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					Creative
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                       Macroeconomic Landscape

                       GDP Growth. As one of the Four Tigers of East Asia, South Korea
                       has achieved an incredible record of economic growth over the past ten
April 9, 2003          years. Three decades ago GDP per capita was comparable with levels in
                       the poorer countries of Africa and Asia. Today South Korea’s GDP per
                       capita is seven times India's, 17 times North Korea's, and comparable
Rating: HOLD           to the lesser economies of the European Union.

                       Future Outlook. Analysts forecast South Korea’s real GDP to expand
                       by 4.6% in 2003, growing to 5.3% in 2004. The foreign trade balance
Emerging Markets       will make a large contribution (2.2 percentage points) to overall growth
                       in 2003. This will largely be the result of a slowdown in import volume
                       growth on the back of a sharp deceleration in domestic demand
                       growth.

                       Political Exposure
John Genovese
jfg214@stern.nyu.edu   In current events, President Roh Moo Hyun has assumed office as of
                       2003. South Korea’s new focus should be on liberalism and not
Edward Mui             populism (a political strategy based on a calculated appeal to the
egm209@stern.nyu.edu   interests or prejudices of ordinary people). In terms of domestic
                       politics, the outlook is faced with many unknowns. With a new
Ram Narayanan          president comes a new direction for the country. The GNP may
rn291@stern.nyu.edu    oppose Roh’s promised political reforms because they view Roh as a
                       dangerous radical. External politics are very sensitive as the situation
Mitesh Patel           with North Korea has increased tension. North Korea’s defiance in
mp564@stern.nyu.edu    maintaining a nuclear development program poses great danger.
                       President Roh promises to carry on with the “sunshine policy” by Kim
Sachin Patel           Dae Jung with the US. They are facing two fronts that have isolated
smp241@stern.nyu.edu   them from the US and North Korea, posing a great challenge for Roh
                       to ease tensions.
Aric Schachner
ahs233@stern.nyu.edu   Telecommunications Industry

                       The wireless market has proven to be the fastest and most profitable
                       sector of telecommunications. Cellular penetration, a major growth
                       driver in the past, now hovers around 65% in Korea, a level most
                       analysts consider near saturation. This has led many telecom companies
                       to focus growth efforts in other areas, particularly in value-added
                       services (VAS). Wireless Internet services posts a penetration rate
                       around 16-20%, this rate is expected to grow to at least 35-40% by
                       2005. Korean telecom operators are thus pushing anxiously for VAS to
                       become the engine of future growth.




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                            TABLE OF CONTENTS

                                                                    Page(s)
Executive Summary……………………………………………………………………………….                    3-4
The LG Telecom Case…………………………………………………………………………....                 5
    Political Conditions…………………………………………………………………………...             5
         Historical Post WWII Background………………………………………………………       5
         Political Evolution……………………………………………………………………….            5-6
         Political Issues of 1990’s…………………………………………………………………        6-7
         Recent Political Issues……………………………………………...…………………….       7
         New Regime…………………………………………………..………………………….                 8
    Social Conditions…………………………………………………..…………………………                8
         Background………………………………………………………………………………                   8-9
         Population…………………………………………………………..……………………                 9
         Education………………………………………………………………...………………                 9-10
         Labor…………………………………………………………………………….……….                    10
         Youth………………………………………………………………………..……………                    10
         Corruption & Crime…...………………………………………………………………….           10
    Macroeconomic Conditions………………………………..………………………………….            11
         Background……………………………………………………………………………….                  11
         Current Economic Situation…………………………………...………………………….      11-12
         Economic Outlook……………………………………………………………………….               12
    Telecommunications Sector……………………………………………………..…………….           13
         Mobile Phone Service Industry…………………………………………...……………….    13-14
         Regulatory Environment………………………………………………………………….           14
         Tariff Cuts……………..…………………………………....…………………………….            14-15
         Mobile Number Portability……………………………………………………………….         15
         Handset Subsidy and Marketing…………………………………………………….…….      15-16
         Technology and New Services……………………………………………………………         16-18
         3G Mobile Network……………………………………………………………………...             18-20
         Telecommunications Industry……………………………………………………………         20
         Wireless Growth Drivers…………………………………………………………………           20-21
    LG Telecom………………………………………………………….……………………….                     21
         History…………………………………………………………………...……………….                 21-22
         Company Description…………………………………………………………………….             22-23
         Brand Names……………………………………………………………….…………….                 23-24
         Top Competitors………………………………………………………...………………..            24-25
Case Solution…………………………………………………………………………….….……..                   26
    Current Market Situation……………………………………………………………...……….          26-27
         Stock Performance………………………………………………………………….…….             27
         Historical Trading Range…………………………………………………………………          28
         Network Contracts…….………………………………………………………………….             28
         De-Levering of Balance Sheet…………………………………………………………….       28
    Regulatory Effects…………………………………………………………………………….                28-29
    Investment Outlook………………………….……………………………………………….                29-30
         Investment Positives……………………………………………..……………………….          30
         Investment Risks………………………………………………………………………….              30
    Financial Analysis…………………………………………………………….……………….               31-34
    Discount Rate………………………………………………………………………...……….                 34-35
    DCF Analysis…………………………………………………....…………………………….                 35
Final Recommendations…………………………………………………………………………...                36-37
Exhibits 1 & 2 ...……………………………………………….………………………..........…….         38
Appendix (Financial Data)………………………………………………………………………....            39-43
Works Cited………………………………………………………………………………….…….                      44-46


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                                    EXECUTIVE SUMMARY


As partners of the Creative Consulting Group, we have been hired to analyze the current condition
of LG Telecom. The analysis will include a comprehensive overview of South Korea, as well as an
in-depth financial evaluation of LG Telecom. Our goal is to determine LG Telecom’s future
strategy within the wireless telecommunications industry.


LG Telecom is part of the diverse conglomerate, LG Group, which has businesses ranging from
chemical refining to mobile handsets and wireless services. LG Telecom is South Korea’s third
largest wireless services provider. However, they are faced with intense competition and strict
government regulations which are aimed to lower retail prices for wireless services through
government subsidies.       These new regulations along with fierce competition may hinder LG
Telecom’s ability to survive.


Our analysis will cover the following topics:
    •   Political Environment
    •   Social Conditions within South Korea
    •   Macroeconomic Landscape
    •   Telecommunications Sector
    •   LG Telecom’s Business
    •   Current Market Situation
    •   Investment Outlook
    •   Financial Analysis
    •   Final Recommendation


The key elements used to evaluate LG Telecom’s position within the wireless market will focus
around statistics pertaining to the mobile phone industry. In particular we will examine the
industry’s growth drivers, such as ARPU (average revenue per user), market capitalization, and
subscriber growth. In addition, changes in regulation and the implementation of the 3G cellular
technology will be considered for our final recommendation.



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Due to the uncertainty of the South Korean political environment and the ever-changing wireless
phone industry, LG Telecom is an interesting case for business students. As the first generation to
grow-up with cellular phones as a predominant means of communication, many students have made
mobile phones an integral part of their daily lives. The challenges that LG Telecom faces today are
the same challenges that cellular phone companies and service providers are facing around the
world. With the advent of 3G technology in the near future, the continuous developments in
government regulation, and the changing consumer behavior with regards to technology, the mobile
phone industry is one of the most interesting industries in the business world.


The LG Telecom case in particular is interesting for seniors to study for numerous reasons. First, as
students make the transition from school to the business world, we must be aware of international
markets and how they affect the world economy. Second, we are able to use our finance skill set to
evaluate foreign markets in regards to exchange rates, DCF computations, and sovereign risk
adjustments. Finally, many students of this class have had their first opportunity to learn more
about emerging markets and how the volatility in these markets can create and destroy an
individual’s wealth.




