SKM to Launch FMS Service

South Korea’s largest wireless carrier SK Telecom (SKM - Analyst Report) announced plans to introduce its fixed-mobile substitution (“FMS”) service. Assuming near-term approval of the service by the telecom regulator Korea Communications Commission, the company targets the commercial launch on Nov 1.
 
FMS refers to use of cellular handsets instead of wired or cordless landline phones for communication. This entails migration of voice minutes from fixed-line to wireless networks. FMS differs from fixed-mobile convergence, which allows users to switch between fixed-lines and mobile networks using a single dual-mode handset and two different technologies. Currently, FMS services are widely available in Europe.  
 
SK Telecom’s FMS service allows customers to make calls within a designated area (called “Discount Zone”) under the company’s network coverage. These calls will be charged at a discount rate which is the same as fixed-line VoIP (Voice-over-Inernet Protocol) service. Currently, tariffs levied on fixed-line VoIP service are KRW39 (US$0.03) per 3 minutes for landline-to-landline calls and KRW13 (US$0.01) per 10 seconds for mobile-to-landline calls.   
 
Initially customers will be allowed to choose one discount zone with an option to change the location once a month. However, SK Telecom is considering to offer multiple discount zones in a few months following the service launch.   
 
Despite being the leading player in the domestic wireless market, SK Telecom faces greater challenges ahead in retaining market share. Given the high level of wireless penetration in the Korean market, the company is pursuing various business opportunities that will enable delivery of new value-added services to its customers.
 
The FMS service represents a response to the fixed-mobile convergence (“FMC”) service launched by the company’s archrival KT Corp. (KTC - Analyst Report). However, SK Telecom’s service offers certain advantages over its rivals offering.
 
FMS uses only cellular network compared to FMC which operates on both fixed-line and cellular networks. This eliminates the need for handsets with Wi-Fi (wireless broadband) capabilities and network access points which are essential for FMC. Moreover, FMS offers a wider network coverage while maintaining call quality. The FMS service, which is aimed at replacing home phones, is expected to boost SK Telecom’s wireless business driven by the migration of fixed-line traffic to mobile.