.S. carriers don’t have to contend with our population density problems. Third generation is important to Korea as we believe our customers will want to access multimedia Internet services through their handset. We’re already experiencing high demand for our NETSGO Internet service and see third generation as the means of providing an enhanced service for our mobile market.

Our objective with third generation is to return something to the world community. We benefited from technology developed in the U.S. and now we’d like our engineers to make their contribution to the next generation.

CDMAS: What are SK Telecom’s ambitions in the international arena? Where have you invested to date and where do you intend to invest in the future? Do you see these investments linked with Korean industry?

Dr Jung Uck Seo: I’d describe our approach to international investment as low key and careful. My personal belief is that we need to build on our domestic success first. By that I mean we would like to work with foreign partners in Korea before we venture with them in to overseas markets. We must make sure that we have the right cultural fit and that language isn’t a barrier. We don’t want to get into hot water too fast.

We’re working closely with Motorola and Lucent here in Korea and that gives us confidence to work with them in other markets. We regard this type of partnership as a family business and part of the spirit of globalization. This is a major part of the reason of why I’m here at PTC’98. It’s a matter of connecting with people and not falling into the trap of isolation. The form of that cooperation could range from R&D, through training, to direct equity participation.

As far as overseas participation is concerned, we’re already involved in a paging venture in India and are actively looking for other opportunities. We’d particularly like to invest in the U.S., where I trained and have a good understanding of the market. We’re looking for a good business relationship where we will be able to use our unique Korean expertise and experience. We regard a successful partnership as a marriage of cultures rather than just making money. It’s about the globalization of the way we think.

We’ll work closely with Korean companies in achieving this ambition, but we’ll also work closely with Motorola and Lucent where it is mutually beneficial. Samsung and Hyundai always ask us to join with them when they need operating experience and their involvement in our networks gives us the confidence to build a successful business. Our objective is to avoid overheated markets where unrealistic prices are being paid. We have an obligation to make money for our shareholders and this involves a rational approach to any opportunity.