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                                    THE LG TELECOM CASE


POLITICAL CONDITIONS
  Historical post WWII Background
  The political make-up of South Korea is based on the post World War II proposal in which the
  Korean Peninsula was divided at the 38th parallel. Thus, in 1948, the Republic of Korea (ROK) was
  proclaimed in the southern end as opposed to the Democratic People’s Republic of Korea in the
  North. There was an attempt by the North to take over the South causing the Korean War in 1950.
  After the war, the peninsula was still at a stalemate and fighting stopped at the demilitarized zone
  (DMZ) where the two nations are split. South Korea was then governed by a succession of
  authoritarian regimes, characterizing an era of utmost corruption. A directly elected President
  governs the ROK. In addition, a unicameral National Assembly is selected by both direct (90%) and
  proportional (10%) elections.     In 1987, President Chun Doo Hwan implemented reforms
  throughout the country which shifted power to the national assembly and implemented a new
  constitution. The new constitution mandated for presidential elections every five years.


  Political power in South Korea rests with the president, who has enormous power over the
  government and military. Cabinet ministers rarely serve more than one year in office because of
  frequent reshuffles during times of crisis. While the prime minister is in charge of economic and
  educational management, their position is primarily symbolic.


  Political Evolution
  In 1988, Roh Tae Woo took office as the elected president and attempted to improve relations with
  opposition politicians as well as the situation with the North. He was able to establish diplomatic
  relations with the Soviet Union in 1990 and China in 1992. However, he confirmed his party’s
  financing scandals in 1995.


  In 1992, Kim Young Sam of the Democratic Liberal Party (DLP, later renamed the GNP) was
  elected as the new president, the first non-military civilian to hold office since the Korean War.
  Tensions with his new party would arise during this time, as he was a former opposition leader who
  had merged his party with Roh’s party the Democratic Justice Party (DJP). Kim launched




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campaigns to eliminate corruption and administrative abuse while trying to improve relations with
the North due to economic pressures. In 1993, Kim abolished the need of government approval for
the ownership of land by foreigners. This was a big step to open up South Korea’s doors to the
international community to boost their economy. 1995 was a big year for the Korean Peninsula in
which the North began talks with the U.S. seeking economic help. The South was in an economic
danger as well and the talks were encouraged to build a unified Korea.


In 1996, South Korea joined the OECD. Later that year, 5000 students protesting for reunification
with the North were arrested by the Army. President Kim Young-Sam announced that he would
take leaders to court under the anti-communist national security law to prevent treason and
corruption. He also implemented a new policy of “real names” reform where bank accounts must
be held using real names instead of assumed names to prevent graft.


Political Issues of 1990’s
During the nineties, South Korea had developed a strong bilateral relationship with the U.S. They
became partners and allies sharing common democratic values and practices to advance
democratization and human rights. The U.S. provided a strong security force for South Korea with
the 1954 U.S.-Korea Mutual Defense Treaty to help defend them from external aggression. The
U.S. has about 37,000 troops in the country. 1997 was another major point in South Korea’s history
as a new president was elected and the nation as well as other Asian countries was faced with the
Financial Crisis. Kim Dae-Jung’s election was the first time that power was transferred to an
opposition party since the country’s independence. Their chief opposition was the Grand National
Party (GNP). His presidency representing the left-leaning National Congress for New Politics
(NCNP) was one filled with reform on the economy largely based on the support of the labor and
National Assembly.      The labor movement supported his views with labor unions willing to
cooperate with his government. Kim had struggles with controlling the National Assembly because
of the resilience of the opposition party GNP. He attempted to split the GNP but failed to do so
and instead, ha d to form coalitions with the United Liberal Democrats (ULD) and the Democratic
People’s Party (DDP). Eventually his party gained substantial power in the June 4 local elections.
His recovery efforts from the 1997-1998 financial crises were crucial in bringing the Korean
economy up. From 1998 to 2000, the coalition with the ULD fell apart twice due to differences
between the ULD leader Prime Minister Kim Jong Pil and Kim Dae Jung. Kim Jong Pil formed the


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 feared Korean Central Intelligence Agency, which attempted to assassinate President Kim Dae
Jung. With this coalition problem, they also faced pressure from the largest party in Korea, the
GNP. Policy implementation was difficult at this time with the pressures and bitterness coming
from the GNP and ULD. In 2000, Prime Minister Kim Jong Pil resigned as prime minister and was
succeeded by Park Tae Joon of the ULD. However, he too resigned after a scandal and ULD leader
Lee Han Dong became the prime minister.


When Kim had taken office in 1998, he announced his “sunshine policy” of positive engagement
towards the North. In 1998 they found a North Korean submarine in their territory inside fishing
nets. Later that year, the ROK sunk a North Korean semi-submersible. Their navies would clash
again in July 1999 in disputed waters. Things seemed to turn around in 2000 when the first ever
inter-Korean summit is held in North Korea’s capital, Pyongyang.          In 2001, the Millennium
Democratic Party (MDP) reactivated their coalition with the DPP and ULD who later leaves the
                coalition. In 2002, Roh Moo-hyun of the MDP and Lee Hoi-chang of the GNP
                faced off in the presidential election. Roh Moo-hyun narrowly prevailed. Again, the
                parliament was dominated by the opposition GNP. Currently, they are attempting
                to block his choice of prime minister.


Recent Political Issues
South Korea’s major political issue is the military threat coming from North Korea. North Korea’s
aggression towards the South is strong and a major threat because of their stockpile of chemical
weapons (one of the world’s largest), and they’re nearly one million strong army. Terrorism coming
from the North has been ever present such as the assassination of four members of South Korea’s
cabinet in Burma, bombings of Korean Airlines plane, and the violations of South Korean territory
by naval vessels. US troops now remain in South Korea near the DMZ to prevent tensions from
arising. Things do not seem to look brighter as the Bush administration labels North Korea as part
of the “axis of evil.” Tensions are more likely to rise than fall in the years ahead. With the North
refusing to disclose nuclear information and their possession of weapons of mass destruction in the
aftermath of 9/11, a crisis is looming over their reactivation of a nuclear generator. The US has
linked ties between North Korea and Osama Bin Laden and their continued harboring of Japanese
Red Army hijackers since 1970 with the selling of weapons to terrorist groups in the Philippines.




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  A New Regime
  In current events, Roh Moo Hyun is to assume office on February 25th. He has formed a transition
  team to gain formal status and plans for the parliament. The team is made up of mostly professors,
  rather than politicians or bureaucrats. Their focus should be on liberalism and not populism. A
  Kim Dae Jung loyalist, Moon Hee Sang of the MDP was appointed as the chief of staff and has
  stated his opposition to changes in the MDP structure. In terms of domestic politics, the outlook is
  faced with many unknowns. With a new president comes a new direction for the country. They
  face obstacles from the opposition GNP who controls the parliament and will likely encounter
  legislative programs being obstructed. Roh has promised political reform, but GNP may oppose
  because of their view on Roh as a dangerous radical. External politics are very sensitive as the
  situation with North Korea is increasing tension. North Korea’s defiance in maintaining a nuclear
  development program poses great danger. This will also makes things worse for their alliance with
  the US. Roh promises to carry on with the “sunshine policy” by Kim Dae Jung with the US. There
  have been recent protests centered on the acquittal by court martial of the drivers of a US military
  vehicle that killed two teenage girls. They are facing two fronts that have isolated them from the US
  and North Korea, posing a great challenge for Roh to ease tensions. Roh wanted US forces out of
  Korea and has planned for military forces to take place in the event the US pulls out their troops.
  Like the US, China and Russia oppose pressing the North’s leader Kim Jong Il too hard and seek a
  diplomatic solution. But if the US topples over Saddam Hussein in Iraq, North Korea will likely be
  the next military target. Roh is unknown in Tokyo as much as in Washington and there are fears of
  him being too much of a nationalist. His stand on foreign investments is not clear, but is dependent
  on the growing nuclear crisis in the North.


