SK Telecom (SKM), South Korea’s wireless kingpin, is reportedly entering the mobile credit card market. The company has sealed a deal to acquire 49% stake in Hana Card, the credit card unit of Hana Financial Group, for KRW400 million (US$346 million). Hana Financial, the fourth largest financial company in South Korea, will hold the remaining 51% stake.
Hana Card currently holds 3.5% share of South Korea’s credit card market and targets to become the leading player in this market within five years through this deal. SK Telecom’s Board recently approved the transaction, which if completed successfully (expected in Feb 2010), will enable South Korea’s first telecom operator to enter the credit card market.
The deal will enable SK Telecom to offer wide-scale mobile payment services to its 24 million wireless customers. The company will soon introduce a mobile credit card (a chip installed on cell phones) enabling subscribers to make payments for purchases through thier wireless devices as well as access personal banking information. This will usher a new era of mobile payment and financial solutions in South Korea.
The market for mobile payment offers enormous potential for growth. South Korea’s wireless payment market is projected to reach approximately KRW1.7 trillion (US$1.5 billion) in 2009 and is forecasted to grow at an average annual rate of 21.5% over the next three years. This will offer the SK Telecom−Hana joint venture ample opportunity to tap the fast growing telecom-finance convergence market.
Given the high level of wireless penetration in South Korea, SK Telecom is seeking new avenues for growth which includes delivery of new value-added services. The company is increasingly focusing on offering next generation services that bundles banking and telecom services. SK Telecom is currently offering cell-phone banking, where subscribers can transfer funds between accounts through mobile phones.
Moreover, through a $16 million joint venture (Mobile Money Ventures) with Citibank (C), SK Telecom launched a service platform for Citibank Hong Kong to offer mobile banking and mobile stock trading services, leveraging the growing global market for mobile banking. This form of transaction delivery offers a new revenue stream at attractive margins.
However, SK Telecom’s archrival KT Corp (KTC), South Korea’s second-largest wireless carrier, plans to respond to the company’s new initiative with its own credit card deal. KT is aiming for a stake purchase in BC Card, Korea’s largest credit card company with nearly 40 million customers.
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