Learnings from an Advanced Market - Korean Experiments - Marketing Insight by Jin Kook Kim Jenny I Jin Jang

Contents I. Overview of the Korean Market II. Research Design III. Key Findings IV. Conclusions and Implications

2/32 Introduction Overview of Korean Telecommunication Market Why is Korea the Test Bed of Mobile Convergence? Mobile Convergence Initiatives in the Korean Market

3/32 Overview of Korean Telecommunication Market The first country to adopt CDMA Three domestic service providers (SK Telecom, KTF, LG Telecom) Three major handset manufacturers (Samsung, LG, Pantech) Handset purchase price: average 292 euros * Mobile service charge: average 28.5 euros a month * Communication expenses higher than : ‘education’, ‘medical care’ *Source: The 4 th Syndicated Telecom Research by Marketing Insight (Sep. 2006) Low-end products/ Non camera phones Prepaid billing system Charge for receiving calls Imported phones Korea has almost No Market for: Overview of the Korean market

4/ Music Phone Camera phone (Built-in) Telematics (Phone) Mobile- Banking S-DMB (phone) T-DMB HSDPA Wibro World’s first launch Mobile Convergence Initiatives in the Korean Market Overview of the Korean market 3.5 Generation

5/32 How Do Korean Consumers Use Mobile Convergence Service? 1 Music Camera Telematics Banking DMBHSDPA Game Overview of the Korean market

6/32 Mobile Convergence - Government - Business - Media - Consumers  Necessity of n ew revenue streams for carriers Obsessive atmosphere What Makes Korea a Test Bed? Overview of the Korean market  Solid IT infrastructure  Focus on premium handsets

7/32 DifferenceS-DMBT-DMB Launched in May 2005Dec Governed by Ministry of Information & Communications Ministry of Culture & Tourism Law TelecommunicationsBroadcasting Operated by Mobile service provider Broadcasting Corp. Focus on Satellite broadcasting Terrestrial broadcasting Profit source Subscription feeBased on advertising Price €11Free  Further development of mobile convergence involves issues of diplomacy among various parties rather than technology. Key Issue for the Convergence Market Overview of the Korean market

8/32 Research Design Study Purpose Research Methodology

9/32 Study Content Ongoing convergences in the Korean market 1 1 Consumer responses to convergence 2 2 Prospects for mobile convergence Prospects for Fixed-Mobile Convergence (FMC) Research Design

10/32 Universe Study Frequency Study Frequency  More than 100,000 mobile phone users Sample Size Sampling Frame Sampling Frame Major Contents Major Contents Overview of Syndicated Telecom Research (by Marketing Insight)  Mobile phone users aged  Conducted bi-annually since March 2005 (March and September)  Panel of Marketing Insight (0.6 million panelists)  Members of major Internet portal sites  U&A  Mobile Convergence  CPQ (Consumer Perceived Quality) Research Methodology  survey Data Collection Data Collection Research Design

11/32 Buyer within 6 months Respondents Data Collection Time of purchase 4 th Wave 4 th Wave Aug 30 - Sep ,90121,015 Mar-Aug rd Wave 3 rd Wave Mar ,000 17,477* Sep Feb nd Wave 2 nd Wave Sep ,45524,704 Mar-Aug st Wave 1 st Wave Mar 10 - Apr ,77924,212 Sep Feb 2005 *Demand was temporarily low due to a mobile handset subsidy policy Primary target is those who bought a handset within past 6 months. Research Methodology Research Design

12/32 Mobile Convergence Market & Trends Pricing Prospect for FMC Key Findings

13/32 Owner- ship Use rate (Owners) Satisfaction rate among users Feature Camera9894 (95)42 Music playback8962 (70)50 Telematics286 (23)36 Banking275 (19)63 S-DMB86 (75)21 T-DMB98 (80)28 HSDPA (57)- Wibro--- Service Game download service-3035 Music portal service-1425 (Base: Buyer within past 6 months, Unit: %) Penetration, Use Rate and Satisfaction Rate Key Findings

14/32 Telematics Banking T-DMB S-DMB Music Portal Service Game Downloads (Use Rate) (Satisfaction rate) (Unit: %) The fourth Use Rate and Satisfaction Rate Key Findings

15/32 Telematics Banking T-DMB S-DMB Music Portal Service Game Downloads (Use Rate) (Satisfaction rate) (Unit: %) The fourthThe third Changes in Consumers’ Responses to Convergence Key Findings