SOCIAL CONDITIONS
  Background
  South Korea is one of the most ethnically homogeneous countries in the world, resulting in mostly
  an indigenous Korean populace. Korea was first populated by a “Tungusic branch of the Ural-Altaic
  family”, which migrated to the Korea peninsula from the northwestern regions of Asia, as early as
  5000B.C. Some also settled parts of northeast China (Manchuria); Koreans and Manchurians still
  show physical similarities-in height, for example. People of Chinese descent make up the country’s
  largest minority group. Interestingly enough South Korea enjoys religious diversity of multiple
  denominations including: Christianity, Buddhism, Shamanism, Confucianism, and Chondogyo.


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Population
The population of South Korea is 48,324,000. The country’s population density of 487 persons per
sq km is one of the highest in the world. The majority of the population lives in the southern and
western coastal areas. The annual rate of increase has dropped steadily from more than 3 percent in
the late 1950s to 0.85 percent in 2002. Urbanization of the country has proceeded rapidly since the
1960s, with substantial rural to urban migration; 82 percent of the population is now classified as
urban.


In addition, the average life expectancy is increasing at a high rate to a predicted average of 75.6
years of age as opposed to the current life expectancy of 57 years. Industrialization has lead to
improvements in Korea’s water supply, sanitation, housing, diet, and medical services.


The same language and culture is promoted through out the
country, with little differences across regions and cities. Society is
very urban, where more than half the population resides in big
cities. One quarter of the population is located in Seoul, while the
government continues to promote regional urban centers to
encourage further urban growth.


Education
Primary education is free and compulsory for all children between the ages of 6 and 15. Secondary
education consists of three years of middle school and three years of high school. Private schools
play an important role, especially above the primary level. The country has 297 institutions of higher
education, with a total annual enrollment of 2.5 million students. The principal universities are
Korea University, Seoul National University, Ewha Women’s University, and Yonsei University. An
estimated 100 percent of the adult population of South Korea is literate.


Education in South Korea takes an important role in the government’s budget. As a result, 16.4%
of South Korea’s government spending was reserved for education. This level surpasses the United
States. The Korean government is trying to educate not only urban areas, but also rural areas to
create an equally educated population.




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Labor
In 2000 the total labor force was 24 million. Of this figure, some 11 percent were
engaged in agriculture, forestry, and fishing; 28 percent in industry; and 61
percent in services. W omen make up 41 percent of the labor force. The
principal labor organization is the Federation of Korean Trade Unions, with a
membership of more than 1.8 million.


Youth
South Korea’s opinionated study body is well educated and therefore has strong views on social,
political and economic issues. Protests against the rise of capitalism are frequent due to their
socialist ideals even though they claim to support the benefits of capitalism. Nationalism is still
prominent and is a major sentiment among Korea’s youth.


Corruption and Crime
South Korea maintains a relatively low level of crime. They are one of the world’s safest countries.
Organized crime and corruption has been much reduced. In past cases, Korean firms were subject
to slush funds and fraud. For example Daewoo, the second largest group, was found to have
committed frauds. Their executives were found participating in organized crime that revolved
around the firm. Civil unrest in South Korea has been calmer now than in the past. Known for
mass demonstrations and militant trade unionism, moralistic civic groups have emerged. Theses
demonstrations focus on the social democratic and anti-trust nature, not anti-capitalist. With a anti-
communistic mentality, South Korea has opened up their doors to foreign business. They are a
member of the WTO and the OECD. Violent crime in general is very limited in South Korea,
although white collar crimes such as extortion and bribery are commonplace. The country is known
as one of the safest in the world. Terrorism is no longer such a fervent threat as it used to be in the
past; however, the United States does claim that North Korea has contacts with Al Qaeda’s terrorist
network.




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MACROECONOMIC CONDITIONS
  Background
  South Korea has achieved an incredible record of economic growth over the past ten years. Three
  decades ago GDP per capita was comparable with levels in the poorer countries of Africa and Asia.
                                                              Today its GDP per capita is seven times
                                                              India's, 17 times North Korea's, and
                                                              comparable to the lesser economies of t
                                                              he European Union. This success
                                                              through the late 1980s was achieved by
                                                              a system of close government/business
                                                              ties, including directed credit, import
                                                              restrictions, sponsorship of specific
                                                              industries, and a strong labor effort. The
  government promoted the import of raw materials and technology at the expense of consumer
  goods and encouraged savings and investment over consumption. However the stream of good
  luck for South Korea ran out.


  The Asian financial crisis of 1997-99 exposed certain longstanding weaknesses in South Korea's
  development model, including high debt/equity ratios, massive foreign borrowing, and an
  undisciplined financial sector. Growth plunged by 6.6% in 1998, and then strongly rebounded to
  positive 10% in 1999 and 9% in 2000. This surge in growth did not last long; growth fell back to
  3.3% in 2001 because of the slowing global economy, falling exports, and the perception that much-
  needed corporate and financial reforms had become stagnant.


  Current Economic Situation
  South Korea’s economy showed great resilience in 2001 despite the turmoil in the U.S. and Japan,
  with continued strong GDP growth. Real GDP was in the black by 3.0%, a sign that sector-related
  weakness and global IT slowdown were not enough to bring the nation into recession. According to
  the Ministry of Finance and Economics (MOFE), Asia’s fourth largest economy is projecting
  growth of 6.3% for 2002, staying on track with earlier estimates. The Bank of Korea and external
  analyst reports reiterate this prediction. Long-term, South Korea’s expansion is expected to continue
  with GDP growth projected around 6% in 2003.


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The economy has slowly recovered since mid-1998 following the Asian Financial Crisis, and the
Bank of Korea (BOK) has maintained a low interest rate policy aimed to stabilize slightly over 5%.
As part of the IMF bailout plan in the late 1990’s, BOK implemented high interest rates to ensure
foreign currency liquidity and stabilize the exchange rate. However, these high interest rates caused
the real economy to contract and pushed many firms towards bankruptcy. In 1998, the government
pursued lower interest rates to rescue the economy from a recession. As a result, the inter bank call
market rate decreased to 6% in 1998 from its peak of 20% in late 1997, then falling again to 4% in
1999. The stable inflation forecast of 2002-2004 is due to further deregulation of closed areas of the
economy, particularly the services sector, and the Won’s continued appreciation against the US
Dollar. Consumer price inflation in the first nine months of 2002 averaged 2.6% year on year;
broadly in line with expectations of an average increase of 2.8% for the year. Forecasted inflation
rates are shown above. The forecasted appreciation of the Won against the US Dollar in future
years will be supported by a continued favorable trade position and net capital inflows. Stability of
the currency has mainly been the result of the steady rise in foreign-exchange reserves, increased
foreign direct and portfolio investment, and a decline in foreign borrowing. In addition, the
government no longer intervenes directly in foreign-exchange markets to maintain a target for the
exchange rate.


Economic Outlook
Analysts forecast South Korea’s real GDP to expand by 4.6% in 2003, growing to 5.3% in 2004.
The foreign trade balance will make a large contribution (2.2 percentage points) to overall growth in
2003. This will largely be the result of a slowdown in import volume growth on the back of a sharp
deceleration in domestic demand growth. Export volume growth will slow in 2004, to 9.5%, partly
reflecting a decline in competitiveness as a result of the continued appreciation of the won. This
slowdown will serve to reduce the contribution of the foreign trade balance to overall growth to just
1.2 percentage points.




