[Q&A] Hwang Hyun-sik, President of LG Uplus, "The first spin-off will be 'Idleulnara'... Specific plans are undecided"

(From left) CTO Lee Sang-yeop, Head of Consumer Division Jung Soo-heon, CEO Hwang Hyun-sik, Head of Enterprise Division Choi Taek-jin, and CSO Kwon Yong-hyun answering questions at a press conference. Photo by LG Uplus

[Asia Economy Reporter Oh Su-yeon] LG Uplus is ushering in the 'Uplus 3.0' era centered on four major platforms. The company has set a goal to achieve a corporate value of 12 trillion KRW and a 40% share of non-telecom business by 2027.

On the morning of the 15th, LG Uplus held a press briefing at the Ambassador Seoul Pullman Hotel in Jung-gu, Seoul, unveiling its mid- to long-term growth strategy across new businesses.

President Hwang Hyun-sik defined the four major platforms as three new businesses?Lifestyle, Play, and Growth Care?and future technologies represented by Web 3.0, announcing a strategy to accelerate innovation in customer experience.

In the Lifestyle platform, LG Uplus plans to build a platform with 7 million users by 2027 by closely analyzing customer data. The Play platform will evolve Internet TV (IPTV) into 'OTT TV,' optimized for viewing over-the-top (OTT) online video services. Growth Care will transform 'Idleunara' into a 'Kids' Netflix' OTT service. Additionally, a Web 3.0-based reward system will be established to provide value to customers.

President Hwang emphasized, "For a dimensionally different customer experience innovation, customers need to spend more time using Uplus services. We will fiercely prepare the four major platform businesses so that all of the customer's time is consumed within Uplus's platforms."

Below is a Q&A session.

- Telecommunications companies can pursue new businesses based on infrastructure, such as business-to-business (B2B) platforms and solutions. The growth strategy announced this time seems focused on business-to-consumer (B2C) businesses. What was the reasoning behind this?

▲ Hwang Hyun-sik, President of LG Uplus: The new businesses I mentioned today are B2C-centered. We are also making various attempts for B2B new growth businesses, including reorganizing solutions and platforms. I hope to have an opportunity to discuss this again later.

- Compared to competitors like SK Telecom and KT, what competitive advantages does LG Uplus have?

▲ President Hwang: The directions pursued by the three telecom companies are fundamentally the same, so it may be difficult to have differentiation in direction. However, the service we launched this time and the question I received most often was how we designed services to make cancellation easy. Unlike business objectives, we focus on customer convenience and customer experience innovation, designing businesses to offer more customer-centric services rather than focusing on profits or targets. That is a difference.

Secondly, LG Uplus continuously pursues openness. Especially in the Play platform, we aim for an open ecosystem that coexists and creates synergy with various surrounding service companies. These aspects empower us to provide more valuable services to customers.

- Competitors have focused on content-centered non-telecom services and succeeded, but have been criticized for neglecting telecom services while strengthening non-telecom. Although I think this is a misunderstanding, since LG Uplus is preparing for a new era, misunderstandings may arise.

▲ Kwon Yong-hyun, CSO of LG Uplus: I remember a YouTuber last year questioning whether basic telecom service quality, including 5G, was neglected due to focusing on new businesses. LG Uplus is fundamentally a telecom company, and looking at the internal organizational structure, including the network and CTO divisions, our systems for creating and providing products are better equipped than other telecom companies.

The new businesses LG Uplus pursues are not product margin businesses but are based on the premise that the telecom network operates well, adding data to other services to enable more data utilization. If basic telecom services fail, future growth is a concern. We will continue to pay attention to telecom quality.

- Platform companies create ecosystems where supply and demand meet. However, telecom companies seem to call it a platform when they create various services and customers enjoy them diversely. Do you have plans to create a general platform marketplace where supply and demand meet, like Google or Meta?

▲ President Hwang: There are various definitions of platforms. The platform we envision is one where LG Uplus provides customers with new experiences, customers who recognize that experience as new value gather, spend time, and leave data traces as a result. That data becomes the source of new customer experiences, forming the structure of the platform.

- In LG Uplus's platform strategy, which comes first: increasing non-telecom revenue or establishing a customer strategy? What is the priority?

▲ President Hwang: The goal of LG Uplus is clear: whether changing company revenue or profit structure is the priority, or attracting customers through the platform is the priority. Changes in performance or management figures must come from customers. We innovate customer experience, and whether this grows into a platform determines the results. Therefore, we do not set revenue or profit as the initial goal. Focusing on what revenue sources to create or how to expand business can blur the essence. At this stage, we should focus on the most fundamental concepts.

- There is criticism that LTE market share rankings may solidify during the transition to 5G.

▲ Jung Soo-heon, Head of LG Uplus Consumer Division: Platforms will also be a good weapon to increase market share during the 5G transition. LG Uplus's market share has already exceeded 30%. It is also the most preferred brand among the MZ generation.

- Although the variety of choices is good, there is criticism that the discount rate is not noticeable. Is there a possibility of restructuring?

▲ Head Jung: The low discount rate is because LG Uplus does not charge subscription fees. Considering total costs, it is much cheaper. We are continuously researching how to provide benefits to customers through collaboration with partners.

- At last year's press briefing, you announced organizational restructuring plans and implemented them. How efficient has the operation been?

