NEW YORK-Consumer perception of Korea Telecom as “slow moving and bureaucratic, but quite good at service provision,” has helped, not hindered, its subsidiary Korea Telecom Freetel, said Sang-Chul Lee, president and chief executive officer.
The Code Division Multiple Access personal communications services provider, which holds 10 megahertz licenses in perpetuity, began commercial operations in October 1997. Emulating its parent’s reputation for reliability and belying Korea Telecom’s image as a plodder, Freetel has been on the fast track ever since.
It reached the 1 million subscriber milestone six months after its debut, doubled that number by its first birthday and tripled it by March of this year.
Freetel, whose network has a capacity for 6.5 million customers, is the world’s largest PCS carrier and the fastest-growing wireless service provider anywhere, according to Lee.
Between the end of March and mid-June, Freetel posted another 200,000 net new customer additions. This total reflected a temporary slowdown experienced by all five of South Korea’s wireless telephony providers due to their simultaneous elimination of handset subsidies on June 1. In response, Freetel plans to introduce a handset installment payment plan, he said.
“The handset subsidy was quite high, about $200. I hate to say its (elimination) was government-mandated. But the government suggested it, and the heads of all five carriers agreed after an overnight meeting,” he said.
“After a temporary slowdown, the increase in the number of subscribers was so sharp that the network couldn’t keep pace.”
To help pay for network capacity expansion and services and also for investments in other Asia-Pacific countries, Freetel hopes to go public in South Korea by the third quarter and obtain a listing on Nasdaq by early next year, Lee said. It also is working with Donaldson, Lufkin & Jenrette Securities Corp. to find a strategic or financial investor willing to purchase up to 20 percent of the carrier, he said.
On a parallel track as it gears up for an initial public offering, Freetel plans a September commercial launch of voice and data services at 57.6 kilobytes per second, and mobile data and location services. The upgraded offering also will improve call quality and network call handling capacity.
“The reason we think wireless data will prevail is that handsets are becoming more and more computer-like, and there are three times more (wireless) handset users than [personal computer] users,” Lee said.
“By September, we will be offering Internet access with a small display.”
Customers will pay the standard airtime charge, which averages 10 cents per minute, plus 2.5 cents each time they retrieve data.
Brand-named PanDORA, which stands for Pan-Data Objective Relating Architecture, Freetel’s wireless Internet offering will involve the PCS carrier in the receipt of data from a variety of sources and “information messages for display on the small screen of a handset terminal,” Lee said.
“I’m not sure who should run this type of provisioning in the future. Wireless carriers may have to. On the wireline side, carriers can just connect users to an Internet Protocol.”
Next year, Freetel plans to roll out cdma2000, offering 144 kbps voice and data services. This will double network capacity and provide better coverage. It also will result in increased battery standby time for end-user devices.
By mid-year 2000, Lee said he expects the Korean government to issue three licenses for third-generation IMT-2000 wireless services. Each license is to be allocated 20 megahertz of spectrum in the 1.8 GHz to 2.2 GHz range.
There are five cellular and PCS carriers in South Korea: Korea Telecom Freetel, LG Telecom, DACOM Hansol PCS, SK Telecom and Shinsegi Telecomm.
“Korea is the most regulated telecommunications market in the world,” Lee said.
“Consolidation so far has been government directed, but in this case, it may happen naturally.”