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TELECOMMUNICATIONS SECTOR
  Mobile Phone Service Industry
                       In 2001, South Korea became the leader in providing CMDA 2000 services in
                       the world telecom industry. In October of 2000, Korea's top mobile carrier, SK
                       Telecom became the world's first operator to launch a commercial mobile
                       service using CDMA 2000 technology, which was first developed by U.S. firm
                       Qualcomm Inc.       CDMA 2000 technology at that point in time was the
                       dominant wireless technology in the United States and South Korea. CDMA,
                       or Code Division Multiple Access, is a cellular technology which can deliver
                       multimedia applications such as games, video on demand, video messages and
                       high-speed Internet access. It competed against the GSM 2.5G networks found
                       in Europe. These technologies were precursors to the full third-generation
                       (3G) services that are available today.


  In 2002 the Korean mobile sector ended with 32.34 million subscribers, this is up 11.4% from the
  2001 figures. The mobile sector’s performance is based on Average Revenue per User (ARPU) and
  Minutes of Use (MOU).


  In addition, penetration of users is used to determine what percentage of the country has access to
                                                             7.7%. The Gross additions less
  mobile phones. In 2002, they reached a penetration rate of 6
  deactivations gives us their net new subscribers which ended at 0.33 million new subscribers at the
  end of year 2002. LG gained 0.05 million net subscribers, in 2002. With LG standing in third place
  as the wireless providers, they maintain a 14.8% market share compared to SKT’s 53.2% and KTF’s
  31.9%.
  Market Share 2001                                        Market Share 2002




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Since commercial services began in June 2001, 2.5G and CDMA have increased at a very high rate.
Based on the number of deployed handsets at the end of 2002, South Korea is believed to have 28.2
million or 55.2% of total subscribers carrying the new handsets. With the introduction of the new
3G technology, the telecom sector should have a greater outlook with the new technology.


Regulatory Environment
The Ministry of Communication (MIC) governs the communications industry within South Korea.
                                                                             a
Their main goals are to accelerate information, promote the IT industry, and f cilitate market
deregulation and liberalization. Their focus is to ensure fair competition and to promote transparent
corporate governance. In addition, they promote venture capital along with R&D within the
communications sector. Their efforts have been instrumental in closing the digital divide within
Korean society and to establish an innovative and world renowned communications sector for
South Korean.


Regulation by the Ministry of Information and Communication (MIC) will continue to weigh on the
performance of Korean telecom companies for the foreseeable future. Although most of the bad
news appears to be out already, there is always the lingering uncertainty as to the next regulatory
issue – as seen in the sudden capital expenditures increase induced by MIC at the end of 2002.
Nonetheless, LG Telecom appears to have been able to grow and attain profitability to a degree
throughout difficult regulatory situations in the past several years, including market share restrictions
in 2001 and several tariff cuts.


Tariff Cuts
Tariff cuts have been the most high-profile regulation concerning wireless telecom companies in
Korea. Although MIC only regulates tariff rates for LG’s competitor SKT, this has a ripple effect as
LG and other telecom companies have to lower rates at the same time to stay price-competitive.
MIC cut SKT’s rate by 8.3% in January 2002 and again by 7.3% in effective January 2003 vs
consumer groups’ demand of a 20-30% slash. Deep tariff cuts run the risk of a less competitive
environment in the wireless sector since companies are unlikely to be able to turn profitable at low
tariff levels.




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 Tariff cut history (Standard plans)




Mobile Number Portability
Mobile number portability (MNP) may become the next big regulatory risk in January 2004 for
wireless operators because of the potential increase in marketing costs and higher churn rates for
operators. With MNP, wireless subscribers can switch operators without having to change their
mobile phone numbers. LGT subscribers will be granted MNP in January 2005. MNP is being
phased in because a MIC-commissioned study indicated that LG’s competitor, SKT’s market share
will swell by up to five percentage points if MNP is implemented at the same time.


In addition, the single dialing prefix system (010) to be implemented beginning 2004 and the rollout
of W-CDMA 3G around end-2003 may shift subscribers’ focus from tariff rates to the quality of
operators and specific features. Most subscribers are accustomed to their current operators’ services
and fee schemes, and that the majority of wireless subscribers would not switch operators unless
there were a compelling reason – such as a significant tariff gap. Switching operators involves the
hassle and cost of buying new handsets and learning about different services and fee schemes.


Handset Subsidy and Marketing
The allowance of certain handset subsidies and some marketing activities, such as membership or
royalty programs, may well help clarify marketing costs for wireless operators. It appears that the
MIC is likely to be stricter in enforcing its policy on handset subsidies. The MIC has announced
plans to allow limited subsidies, 10-20% of retail handset price, for certain handsets from March
such as 3G, PDA and handsets that have been sitting in inventory for over 12 months. The ‘indirect
handset subsidy’ has been one of the biggest cost items for wireless operators since the ban in June


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2000, and the limited handset subsidy should help reduce marketing costs. MIC has also imposed
restrictions on marketing activities via membership or royalty programs starting January this year,
which should also help reduce marketing costs for the wireless operators. Instead of providing
almost unlimited benefits such as significant discounts at ski resorts, theme parks, and restaurants,
operators are now required to sum up and restrict the total discounts and benefits per member,
while charging annual membership fees to reduce discrimination against non-members.


Technology and New Services
As the subscriber market nears saturation, telecom companies in Korea will continue to introduce
new services using better technology to increase ARPU or market share. Wireless operators, except
LG Telecom have started to offer CDMA 1x EVDO (evolution data only) services since mid-2002,
which provides 2.4Mbps of transmission speed vs. the regular CDMA 1x speed at 144Kbps. EVDO
enables downloads of bandwidth-intensive and more sophisticated wireless data content. An
example would be streaming video, which increases the profile of wireless data and opens up new
business opportunities such as wireless commerce and finance.


Evolution of Wireless Telephone Industry




These new services can generate commission revenue for wireless operators, for providing the
network, along with traffic fees, helping to reinforce growth and expand margins. The improvement
in wireless data platforms, such as virtual machines (VM), is also enabling faster operation of data
such as games on wireless handsets. Meanwhile, improved wireless security features such as W-PKI
(wireless public key infrastructure) and encryption technology should provide a safer environment


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for wireless finance and commerce to take place While voice capacity is ample for all wireless
operators (only requiring 9.6Kbps per subscriber), exponential growth in data demand is causing
certain quality issues.


Surging non-SMS data sales in South Korea




Wireless data is also requiring increasing bandwidth (average downloading speed currently at 20-
30Kbps) as content is becoming more sophisticated – with correspondingly larger file sizes – and as
more subscribers are downloading bandwidth-intensive content such as games and video clips. The
problem is that a base station can handle only so much voice and data bandwidth requirements
concurrently. For example, a CDMA 1x base station can concurrently handle approximately
900Kbps per channel or sector (1 FA) while base stations normally have three sectors (countryside
base stations may have one or two sector systems). This means that the maximum voice calls a
normal base station can handle would be 282 calls (94 voice calls per sector x three sectors).




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3 rd Generation Wireless Technology Capabilities




3G Mobile Network


1X EV-DO (EV-DV)
Current 2G networks are based on the asynchronous method, which was led by Europe, and the
synchronous method, led by the U.S. Accordingly, 3G networks will be set up based on two
methods asynchronous W- CDMA and synchronous cdma2000.


As most global mobile carriers adopt W-CDMA, it is becoming main stream in the global telecom
industry. In Korea, SKT and KTF will provide 3G services based on W-CDMA, while LGT will
base its 3G services on cdma2000. The standards for 3G cdma2000 are 1X EV-DO, and 1X EV-
DV.


In Korea, 1X EV-DO has been commercialized in frequency bands between 800Mhz and 1800Mhz
(3G services operate under 2GHz frequency). Synchronous 1X EV-DO is compatible with existing
networks (IS-95A/B, cdma2001X), and can offer multimedia services (including MMS, VOD,
mobile broadcasting, etc.) at a maximum speed of 2.4Mbps.




