The introduction of new high-speed mobile internet services has made Korea's cut-throat mobile phone market even more competitive, analysts say. Over the last month, companies rolled out the new HSDPA mobile data service, which is sometimes classed as a '3.5G' telecoms standard.

Korea now has slightly more than 41.1 million mobile phone subscribers. With little room for growth in the country's saturated mobile market, carriers have only managed a net increase of 329,000 accounts over the past year. The carriers are investing heavily in new services and marketing as they attempt to lure subscribers from their rivals. One operator, SK Telecom, alone claims to have spent almost $2bn in the past two years to upgrade and expand its network.

“First quarter [mobile service provider] earnings are projected to be more sluggish than expected due to higher marketing outlays,” commented Shihoon Lee of Hyundai Research in Seoul.

Churn rates rose to 3.6 per cent in March, as users switched carriers to try new services. “the nationwide launch of 3G services seems to have made an already competitive environment even worse,” Lee said.

HSDPA (High speed downlink packet access) is an enhancement of the 3G WCDMA technology. It can provide speeds of more than 1 megabit per second.

“We believe the wireless telecom market is bound to improve gradually going forward, and the service environment should move towards 3G services in the long haul,” Lee predicted.

“In light of this, the industry should be able to boost profitability through higher ARPU (average revenue per user) as well as reduced portions of marketing and depreciation expenses relative to operating revenue”.