16/32 Reasons for Dissatisfaction with Convergence Service S-DMB %Dis- satisfied Price* Major reasons for dissatisfaction *Monthly fee (as of Sep. 2006) PriceContentQualityConvenience 51% €11 T-DMB Free 48% Music €4 37% Game 19% ** Telematics € % Banking €0.7 8% ** Charged per download: data + call charge        Key Findings   

17/32 Use (intention) rate Use rate (a) Intention rate (b) Gap (b-a) Banking53732 T-DMB83426 Telematics62418 S-DMB6115 Music portal Wibro-32- HSDPA-26- Market potential based on a comparison of current use and future use intention (Unit: %) Prospects for the Convergence Market Key Findings

18/32 Telematics Banking T-DMB S-DMB Music portal (Use/Intention Rate) (Satisfaction rate) (Unit: %) Prospects for the Convergence Market The fourthThe thirdIntention HSDPAWibro Key Findings

19/32 Current price (monthly fee) as of Sep Price willing to pay Current usersIntenders Telematics Banking S-DMB T-DMBFree Music portal HSDPA Wibro (Unit: Euro) < < < < <  Intenders are willing to pay slightly more than current users.  Acceptable price for users is estimated to be €2, much lower than the current price. Price Acceptance for Each Convergence Service < < < < = Key Findings

20/32 Telematics Banking T-DMB S-DMB Music portal (Intention Rate, %) (Price, € ) (Base: Intenders) Willing to payCurrent price Price Acceptance for Each Convergence Service  Intention Rate & Acceptable Price Key Findings HSDPA Wibro

21/ Shopping61 Messenger55 Blog/mini home page51 On-line cafe/club47 Video service (Unit: % MA) Communication- centered + shopping Entertainment-centered + (Unit: % MA) Music portal service Video service10 Broadcasting service8 Traffic information  Experience in fixed lines  Experience of mobile Experience of Fixed-Mobile Convergence Services Key Findings

22/32 Experience Future Intention of mobile PCMobile Traffic information43830 Financial service42628 GPS service-528 Broadcasting service26824 Video service Music portal service Practical service on a real time base Entertainment service  Intention of future use of mobile (Unit: % MA) Potential for Fixed-Mobile Convergence Services < Highest experience but low intention Key Findings

23/32 (Experience in Fixed lines) (Future intention of Mobile) (Unit: %, MA) ExperienceIntention Potential for Fixed-Mobile Convergence Services Shopping Messenger Blog Café/Club Video Traffic Finance File Management Broadcasting Home networking Edu./E-book Network game Music  Experience in fixed lines vs. Future intention of Mobile Key Findings

24/32 Conclusions Implications Conclusions and Implications

25/32 Camera Most common feature in convergence - But does not generate much revenue Music Low growth potential - Low satisfaction & intention rates - Difficult to make profit by increasing the use rate Game Declining use rate - Need to develop fun games while on the move Conclusions - Prospects for each convergence service- Conclusions and Implications

26/32 Tele- matics Tele- matics On a steady rise with its own product value - Needs to compete with low-end navigation products Banking Most promising convergence service - Failure of initial price strategy: too low to make profits - Issue of chip integration will be a turning point DMB Complex issues among parties  Uncertain market - The solution for above issues involves agreement between interested parties Conclusions - Prospects for each convergence service- Conclusions and Implications

27/32 Pricing 1. Maximum affordable cost (median): € Current monthly cost (median): € New product intenders: approx. 30% - they are willing to pay approx. € 5 (equivalent to € 34 - € 28.5) 4. Acceptable price for existing service: € 2 Implications - Marketing Tips for Mobile Convergence- Several hypotheses were derived: Conclusions and Implications

28/32 Product Promising products: “Practical, NOT heavily content-dependent”  Banking service: High growth potential  Telematics: Practical but limited in service  Music portal service: Not practical and too content-dependent Implications - Marketing Tips for Mobile Convergence- Conclusions and Implications

29/32 Promotion Event-centered convergence services: sport or entertainment events  Eg. WBC event Distribution Diversity of distribution channels  Eg. Selling of mobile handsets at banks for mobile banking Implications -Marketing Tips for Mobile Convergence- Conclusions and Implications

30/32 The future of mobile convergence is uncertain. The success and failure of mobile convergence is hard to predict. Numerous unexpected variables that may affect the success or failure of mobile convergence lead us to uncertainty. Epilogue T-DMB: Promising! S-DMB: Not promising! What’s happening?

31/32 From a conversation with a CMO of a mobile service company… Q. Any success yet? A. None yet. Q. Will there be one? Q. What are you doing? A. Not sure A. We’re trying! Epilogue Mobile Convergence Mobile Convergence

32/32 Marketing Insight