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1X EV-DV technology is an upgrade of EV-DO. EV-DO, dedicated to data services, cannot offer
voice services. On the other hand, EV-DV can provide both voice and data services, improving
network efficiency. Despite this, 1X EV-DV has still not been commercialized. Going forward,
LGT plans to base its 3G network on 1X EV-DV technology.




W-CDMA
W-CDMA has the following features has three main features. First, in terms of data transmission
speed, W-CDMA does not differ much from EV-DO. Accordingly, WCDMA is not significantly
distinguished from other technologies (if excluding visual telephone services provided by W-
CDMA).


However, W-CDMA guarantees stability with its transmission speed of 384Kbps. Additionally, 1X
EV-DO cannot guarantee quality of data communications, as capacity is concentrated on certain
users in the case of using high-capacity data services.


Third, massive CAPEX is required for W-CDMA due to incompatibility with existing synchronous
networks. Furthermore, W-CDMA does not support handoff between 2G and 3G networks. In
light of technological development, W-CDMA has greater growth potential relative to cdma2000.




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Telecommunications Industry
Valuations of Korean telecommunications companies have been hit hard by concerns over
regulatory issues such as tariff reductions and government capital expenditure requirements.
However, because this news is already priced in and the heavy sell-off seems overdone, Korean
telecom companies are quite cheap when compared to their global peers. Until very recently, profit
growth for Korean telecom companies has been rather stagnant. The wireless market has proven to
be the fastest and most profitable sector of telecommunications. Cellular penetration, a major
growth driver in the past, now hovers around 67.7% in Korea, a level most analysts consider near
saturation. This has led many telecom companies to focus growth efforts in other areas, in value-
added services (VAS). The total market size of wireless Internet services in South Korea is estimated
at W1.25tn for 2002, which is 9.5% of industry revenues. Wireless Internet services posts a
penetration rate around 16-20%, leaving room for tremendous growth in this sector. In fact, this
rate is expected to grow to at least 35-40% by 2005. Korean telecom operators are thus pushing
anxiously for VAS to become the engine of future growth.


Wireless Growth Drivers
There are a few critical catalysts that will drive the growth of the wireless Internet in Korea. First, at
present, the majority of the users of wireless Internet in South Korea are teenagers. In order to


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  widen the user base beyond young adolescents, useful new applications are being developed in
  mobile commerce that allow the user to place financial transactions, view video, and perform a
  wider array of functions. Second, standardized hardware platforms are being created so that content
  providers need not develop software for different mobile handsets. This increases download
  capability, enhances security, facilitates the introduction of new multimedia content, and above all,
  stimulates customer interest. Finally, the development and implementation of the 1X EV-DO
  wireless infrastructures to replace traditional CDMA networks will greatly enhance the speed of data
  transfer. It is also important to note that Korean customers are generally Internet savvy, as rising
  figures for Internet usage frequency reveal. In addition, the Korean government is actively engaged
  in the promotion of wireless Internet through plans such as the Public Mobile Services Decree that
  would allow the public to access government services through a mobile website. This along with the
  perpetual demand for Internet access further lends itself to sustainable growth in this emerging
  industry.


LG TELECOM
  History
  LG Telecom was established in July 1996, with the opening of its Main Switching Center in Seoul,
  and in January 1997 the Korean government authorized the company’s R&D Center as a national
  center for industrial research. In June 1997, the company’s Network Management Center (NMC)
  was established, and the Customer Services Center was opened in July 1997. In October 1998, the
  company launched its commercial PCS service in Korea. In January 1998, the company introduced
  its CDMA Optical Transmission Antenna (L’COTA), and in March 1998, the company established a
  partnership with the Venezuelan PCS Consortium, for the perfection CDMA PCS network
  architecture, in order to bring master technical and operational know-how to the company. In
  October 1998, the company and BT formed a strategic partnership. BT bought an approximate 23%
  stake in the company. In 1999, the company’s wireless Internet commercialization and ez-channel
  launched, the world’s first broadcasting service provided by a mobile phone. In 2000, the company
  launched a number of new services, including btob, Korea’s first mobile telecommunications brand
  designed exclusively for business, and ez-java, a PCS eMoney service. In 2001, the company spun
  off its Customer Service Division. LG’s parent company announced in September 2002 that it plans
  to invest KRW1.8 trillion in R&D in this division, over the coming year.




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The company is headquartered in Seoul, South Korea and has 1207 employees. LG Telecom
commenced PCS services in October 1997 and is Korea’s smallest wireless communications service
provider. As of December 2002, LGT had approximately 4,790,000 subscribers, or a market share of
14.8%. LGT comes under the aegis of the LG Group, a diverse conglomerate with strong domestic
electronics and refinery businesses. The LG Group’s telecommunications-related holdings include
Dacom Corporation, primarily a DLD and ILD service provider, and Hanaro Telecom, a broadband
and licensed local voice provider. Fiber-optic backbone provider Powercomm is slated to enter the
LG fold shortly.


LG Subscriber Breakdown 2002
                                                    Company Description
                                                    LG Telecom is a provider of a wide range of
                                                    PCS     services   (Personal   Communications
                                                    Services, which use CDMA technology. A PCS
                                                    allows the user to make and receive local and
                                                    overseas. The company has approximately 4
                                                    million subscribers.   In 1996, the company
succeeded in commercializing CDMA technology through cellular services for the first time in the
world and provides a nationwide PCS service in Korea. The company offers integrated wire and
wireless Internet services which can be accessed by a mobile phone, the first of its kind in Korea,
and offers WAP Internet services.


The company concentrates on establishing networks through network design, base station
construction and advanced system operation while accelerating extension of coverage areas as well
as the development of calling quality through L’COTA, repeaters, and L’Pico according to the
specific geographical conditions of each region of Korea.


LG Telecom (LGT) was one of the biggest turnaround stories in Korea during 2001. LGT posted a
sharp turnaround in 2001, recording net income of W154bn, up from a net loss of W442bn in 2000.
The turnaround was due mainly to the ban on handset subsidies and steady ARPU and subscriber
growth. The success of LGT attests to the benign competitive environment for cellular operators in
Korea. Korean mobile operators boast some of the highest profitability margins globally, yet as seen


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in LGT’s stock they continue to trade at significant below their value. At the end of the last year,
LGT was also able to raise W343.6bn in equity financing, shoring up its balance sheet considerably.
Subsequently, its debt to equity ratio dropped from an alarming 695% in 2000 to a respectable 128%
in 2001.


LG Telecom Brands
    •   Ez-i: LG TeleCom has been providing the first Korean wireless Internet service since May
        1999. Through its over 8,000 options, customers are able to experience the diverse wireless
        Internet services offered by LG TeleCom, which are useful in everyday life. Also, LG
        TeleCom commercialized the world’s first Java Station; using an alliance with BT Genie, LG
        are leading the world wireless Internet market on the basis of the accumulated ez-i
        technology and know-how.
    •   Khai: Launched on February 2000 aiming at the new generation in the 19-24 age group, is a
        cultural trend combining mobile communication and cultural facets. Mobile communication
        has now evolved past simple voice calls to a device that satisfies the diverse cultural needs of
        the new generation. With Khai, customers are able to experience diverse cultural aspects
        including fashion, sports, music, performances, and dancing with discount benefits added.
    •   Khai Holeman: Conceived to suit the patterns of mobile telephone use among teenagers,
        has evolved past being merely a rate system to a device that satisfies the diverse needs sought
        after by teenagers. Khai Holeman includes not only a teen-only rate system, but also
        incorporates teenage interests in such things as invitations to various events and discounts.
        In particular, taking into consideration that animated chara cters are mostly in demand by
        teenagers, the unique character of Holeman was created. Diverse marketing techniques were
        implemented under this brand, meeting with an enthusiastic response from not only teens
        but also from adults.
    •   Btob: Originated for more effective communication, more efficient work, and more
        optimum resource management, is the first Korean mobile communication service
        exclusively for business. LG TeleCom has the largest market share in the mobile office
        market; the mobile office is an essential infrastructure to an enterprise. Btob is a tool to
        bring innovations in work from the perspective of business process redesigning; LG




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    •   TeleCom is already providing corporate sales service which is at the level of mobile
        consulting on the basis of numerous past successes. LG TeleCom aims to open a new age in
        the corporate mobile communication market through providing enterprises with the highest
        level of competitiveness by creating not only the mobile office but also specialized data
        solutions tailored to your needs.
    •   IMT (International Mobile Telecommunication) 2000: A worldwide next generation
        mobile communication that allows access from one IMT-2000 handset unit (handheld
        computer + phone) to wire/wireless and satellite network integrated global roaming service
        (using the same number overseas) as well as real time multimedia service. It includes
        Internet, data, fax, video, video communication/conference, TV viewing, and motion
        picture. The service is accessible anytime, anywhere, and with anyone.


