Press release: Lessons to be learnt as 3G reaches 40% penetration in Japan and South Korea

April 2006 – While it is very early days for 3G in most countries, mobile operators in Japan and South Korea have already reached 40% penetration of 3G services and they provide valuable lessons for mobile operators in other regions, according to a new report, Lessons from the Japanese and South Korean Mobile Markets: handsets, services, content and pricing.

Mobile operators in Japan and South Korea have consistently led the world in the development of innovative mobile services and technology. They have unrivalled track records of introducing new handset capabilities and services, and they are currently the only markets to achieve mainstream adoption of services delivered by 3G networks.

"Despite the intention of Western mobile operators to develop a broader range of non-voice services, data ARPUs are still dominated by basic SMS person-to-person messaging," says Dr Alastair Brydon, co-author of the report. "In contrast, Japanese and South Korean operators generate a significant proportion of their total revenue from data services other than text messaging." The report shows how this data revenue is achieved with rich portfolios of services, including mobile Internet access, entertainment, ringtones and music, games, mobile TV and video, community portals and mobile transactions.

While Japan and South Korea have had some successes with non-voice services, the Analysys report warns against blindly following their lead. "In the race to offer new services and capabilities, operators in Japan and South Korea have sometimes failed to anticipate the full commercial implications of their actions," says Alastair Brydon. "Innovation has not always translated into strong revenue growth." Despite rapid migration from 2.5G to 3G, Japanese operators have struggled to grow overall ARPU. For example, NTT DoCoMo suffered a 15% decline in overall ARPU between 2003 and 2005.

 According to co-author Dr Mark Heath, "Obsession with the latest technology and services in Japan has led to insufficient attention to more basic services, such as voice and messaging." Japan has already seen a steady decline in voice usage, exacerbated by low-priced messaging services, which encourage users to send mobile emails instead of making voice calls. With a stronger focus on voice services, South Korean operators have achieved voice usage growth and maintained voice ARPU with a range of innovative tariffs. Mark Heath adds, "Mobile messaging revenues are in terminal decline in Japan. Despite an average of over 400 mobile emails sent and received per 3G customer each month, messaging revenues in Japan lag those in markets with much lower usage. The pricing method adopted significantly under-prices messaging and other low-bandwidth services."

Lessons from the Japanese and South Korean Mobile Markets examines the development of the Japanese and Korean mobile markets in order to uncover key lessons for operators worldwide. The report considers the prospects for innovations, such as mobile credit card transactions and handsets equipped to read barcodes, and presents strategies for succeeding with 3G, multimedia services and flat-rate charging for voice and data.