September 5, 2008

SK Rebrands Online Unit

By Blecken, David

SK Telecom hunts for an agency to launch a new brand into Korea's web market SEOUL SK Group's SK Telecom has called a pitch for a creative agency as it prepares to launch the SK Broadband brand into Korea's competitive internet market.

SK Broadband will be the new name for Hanafos, the broadband provider operated by Hanaro Telecom. SK Telecom took control of Hanaro last year after purchasing a near 40 per cent stake for 1.1 trillion won (US$1.1 billion).The rebranding exercise is understood to be imminent, though observers have suggested that it would be unwise to abandon association with the Hanafos name too quickly, since the brand carries considerable equity in Korea.

Hanafos is currently the second largest player in an intensely competitive market, controlling almost 25 per cent behind KoreaTelecom's (KT) Megapass service, which has a market penetration of just over 44 per cent.

Other competitors include LG Telecom's Xpeed, with a share of around 15percent,as well as a number of regional carriers outside the Seoul metropolitan area.

According to Steve Yi, regional planning director at Grey Korea, there is now little clear differentiation between broadband services, with connectivity having reached saturation point (at the end of last year, 82 per cent of Korean households had broadband connection).

However, he points out that Megapass is the obvious choice for many consumers since it is packaged alongside KTs standard landline services, which reach almost 90 per cent of Korean homes. The company also recently upgraded its service offerings in view of consumer sensitivity to bandwidth.

As the challenger, Hanafos' marketing efforts have centred on bundling its services which include PSTN (public switched telephone network) internet calling and IPTV into one package along with its broadband offering. While advertising for broadband services traditionally focuses on speed, Yi notes increasing attention to IPTV, which he says is a rapidly developing area and will be the "key battleground for the future".

Hanafos' HanaTV, though only two years old, has established itself as a pioneer in the sector ahead of KTs rival service MegaTV.

Ki Seok Ha, an analyst at research firm IDC Korea, predicted that as a leader in the IPTV field, SK Broadband's tactics will focus on developing this service while expanding its bundled packages - an area where rival LG Telecom lags behind.

Yi noted that while the prospects of success for SK Broadband are difficult to determine, consumers are unlikely to switch providers unless given a clear incentive.

Ha added that the company may benefit from a gradual reduction of regulations governing number portability between PSTN and VoIP services, though given KT's 90 per cent share of the domestic PSTN market, it will continue to face a stiff challenge.

Agencies competing for SK Broadband's account include TBWA and Lotte in-house agency Daehong.

Korean Telecom... will consumers want to switch providers?

Copyright Haymarket Business Publications Ltd. Aug 7, 2008

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