Top Competitors
LGT is trading at a discount to its Korean peers, but the question to be asked is whether it is a good
buy.    When comparing the discount applied between first and second tier operators within
respective markets, LGT appears to be trading in line with its peers as seen in exhibit 1. However,
Hong Kong and Taiwan’s wireless sectors are fragmented with Hong Kong having six and Taiwan
having five telecom companies. As was true with Korea around 1999, such fragmentation creates
the potential for dramatic shifts in market dominance through mergers and failures of competitors.
However, the dynamics in Korea are now quite different as consolidation has already occurred. The
only change that may have a dramatic impact on the Korean market would be the demise or
acquisition of LGT.


    •   Korea Telecom Freetel:          Established in January 1997, and successfully launched
        commercial service in October 1997. KT Freetel signed more than one million subscribers
        within their first six months of operations. After 18 months of service, the company has
        more than 3 million subscribers. As of April 2000, KT Freetel has over 4.7 million
        subscribers. For the fiscal year 2001, revenues totaled $4.3 billion. In September 1999, KT
        Freetel became the first cellular operator to launch IS-95B wireless Internet service. This
        service expanded nationwide in February 2000. KTF, concluded the merger contract with
        KTICOM in 2002 and was KTF ranked No.1 in mobile Service on the Business weeks's IT
        100 in the world. It is headquartered in Seoul, South Korea.


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    •   SK Telecom: South Korea’s number one wireless telecommunication services provider.
        For the fiscal year 2001, revenues totaled $6.37 billion. The company has interests in a
        variety of fields covering energy production and distribution, films, fibers, petrochemicals,
        telecommunications, engineering, international trade and finance. The company is part of the
        SK Group which is made up of 60 member companies, including around seven that are
        listed on the Korean Stock Exchange. SK Telecom has a presence on six continents. The
        company is headquartered in Seoul, South Korea.




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                                         CASE SOLUTION


  The case solution is comprised of the following steps:
      •   Current Market Situation
      •   Regulatory Effects
      •   Investment Outlook
      •   Financial Analysis
      •   Ratio Analysis
      •   Discount Rate / DCF Analysis
      •   Conclusion and Suggestions


CURRENT MARKET SITUATION
  Despite the recent economic recovery in Korea, LGT's top-line growth has been declining. Even
  though LGT is third in market share, they maintain high EBITDA margins (39% estimated in 2003),
  an accomplishment that is difficult to find in other countries. In 2001, the Korea mobile sector
  ended with 29.05 million subscribers, which were up 8.3% from 2000.           The mobile sector’s
  performance is based on Average Revenue per User (ARPU) and Minutes of Use (MOU). In
  addition, penetration of users is used to determine what percentage of the country has access to
  mobile phones. In 2001, they reached a penetration rate of 61.2%. The Gross additions less
  deactivations gives us their net new subscribers which ended at 0.19 million new subscribers at the
  end of year 2001. Though LG lost 0.06 million net subscribers, they gained 4.28 million in the
  month of December alone. With LG standing in third place as the wireless providers, they maintain
  a 14.7% market share compared to SKT’s 52.3% and KTF’s 33.0%.


  Management is targeting 5.3m subscribers (+11% YoY) by the end of 2003 (with a market share of
  16%), and has earmarked a Won400bn marketing budget (almost similar to the Won418bn in 2000).
  The company’s rationale behind the aggressive expansion and marketing plan is to strengthen its
  weak competitive position and brand image in order to benefit when the MNP is introduced in
  2004.




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In 2002, LGT experienced an 11% subscriber base growth, but at the same time, its ARPU fell 9.5%
YoY and net profit fell 53% YoY. While the "Mini" low-end tariff plan helped subscriber growth, it
diluted overall MOU and ARPU levels. Mini currently accounts for 14% of LGT’s total subscriber
base Its expansion plan resulted in an increase in marketing expenses as well as other costs such as
rental and maintenance costs which was due to an increase in the number of retail shops.


                                                                         LG Subscriber Trend for
                                                                         New Tariff Schemes




Stock Performance of LG Telecom




LG Telecom is listed on the KOSDAQ in South Korea. Its ticker symbol is 32640.KQ. It currently
trades at W4,140.00. Its 52 week high was W5,050 and the 52 week low was W3,370 Its current
market capitalization is about W1.3 million. It provides no dividends and the EPS for 2002 was
W739m.




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  Historical Trading Range
  Despite its solid operations, LGT has traditionally traded at a significant discount to other mobile
  operators. LGT is currently trading at a forward EV/EBITDA base of 3.0x to its competitors SKT
  and KFT’s 6.8x and 7.3x. Due to this discounted trading factor, and in-turn weaker competitive
  position, LGT is to trade at a discount to other leading mobile operators.

  Network Contract
  LG Telecom’s 5-year exclusive contract with Korea Digital Satellite Broadcasting to provide wireless
  network service will enhance revenue streams. KDSB will be responsible for downloading contents
  to subscribers, while LGT will handle the uploading of interactive data through its wireless network.
  LGT anticipates receiving 30-60% of the monthly subscription fee, which the company estimates at
  W11,000-21,000. LGT also gets 100% of phone usage revenue. LGT expects some of the content
  providers to shoulder some of the burden. However, KDSB will be competing with both cable TV
  and PC broadband services.


  De-levering of Balance Sheet
  With revenue and EBITDA growth slowing, de-levering of the balance sheet has continued to drive
  earnings for LGT. In addition, the improving financial health of the company should facilitate
  reductions in cost of debt, further aiding earnings growth. This will also reduce the company’s cost
  of capital, having positive implications for share price performance.


  LGT’s earnings multiples are more compelling than SKT’s, but not by a significant amount. LGT’s
  forecasts and, therefore, earnings based multiples fail to take into account potentially favorable
  regulatory and de-levering changes. Also, short-term multiples fail to take into account longer term
  improvements in LGT’s fundamentals and differing costs of capital.

REGULATORY EFFECTS
  Last year Korea’s regulator, the Ministry of information and Communication (MIC), approved the
  merger of SKT and Shinsegi Telecom (STI), without imposing additional conditions upon SKT, or
  other regulations that would favor competitors. LGT and KTF claim they are disadvantaged
  following the merger and argue that some form of asymmetrical regulation needs to be introduced




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  to curb SKT’s dominance. LGT should achieve operational efficiencies when some form of
  regulation such as the proposed ban on handset subsidies. With this new regulation subscriber
  growth, APRU gains and margin expansion are possible.


  The MIC is currently studying the mobile-to-mobile interconnection rate structure, with the
  intention to rebalance the tariffs in favor of smaller operators, particularly LGT. However, the
  government’s argument is that SKT has been in operations for 17 years versus four years for PCS
  operators (LGT and KTF), and therefore, SKT’s imputed interconnection cost is lower than that of
  the PCS operators.


