South Korean telephone company bets on K-pop to expand online services abroad

SEOUL, South Korea - South Korea's largest telephone company is trying to capitalize on the worldwide popularity of Korean pop music, or K-pop, to increase online revenue from overseas as it seeks more control over the content on its network.

KT Corp. said Thursday it plans to launch a mobile version of its online music streaming service abroad this year and promote its video joint venture as a platform for broadcasting live concerts of K-pop stars.

The move by KT to use its iTunes-inspired music service and online broadcasting firm to attract overseas audiences is part of a broader shift in its business. South Korea phone companies have been hit by falling revenue from traditional voice calling while the popularity of downloaded applications for smartphones has dramatically increased the amount of data on their networks without increasing revenue.

KT Chairman Lee Suk-chae said Thursday that telephone companies "will not just be a provider of dumb pipes."

"KT can make profit from apps, content, games and other virtual goods that are circulated and consumed through online networks," Lee said.

The Seoul-based operator is in talks with mobile operators in Japan and China to launch its music streaming service, which it dubbed a "Korean version of iTunes" when introduced to South Korean users last week. In 2011, it invested $3 million for a 51 per cent stake in Ustream Korea, the Korean unit of San Franciso-based Ustream Inc., which allows users to live broadcast and watch videos through mobile devices.

The services could serve as a springboard for KT's thus far unremarkable presence in overseas markets. Last year, KT's overseas revenue of 1 trillion won ($877 million) was less than 5 per cent of its total revenue.

Global K-pop fans from Europe to South America have flocked to online services such as YouTube that have helped accelerate the spread of music videos across national boundaries. KT hopes that its latest services will join the growing list of online destinations for Korean music audiences and bring cash along the way.

KT's bid to gain more control over what content can circulate on its networks resulted in a spat with Samsung Electronics Co., the world's largest maker of web-connected TVs. KT suspended fixed-line Internet service to Samsung smart TV buyers for a few days in February, saying that heavy data traffic from smart TVs burdened its network.

South Korea's saturated mobile market in which the mobile penetration rate tops 100 per cent has also prompted carriers to eye overseas markets. KT's rival, SK Telecom Co., acquired the world's second-largest memory chipmaker, Hynix Semiconductor Inc., to increase global revenue.