SK Telecom eyes $1.8 billion in LTE investments

Kwon Hyok-sang, head of SK Telecom's Network Division, speaks during an interview with Reuters at his office at the company's headquarters in Seoul, May 18, 2011.

SEOUL (Reuters) - SK Telecom (017670.KS), South Korea's top mobile carrier, plans to invest about 2 trillion won ($1.8 billion) to build nationwide Long-Term Evolution (LTE) networks to cope with rampant growth in data traffic from smartphones, an executive told Reuters on Wednesday.

The operator originally planned to roll out nationwide LTE services in 2013, but Kwon Hyok-sang, head of its network division, said the operator could launch services even earlier than planned should demand outstrip expectations.

South Korea's mobile phone penetration rates topped 100 percent last year, and the smartphone market has boomed since the introduction of Apple's (AAPL.O) iPhone in late 2009. Smartphone penetration is expected to reach 42 percent in 2011, from just 2 percent in 2009, according to SK Telecom data.

But rapid growth in smartphone users has failed to translate into strong profit growth for carriers due to heavy network investments, tariff discounts and declining voice revenues.

SK Telecom recently raised its 2011 capital spending plans by 15 percent to a record 2.3 trillion won.

"We are making substantial investments in networks to withstand growing mobile data traffic," the executive vice president said at the Reuters Global Technology Summit.

Kwon said the company would launch commercial LTE networks in Seoul in July and expected to have more than 200,000 LTE subscribers by the end of the year. He predicted that the number could jump more than 10-fold next year as it expands services to 23 cities.

"We are pinning high hopes on the LTE market, which we expect to grow explosively," he said.

He was also upbeat about LTE demand, saying LTE services, which are five to seven times faster than 3G, would lure users with high-quality video calling, video streaming and interactive games.

But analysts say the new technology faces the challenge of offering differentiated services and competitive pricing to compete with existing standards.

Kwon also said the seller of Apple's iPhone and Samsung Electronics' (005930.KS) Galaxy S was not considering scrapping unlimited data plans, which were introduced by SK Telecom and its two smaller rivals last year despite investor concerns that they could overcrowd networks.

"The unlimited data plan is a promise we made to consumers and our stance is to maintain it," he said.

He also said the carrier was considering introducing unlimited data pricing for LTE users.

($1 = 1088.500 Korean Won)

(Reporting by Hyunjoo Jin; Editing by Ken Wills and Jonathan Hopfner)