INVESTMENT OUTLOOK


  The investment outlook for LGT relies not only on financial valuation techniques, but qualitative
  benchmarks and signals/warnings for potential expansion or the antithesis, consolidation of
  acquisition of LGT. LGT’s performance will remain vulnerable to such external factors:


      1. LG Group Strategy: Several recent developments demonstrate that the LG Group’s
          focus on wireless services many be diminishing. This raises the possibility that LGT will be
          “marginalized or used as political currency to further the LG Group’s other strategic
          thrusts”, such as power generation.
      2. MIC philosophy: In the past, the Korean regulatory agencies have felt three big players
          must be in position to ensure adequate levels of competition in the wireless markets. The
          most important of these agencies being the Ministry of Information and Communication
          (MIC), in the past had a steadfast opinion on this issue. However, recently this dictum has
          been rethought, and a new plan of having a single large competitor to compete against SKT
          in the new liberalized market environment, seems to be the most viable course of action
          hindsight of the negative experience of the past three years. According to this, consolidation
          of LGT by KTF is the logical way to achieve this goal.


  Both of these issues could have dramatic consequences for LGT’s valuation in the medium term,
  and both lead to the same conclusion: “LGT is not economically viable in a liberalized market




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environment and should be merged with KTF, to the advantage of both operators.” This
conclusion has important implications for our valuation of LGT, as it introduces political factors to
the valuation process. Within this realm of political factors, a government-led merger of LGT and
KFT, it is likely that the government would heavily influence LGT’s valuation.


Investment Positives
    1. High Beta: Historically, short-term trading momentum can drive LGT’s share price to
        outperform its peers.


    2. MIC: The three-operator sector policy enhances LGT’s returns primarily through
        asymmetric interconnection rates. We estimate that LGT’s net interconnect revenue will
        constitute 36% of it gross interconnection revenue in 2002E, a ratio that may improve to
        45% in 2005.


    3. Marketing Expertise: The LG Group has redefined “consumer-level” branding and
        marketing efforts to an art form over the past40 years. LGT’s efforts at market segmentation
        and brand-building are innovative.


Investment Risks
    1. Heavily Dependent on Regulation: LGT’s long-term viability is dependent on the
        continuation of the MIC’s current philosophy toward the wireless sector.


    2. Lack of Parent Support: LG Group support for LGT appears weaker than for its other
        business areas. LG Group emphasis appears to be in the areas of consumer electronic and,
        in the future, power generations.


    3. Dividend Policy: While none of the wireless players currently pays out a significant
        proportion of net income in dividends, we believe that market maturity and falling capital
        expenditures may see an increased emphasis on dividend policy. We believe that LGT’s
        chaebol affiliation and precarious market positioning will prevent the company from paying
        out a significant proportion of its free cash flow in the future.




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FINANCIAL ANALYSIS


  LG Telecom reported a gross profit of W425,920 million, for the first time in its history in fiscal
  year 2001. For 2002, the profit was W177,606 million, a decrease of 58% from the previous year.
  Since its inception in 1996 it has been competing for market share with the other telecoms and is
  still behind its competitors Korea Freetel and SK Telecom. It has been able to keep up with these
  two competitors mostly due to financial backing by the LG Group. The EBITDA margin was 35%
  for 2001, but only 8% in 2002. The profitability for 2001 can be attributed to its steadily increasing
  subscriber base with 4.3 million subscribers at the end of 2002 in its grasp and its ability to cut
  COGS by lowering depreciation, marketing, & R&D costs. However, in 2002, the dramatic decrease
  was due to the new 3G technology that their competitors have started to introduce, lowering of
  customer tariffs, and increases mainly due to higher marketing, wages, and other costs, such as
  repair/maintenance and transportation. The increase in subscriber base has had a positive impact
  on sales with revenues increasing by 28.66% in 2001 and increasing since 1998 at an average rate of
  20.5%. However this number has been increasing at a decreasing rate. LG has been able to cuts
  COGS, by lowering R&D costs by 86%, Depreciation expenses by 85%, and marketing expenses by
  94% from 2000. But 2002 proved that lower expenditures on 2.5G infrastructure may have created
  quality of service issues that weakened their brand image. To compensate the reduction of capital
  expenditures on 2.5G they had to increase their SG&A expenses in 2002. The end result is a
  decrease in market share leading to smaller profitability growth.


  LG Telecom’s main revenue stream comes from their
  PCS Voice sales. A breakdown of the revenues shows
  that PCS Voice made up 65.8% of their revenues in 2002.
  There has been only moderate growth in the PCS service
  due to the tariff rate cuts and lower interconnection rate
  adjustments made in 2002.          PCS service revenues
  declined by 3% from 2001. In addition, high marketing,
  customer acquisition costs, and market saturation is the
  catalyst for slower growth. Even though their market
  share has increased slightly, the market has seemed to
  reach saturation.


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Although it was able to cut costs LG had declining voice ARPU and MOU in 2002. Average
revenue per user declined 9.5% and was W33.25million in 2002. Minutes of use (MOU) was at 121
minutes for outbound traffic while inbound traffic was 107 minutes, overall it increased by 2.7%
over 4Q01 . The main reason for the flat ARPU seems to be the slower growth in its wireless
Internet revenues and decline in call volumes. The slower data revenue growth may be a function of
a much slower subscriber migration to CDMA2000 1x services with only 213,000 vs. KT Freetel’s
700,000 and SK Telecom’s 2.68 million subscribers.
Monthly ARPU by Carrier 2002




Monthly MOU by Carrier 2002




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One thing that stands out when looking at LG Telecom’s balance sheet is that LG increased their
long term borrowings by 150% from 2001. The total debt load taken on by LG Telecom increased
by 15% from 2001. D/E increased to 188.72 compared to 169.63 in 2002. This is a big change
from the decreased D/E of 735.85 in 2000 to 169.63 in 2001. This is largely due to the increase in
capital expenditures spending in 2002. The company spent W358 billion on the network expansion
for the 2G services. This represented 72% of the total capital expenditures in 2002. The remaining
capital expenditures is made up of the 2.5G upgrades and other IT related equipment. This is a
complete reversal from 2001 when they were able to generate rights offering of W320 billion and
debt repayments of more than W200 billion.


Another key when looking at LG Telecom are their activity ratios. The activity ratios give the
liquidity of specific assets and the efficiency of managing these assets, the short term ratio viewed
here were the inventory turnover and receivables turnover. LG’s inventory turnover went from
26.34 in 2001 to 21.96 days in 2002. This means that demand for its handsets are growing and they
are staying less in their warehouses. The popularity of the new color screen handsets increased
demand therefore generating a better inventory turnover ratio. Its receivables turnover has reduced
from 8.24 to 7.86 from 2001. The long term ratio that is important is the fixed asset ratio. Its gross
fixed asset ratio has gone up from 1.22 to 1.39 from 2001. This increase is due to the increase in
LG’s asset base from new capital expenditures.


Also important is the Liquidity of LG. Liquidity ratios give a firms ability to meet cash needs as they
arise. Their current ratio has decreased slightly from 0.50 to 0.46 in 2002. The cash ratio decreased
from 0.21 to 0.01 in 2002. This is not a good sign as LG’s cash resources are decreasing. Current
assets and cash flow from operations are of concern because of their decrease in profitability and
increase in debt.


Overall since attaining profitability for the first time in the companies’ existence in 2001, they were
able to maintain profitability in 2002. Return on Assets, Return on Equity, and Return on Capital
decreased in 2002 from 2001. ROA was 2.47%, ROE 8.59%, and Return on Capital was 6.13% in
2002. These figures for 2001 were 6.14%, 30.42%, and 13.76% respectively. These decreases were
due to the changes in capital structure in the changing telecommunications industry. They were


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  forced to invest in new technologies in order to maintain their market share while battling market
  saturation at the same time.


