Coronavirus threatens to knock S.Korea off 5G leadership perch

SK Telecom Co

06/04/2020 24:00

(Repeats story that ran on Friday afternoon)
    By Heekyong Yang and Hyunjoo Jin
    SEOUL, April 3 (Reuters) - South Korea is struggling to
retain its lead in global next-generation 5G telecom services,
as the coronavirus pandemic further cools sentiment of consumers
whose interest in the technology has waned due to cost and
quality concerns.
    The Asian nation's telecom operators, led by SK Telecom
 017670.KS  and KT Corp  030200.KS , launched the world's first
5G services exactly a year ago. And Samsung Electronics
 005930.KS , its dominant mobile phone manufacturer, stole a
march on equipment makers globally by launching the first 5G
phone around the same time.
    But after an early growth spurt driven by generous subsidies
for 5G smartphones, the hype has almost vanished as customers
question the value of pricier handsets and sometimes-spotty 5G
services. Now the coronavirus crisis is hitting demand hard.
    Sales of Samsung's new 5G-ready Galaxy S20 phones, which
were launched at the end of February with prices as high as
1,595,000 won ($1,308.81), are down about 30% in South Korea
compared with early sales of its previous model S10 series, an
official at a South Korean operator told Reuters. 
    The weak reception came even though sales of new phones
usually surge right after the product launch, the person said.
    The 5G slowdown in South Korea shows how the coronavirus
could hobble the takeoff of the technology globally. Smartphone
makers, including Apple Inc  AAPL.O , which is currently
scheduled to launch 5G phones in the fall, had been counting on
5G for a sales boost after two years of industry-wide
contraction. 
    Plans for futuristic services such as self-driving cars and
fully automated factories and cities could also be affected by
5G delays. Spain, Italy, France and Austria have postponed
auctions for 5G spectrum because of the coronavirus.
    China's 5G sales, by contrast, are expected to recover in
the second quarter, boosting Chinese companies including Huawei
 HWT.UL , said Tom Kang, an analyst at research firm
Counterpoint.
    Xiaomi Corp  1810.HK , which recently unveiled a new
flagship 5G smartphone, said it is seeing signs of a sales
recovery in China as the country starts to return to normal
following the coronavirus lockdown.  urn:newsml:reuters.com:*:nL4N2BO3BZ
    Samsung has only a small presence in China and sells most of
its premium 5G phones in other markets. 
    
    IMPACT ON BOTTOMLINE
    South Korean carriers added about 400,000 new 5G customers
in February, government data showed, an increase from 290,000 in
the preceding month. But analysts saw that as a subdued number
given the launch of Samsung's S20. And it was less than half the
880,000 recorded in August.
    The 5G market started slowing in November as telecom
operators curtailed marketing spending and customer complaints
grew about choppy network connections and a lack of
differentiated content.
    
    
    Analysts said operators and handset makers have to rely on
fresh subsidies to revive demand, eroding their bottom lines. 
    Samsung had counted on South Korea to take an early lead in
the 5G phone market last year. It was expected to expand 5G
phone sales in other major markets like the United States and
Europe, ahead of Apple's iPhone launch, but the coronavirus is
setting back such plans, analysts say.
    U.S. retailers are already offering about 20% discount for
online sales of the S20, which was launched in America just a
month ago. Samsung's unlocked S20 devices are being sold at
$799.99 on Best Buy  BBY.N  and Amazon.com Inc  AMZN.O , about
$200 discounts from its original $999.99 price.  
    Samsung declined to comment for the story. A Samsung
Electronics chief executive told shareholders in mid-March 5G
smartphone demand was expected to rise this year.
    In an effort to boost volume, Samsung plans to launch more
affordable 5G smartphones such as the A71 series in Korea in the
first half of this year, a telecom source said.   
    "Consumers are cautious about buying new phones, because of
little perceived differences between 4G and 5G phones and price
hike from 4G phones, especially with the virus dampening
consumer sentiment," said Kim Hoi-jae, an analyst at Daeshin
Securities.
    "Therefore, handset makers are expected to launch budget 5G
phones faster."
    South Korea reported on Friday 86 new coronavirus infections
that raised the national tally to 10,062. While the daily
infections have eased from their peaks, consumers are seen wary
of buying handsets.
    "In times like this, changing your phone is not just a
priority," said a manager at a phone retail store in Seoul.    
$1 = 1,218.6600 won)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
South Korea's monthly 5G subscriber growth     https://reut.rs/3aI2TP2
South Korea's 5G subscriber growth interactive    https://reut.rs/3bNSnGm
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 (Reporting by Heekyong Yang and Hyunjoo Jin; Editing by
Jonathan Weber and Muralikumar Anantharaman)
 ((Heekyong.Yang@thomsonreuters.com; +82 2 6936 1470;))