▲ President Hwang: We created a Chief Data Officer (CDO) organization and selected new business organizations during restructuring. There have been various achievements. This year, the most important thing is to strengthen the new business organization further. We realized the need for an internal incubating organization for new businesses, like a company-in-company (CIC) system that can operate independently. This is the biggest lesson learned from operating the organization from last year to this year.

We strengthened the CIC system by creating the 'Infinista' organization internally. Ideas generated inside become products and services, and this organization accelerates and incubates the process until commercialization. It is a separate organization that helps independently commercialize new businesses. Internally, it has already created significant synergy in the early stages.

- Recently, you secured a 20 MHz bandwidth. Has this created an opportunity to narrow the speed gap with competitors? Are you confident in catching up or surpassing competitors' speeds?

▲ President Hwang: The 20 MHz bandwidth is expected to positively impact speed. The biggest improvement will likely be in areas with high data usage. When data usage is high, speed can slow down, but this issue will be resolved, and customers will feel the difference.

- Globally, frequencies below 3.4 GHz are used for 5G. LG Uplus's adjacent bands may be auctioned. What are your thoughts and preparations regarding this?

▲ CSO Kwon: The Ministry of Science and ICT is reviewing the allocation and utilization plan for the entire frequency band, including 6G. It is difficult to express a position on how this will unfold.

- There are rumors about spinning off 'Idleunara.' Please clarify. If the four major platforms succeed, do you plan to spin them off independently?

▲ President Hwang: Spin-offs can be very effective, and depending on market share and business progress, spin-offs may occur. If we attempt this, the first candidate would likely be Idleunara, considering its current progress.

However, spin-offs take time internally and externally, as seen in other companies. There is no confirmed plan yet on when or which business will spin off. If done now, the first candidate would be Idleunara. If the kids OTT service is successfully launched, it would be the first case for spin-off.

- Telecom companies must continue network investments, and participants should fairly bear investment costs. In Korea, Google and Netflix notably do not pay costs. This seems problematic for maintaining sustainable networks. Is this why telecom companies keep considering new businesses?

▲ President Hwang: How to bear network investment costs while sustaining network business is a significant concern, especially ahead of the 6G era.

Multiple operators should share network usage fees, and these companies should also contribute. We believe such discussions are appropriate in principle. We agree that social consensus is necessary on this matter.

- Since the 1st, you introduced eSIM and launched eSIM services. Do you plan to link dual SIM services with future growth strategies?

▲ President Hwang: Currently, eSIM devices are limited, so it is difficult to drive changes using eSIM fully. We are at a stage of experimenting and confirming how customers use eSIM and what value it can provide.

As the range of devices expands, it will certainly become a significant factor for customers. Changes may occur not only in mobile network operators (MNOs) but also in mobile virtual network operators (MVNOs) and channels. We will continue researching and observing what approach is reasonable for customers.

- You mentioned coexistence with OTT. Compared to other companies, LG Uplus's OTT-related activities do not seem very active. When do you plan to take more proactive steps?

▲ President Hwang: Our basic direction is not to operate OTT directly but to create IPTV optimized for OTT viewing. We were the first to exclusively provide Netflix, Disney+, and others. This policy remains unchanged. Soon, we plan to launch 'OTT TV,' a TV platform that allows more comfortable viewing of OTT and real-time services than now.

Rather than trying to prevent market erosion caused by OTT, we aim to launch a new concept TV platform that allows customers who increasingly want OTT to consume content freely by switching between OTT services.

- Today, LG Uplus announced a KRW 7.2321 billion equity investment in smart car software company 'Obigo.' What is the significance?

▲ Choi Taek-jin, Head of LG Uplus Enterprise Division: We recently decided on a strategic paid capital increase with Obigo, announced today. One major growth area in B2B is smart mobility. Although the smart mobility market is still small, the infotainment sector is expected to grow.

Nissan, SsangYong, and recently Toyota have entered the infotainment market. The most important factor in entering this market is the in-car platform. The platform determines the capacity to provide various services. Obigo is the best company in Korea for such platforms. We decided to invest in Obigo as a good partner for LG Uplus's growth in the infotainment market.

- You said you will expand the non-telecom share to 40%. It is expected to increase further over time. After 2027, the non-telecom business share may surpass telecom. In that case, is LG Uplus a telecom company or a platform company?

▲ President Hwang: Despite good financial statements and management conditions, telecom companies are undervalued due to uncertainty. Ultimately, corporate value will vary greatly depending on how much revenue share is increased in new fields rather than the uncertain telecom sector. By 2027, we aim for the non-telecom share to exceed 40%, and afterward, the company will become one where telecom and non-telecom are almost indistinguishable. Customers will naturally perceive the company this way, so there is no need to worry about whether we are a telecom or platform company. We will definitely make it so.

- You cited the DIY rate plan as an example in the lifestyle area. Customers can easily change plans via the telecom app, and selectable plans were already launched during the LTE era. What is different?

▲ President Hwang: Not only rate plans but telecom itself is an area where digitalization is less advanced compared to other industries. We are planning innovative services that can change this in terms of customer convenience and other aspects.

▲ Head Jung: The DIY rate plan envisions a plan that customers can design. It offers high freedom in rate plans, and next, linked with the routine platform, users can create plans including routines. If other customers choose that plan, the creator also benefits. We believe this provides excellent customer experience for both creators and followers. It is a service offered from the perspective of customer experience innovation and creating a customer experience gap.