|Young monks try on 5G-based AR and VR service of LG Uplus at the mobile carrier's store in Seoul, May 7, 2019. / Korea Times file|
By Baek Byung-yeul
SK Telecom, KT and LG Uplus need to come up with more "competitive" business models based on their fifth-generation (5G) networks as the way they generate profits ― super-fast connectivity ― makes it hard to get customers to spend money, according to a recent report by an accounting firm here.
The report by Samil PricewaterhouseCoopers (PwC), "Making 5G pay," stated that top mobile carriers worldwide have been generating lower returns on investments compared with companies in other business sectors over the past three years because they rely heavily on mobile fees.
"To increase their return on investment in 5G networks, the mobile carriers cannot stick to just offering fast data services to their customers. They need to map out a new model to create additional profits," the report said.
With expectations that 5G networks can become new growth engines, mobile carriers have invested heavily in building infrastructure over the past years, but attracting customers only through super-fast connectivity doesn't give them a high return on their investments.
The report called the mobile carriers to be more innovative in developing new business strategies and suggested they adopt a "business-to-business-to-x" (B2B2X) model.
In the traditional business model, mobile carriers are intended to provide services directly to either individual customers or company customers, but the B2B2X refers to a business model in which the service providers collaborate with diverse partners to offer value-added services to a wide range of consumers including individuals, retailers, partners, suppliers or whoever might make up the "x."
As an example, the report stated that many mobile service operators are working closely with video streaming service providers and trying to enhance the model such as enabling subscribers to pick and choose from a menu of video streaming services and receive a discount depending on their selection.
"With the improvements in network capabilities due to 5G, customers can expect to enjoy more network services bundled with content provider services ― including accelerated gaming ― and the operator could offer its network service to the customer as part of that bundle," the report said. "So, as a content provider that is closer to the requirements of the customers, we could be the sales channel for the operator's network service."
In response to the report, an official from a mobile carrier here, said establishing enough 5G base stations nationwide must be done first to ensure all customers can use the 5G network.
Given it took about six to seven years to offer a "hassle-free" 4G service back in the early 2010s, the official added telecommunications companies are planting the seeds for future growth.
"Of course, the telecommunications firms are implementing the traditional push strategy, investing heavily in building 5G infrastructure. This is because allowing more people to experience the next-generation network service is a prerequisite to increase profits from the investment," the official said.
"On the sidelines, they are also developing ways to generate profits by cooperating with business customers such as providing 5G services to factories or drone operators," he added.