Market Insight

LG UPlus’ Home IoT business flourishing in South Korea

August 14, 2017  | Subscribers Only


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Introduction:

When the Korean Ministry of Science and ICT released the country’s June 2017 wireless subscriber data in late July, it showed the country’s IoT service subscribers surpassing the 6 million mark. With all three major telecommunications service providers in Korea expecting a low single digit revenue growth in near future due to market saturation in their core mobile voice and data business, the rapid growth of IoT subscribers is providing a bright spot for the country’s telecommunications industry.

Out of different IoT business segments in Korea, Home IoT business particularly has been gaining a lot of attention lately. LG UPlus (The country’s third largest service provider) has emerged as the leader in the Home IoT business. Since launching its Home IoT service in July of 2015, LG UPlus has added 800 thousand Home IoT subscribers at the end of 2Q of 2017. Considering LG UPlus is adding ~50 thousand IoT Home subscribers per month, the company is expected to comfortably reach the 1 million subscriber milestone before the end of the year.

The 800 thousand subscribers in Home IoT business is astonishing considering it only took LG UPlus 2 years to reach this number. This number is more impressive when we take into account that South Korea is one of the smaller telecommunications markets compare to major markets like the US or China. For an example, if converted into a similar telecommunications service provider in the United States, the 800 thousand subscribers would be similar to T-mobile (Third largest wireless carrier in the US) adding 4-5 million new IoT subscribers in the United States.

This article will review the three key success factors which enabled LG UPlus to add many Home IoT subscribers in a short period of time. Also, this article will cover LG UPlus’ next upcoming products and services from its Home IoT business.

Success Factors:

The three key success factors behind LG UPlus Home IoT business’ recent growth are described below:

1. Affordable and flexible pricing:

Since launching the Home IoT service two years ago, LG UPlus has been offering flexible and affordable pricing options. Currently, the price for the Home IoT service ranges from as little as 1,100 KRW (~$1 USD/month) for servicing a single device to 12,100 KRW per month (~$10 USD/month) – for servicing up to five devices. Although these low prices offered are contingent up on subscribers signing a three year contract, LG UPlus makes these contract options (ranging from 1-3 years) more attractive through offering subsidies (value of up to ~$200 USD) for initial purchasing of the IoT devices and also providing bundling discounts to its existing wireless and broadband internet service customers.

2. Partnerships with apartment builders:

After launching its Home IoT service, LG UPlus has signed partnerships with 25 different construction companies that builds residential apartments and condos in Korea. The partnership involves installing LG UPlus’ IoT platform solution inside newly built apartments. Typical IoT platform installation incudes a wall pad - which refers to a terminal screen attached to a wall inside the living room of an apartment where it can be used to control different IoT devices – such as lights, temperature, home appliances. Each wall-pad is connected to different Home IoT devices inside an apartment and it acts as a smart hub.

By signing the partnership agreements, the construction companies have been able to leverage the Home IoT as the main selling feature for their upcoming apartments for a small fraction of the construction cost. For LG UPlus, the partnerships enabled the carrier to quickly add a group of new subscribers. Each partnership signing has added new subscribers ranging from a few thousands to as many as twenty thousand.

3. Partnerships with device manufacturers:

When LG UPlus started its Home IoT service, LG UPlus’ Home IoT devices mainly consisted of its own OEM devices which provided basic home IoT services such as climate control (smart thermostats), security (video cameras) and lighting (smart plugs, light switches). Since then, through signing partnership agreements with multiple device manufacturers, LG UPlus has continued to expand its Home IoT product offerings. LG UPlus now offers 36 different Home IoT devices. LG UPlus’ current Home IoT device offerings include major home appliance products (Washer, Refrigerators, etc.) from its sister company LG Electronics and its local rival Samsung Electronics. In addition to major home appliances, LG UPlus Home IoT platform also supports rice cookers (suited for the local market) and something unusual and funny as a wireless bidet – refers to a connected toilet seat cover that notifies the user’s smartphone if the user has been sitting on the toilet for too long.

IHS Markit Analysis:

Through establishing partnership agreements with device vendors and construction companies, LG UPlus has added scalability and accessibility to its Home IoT platform. In addition to continuously evolving its IoT platform, offering affordable and flexible price has enabled LG UPlus to rapidly increase its Home IoT subscriber base in two years.

Going forward, LG UPlus has started conducting big data analysis leveraging usage data from its newly acquired Home IoT subscribers. Using the results from the big data analysis, LG UPlus plans to study its subscribers’ IoT usage patterns that can be used to introduce better customized IoT products in the future.

In addition to the big data analysis, LG UPlus is planning to introduce its first voice assistant service in late 2017. When it launches later this year, LG UPlus’ voice assistant product is going to be almost a year behind the products from its local rivals, SK Telecom (NUGU) and Korea Telecom (GiGA Genie). However, LG UPlus’ new voice assistant product will have a big advantage over its rivals since the new product will have over one million subscribers that are actively using the compatible Home IoT platform by the time the product launches in late 2017.

From the success of its Home IoT service, LG UPlus in Korea is demonstrating a telecommunication carrier can be the centerpiece of the smart home IoT ecosystem. Although LG UPlus’ revenue from the Home IoT business is still tiny compared to its core businesses right now, LG UPlus success in Home IoT business clearly shows that IoT is the key business area that can bring revenue growth in the future not only for the South Korean telecommunications market but also for telecommunications markets in other developed countries as well.

Geography
South Korea
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