Smartphones Puts Korean Telecoms' Profitability On Hold As Samsung Dials Up Strong Results

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The rising popularity of smartphones sets the competitive landscape for related industries especially telecommunications and handset manufacturing markets to evolve significantly over the next several years Standard Poor's Ratings Services said in a report.

"Recent developments in South Korea, one of the fastest-growing markets for multiuse mobile devices and a major manufacturer of smartphone handsets, should offer some clues on what is in store for the credit quality of these rapidly-changing markets globally," said Standard & Poor's credit analyst JunHong Park. "Implications for the credit quality of major Korea-based corporations with exposure to the industry appear mixed, in our view."

We expect Korea's rapidly growing smartphone market to continue to crimp the profitability of domestic telecoms and funnel greater benefits to strong manufacturers like Samsung Electronics.

Marketing costs and regulatory pressure will likely constrain the performance of Korean telecoms, but acceleration of Long Term Evolution services and a halt to unlimited data plans will help telecoms recover lost average revenue per user, in our view.

We expect competiveness among global smartphone handset makers to diverge increasingly and Samsung's advanced technology and efficiency to consolidate its strong position in domestic and global markets.

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