New Growth Opportunity for LG Uplus via Internet of Things

How smallest telecom player in Korea is addressing new business opportunity via digital transformation

LG Uplus Corp. (“LG Uplus”) is a South Korean cellular carrier owned by LG Corporation, Korea’s fourth largest conglomerate and parent company of the LG Electronics[1]. Despite being within a conglomerate umbrella, it has the smallest market share within the Korean telecom industry with only 19.9% compared to market leader, SK Telecom with 49.6% and KT with 30.5%.[2] More detrimental aspect of this is that there is no potential growth within the telecom market in terms of user acquisition – mobile penetration is well of 100% and it was a zero-sum game of taking consumers from other carriers – and market landscape has not changed much in the past five years.

In an effort to increase market share in an ever-competitive environment, LG Uplus opened itself to digital transformation and entered into the Internet-of-Things (“IoT”) market as the first mover. Since inception of IoT division in July 2015, they have aggressively invested in the team, increasing its staff to 160 people and launched ‘IoT@Home’.

IoT@Home is basically connecting all the electrical appliances to your smartphone. To name some of the functions available – you could see who is at your door, turn-off the stove, start or halt dishwashers or laundry machines, see what your dogs are doing through the CCTV all through your smartphone. Technically, it allows you to have control of any electrical appliances (individually) from your smartphones. It has proven its initial success by attracting 500,000 new users within six months of its launch.[3] The core customers were young professionals living in urban areas or young couples with babies.

Besides its initial success, I believe there are ample business opportunities that LG Uplus could leverage to expand its revenue base as well as customer base.

First, LG Uplus could easily integrate its functions to many of the electronic appliances of LG Electronics – one of the companies within LG conglomerate umbrella. Currently, LG conglomerate does not have a unified software platform on which all of its services are integrated. By leveraging the base that they are currently building through LG Uplus IoT initiatives, they can gradually compile other affiliates services on a single LG platform to create an attractive network effect for the customer.

Second, LG Uplus could expand into the emerging connected auto industry by partnering with car manufacturers. One of the aspects that limits fast growth within the connected car industry is the absence of software platform that connects the car to users. By connecting the cars with LG Uplus platform which already have significant amount of user base, they could expedite the introduction of connected cars as there would be less friction from consumers in terms of being connected to the cars.

Third, LG Uplus could coordinate with the local governments to reduce energy consumption throughout local houses. Even globally, energy over-consumption is an issue that all is trying to resolve, and one of the core factors of over-consumption of energy is wasted energy – such as lights that are kept on even when no one is in the house. By allowing the users to easily control the electricity usage remotely through their smartphones, it would drastically reduce the energy consumption as well.

Digital transformation has been a critical factor in re-branding LG Uplus as an innovate brand as opposed to telecom player with lowest market share for decades. In addition, it gave LG Uplus a growth strategy which not only gain more market share within the telecom space, but also expand to new business territories which other competitors cannot.

(615 words)

[1] Wikipedia, ‘LG Uplus’

[2] “SKT Market Share Drops Below 50% for the First Time in 13 years”, MoneyS, March 25, 2015

[3] “Industry 4.0 – IoT Big Bets by LG Uplus”, Aju Economic News, Nov 16, 2016

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1 thought on “New Growth Opportunity for LG Uplus via Internet of Things

  1. Really interesting to read about LG’s foray into IoT ! In particular, I think LG is well-positioned to enter this market because of how penetrated they already are in the home appliances market and in many countries, in the smartphone market. The US competitor that comes to mind is Nest, which was acquired by Google and is part of Alphabet now. Nest has faced some turmoil and turnover in recent years, with its CEO departing, poor integration of acquired technologies and the recall of faulty products. It’s experience has showed that full seamless connectivity comes with many obstacles, which can be expensive: http://www.forbes.com/sites/aarontilley/2016/06/03/nest-ceo-tony-fadell-is-leaving-google-amid-internal-turmoil/#62261a122aa5 – I wonder to what extent LG is relying on acquisitions and how successful it has been to date ?

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