  From this analysis, there are some major concerns about its financial condition. Their decision to
  cut costs in 2001 reflects the increase in SG&A expenses in 2002 because of the poorer quality in
  their service and products. Typically, wireless operators that invest less on networks suffer from
  weaker brand power as a result of lower service quality or limited ability to offer services based on
  the newest technology.      LG will focus mainly on raising market share in 2003 by spending to
  upgrade call quality and to increase their profitability. This means if the ban on subsidies is relaxed
  or eliminated in 2003 the risk to LG’s profitability growth becomes significant.


DISCOUNT RATE
  To find the calculation for the “Return on Equity” we must first decide the parameter of which we
  will use. In this case, we decided to use the Goldman Model to adjust for sovereign risk instead of
  just using the Capital Asset Pricing Model. We estimated this figure taking into account the risk-free
  rate for South Korea, which is 4.75%. Additionally, we used a company Beta of 1.5, and a market
  return rate according to the MCII index. In addition to this analysis using the MCII Market Return
  rate, a similar analysis will be made using the South Korean Market Return Rate. We also used a
  sovereign yield spread of 5% which was calculated by subtracting the 10- year US bond yield of
  3.875 from a similar 10-year South Korean bond yield of 8.875.        After these numbers have been
  compiled we used the Goldman Model formula RE = Rf + SYS + B(Rm-Rf) to find a return on equity
  for LGT of 19.13%


  To find the “Return on Debt” we looked at LGT’s non-current liabilities section concerning long
  term debt. Taking into account the different maturities and yields we found a weighted average cost
  of debt of 10.5%. Using the return on debt of 10.5% and a return on equity of 19.13%, we can
  apply both of these rates to find the weighted average cost of capital (WACC) for LGT.


  In the calculation for the “Weighted Average Cost of Capital” we must first compute the debt to
  equity ratio for LGT. We figured debt to be 1,181,582m and equity to be 876,009m, which means
  that the value of the entire company is 2,057,591m. The next step will be to apply these numbers to
  the WACC formula which is WACC = E/V*RE + D/V*RD*(1-TC) where D is debt, E is equity, V is


                                                                                          Page 34 of 46
  Creative Consulting Group


  the entire value of the company (D+E), and TC is the tax rate applied to LGT. Our calculations
  found the weighted average cost of capital to be approximately 12%, which will be used in our DCF
  valuation calculation.


DCF ANALYSIS


  Our cash flows in exhibit 2 are based on a five-year DCF analysis. We arrived at a 12-month target
  price of KRW 5,000. In our analysis we assumed a WACC of 12%, a perpetual growth rate of 4%
  and a terminal EBITDA multiple of 4x to reflect LGT’s weak and possibly deteriorating market
  position as well as the stable ARPU as well as stabilizing marketing costs and declining interest
  expense. 72% of the DCF value resides in the terminal value. Our DCF valuation implies an
  estimated 2003 EV/EBITDA multiple of 4.4x.


  In comparing LGT versus domestic companies in other sectors, LGT is trading at a slight premium
  basis. For instance, the leading 24 companies in Korea have 2003 P/E of 6.8x, which is nearly 18%
  discount to LGT's P/E. LGT EPS growth rate from 2002 to 2003 is expected to be 6% versus the
  leading 24 companies EPS growth rate of 15%. Hence, LGT may be most exposed to a downside
  risk relative to the other domestic telecoms given LGT's lower ROIC, earnings growth rate, and a
  premium P/E multiple relative to our index.




                                                                                      Page 35 of 46
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FINAL RECOMMENDATIONS


After considering the market environment, political landscape, risk factors, financial information and
valuation analysis, there are a number of paths one could make for the future of LG Telecom. Based
on our findings we conclude that LG should divest LG Telecom based on the computed financial
and valuation analysis. This information suggests that the handheld service market is not as
profitable as the as compared to the handheld component market of LG Electronics. From the
income statement we can divulge the fact that profits are greater than that of the manufacturing
sector because of the large fixed costs with is associated with upgrading and implementing wireless
technology. Another important factor is the subsidized costs of handheld electronics, tariff rate
competition and the strength of competitors in the wireless telecommunications industry.


Currently, LG Telecom uses only 4FA CDMA technology (of a total 7FA) and thus, has no
frequency shortage problems. But we view that the company will try to gradually construct a
cdma2000-based 3G (EV-DV) network, to cope with intensifying competition in the wireless
Internet services market. We estimate that it will take about W0.8tn and 3-5 years for LG Telecom
to build a EV-DV network in Korea’s six largest cities. Nevertheless, it is still unclear if LG
Telecom, a CDMA2000-mode operator, will see its profitability improve given that it is difficult for
the company to reach economies of scale due to its inferior customer base. Furthermore, this fact
will be highlighted during the network evolution stage, when mobile telecoms will have to make new
investments. One point that must be noted is that when analyzing the profitability of LG Telecom’s
3G services we assumed that the company’s CAPEX and market expense would be significantly
lower than those of SKT and KFT.


Since the technology is expensive and requires a significant capital expenditure, LG will find it hard
to compete with the much larger and more capital intensive SKT and KFT. With this in mind, we
believe that LG may follow one of four possible strategies. In reflection of the diverse financial
restructuring decisions that can be made, Creative Consulting Group recommends the merger
solution mentioned below.




                                                                                       Page 36 of 46
Creative Consulting Group


    1. We recommend that LG Group divest their Telecom subsidiary because of its low
        subscriber and APRU rates. Considering the company as a whole, LG can benefit from the
        money generated from its sale to use towards more profitable NPV projects.
    2. LG may implement the 3G technology themselves, but we feel this may be too costly due to
        declining profits and a need for LG to cut costs.
    3. LG Telecom may also decide to keep the status quo and implement the 3G technology after
        seeing how it has affected the other firms. LG Telecom will not have first mover advantages
        because of high implementation costs and uncertain future profits from the new technology.
    4. LG Telecom may merge or create a strategic alliance with SKT or KTF so that the
        risk and expenses of implementing the 3G technology can be split between the two
        firms. We feel that this may be the most probable solution, however the problem
        with this proposition is that government regulation may prohibit the merger due to
        monopoly or competition regulations. This is the solution that Creative Consulting
        Group feels that LG Telecom should implement.




                                                                                     Page 37 of 46
Creative Consulting Group



       EXHIBIT 1 - Competitor Analysis of First and Second-Tier
                                          Operators (2002)


                             Korea                             Taiwan                      Hong Kong
                     First      Second                 First          Second             First     Second
                                                  Taiwan            Far
                    KTF           LGT             Cellular          EasTone          SmarTone       Sunday
 EV/EBITDA          5.3x          5.1x                 6.5x             4.8x            3.2x          4.4x
 EV/OpFCF           14.8x         16.0x                36.5x            NM              6.0x          NM
 EV/Revenue         1.7x          1.2x                 2.8x             2.0x            0.1x          0.7x
 P/E                4.3x          12.5x                2.2x             5.0x            9.9x          3.0x



  EXHIBIT 2 - LG Telecom Discounted Cash Flow Analysis ( KRW
                                              Billions)


                                           2002      2003E       2004E     2005E     2006E     2007E
 EBIT                                         230       276         368       412       444       472
 Net Income                                   161       194         258       289       312       332
  + Depreciation & Amortization               314       322         324       332       332       314
  + (Inc) / Dec in net working capital       (99)       (16)        (26)       (9)      (11)      (13)
   -
 Capex                                       359         321        391        350      359       347
 Free Cash Flow                               17         178        165        262      264       286



                                    Terminal EBITDA Multiple

       Discount Rate               2         3         4          5          6         7         8
            8%                   2826      4834       6842       8850      10857     12865     14873
            9%                   2553      4471       6388       8305      10223     12140     14057
           10%                   2294      4126       5957       7789      9621      11453     13284
           11%                   2047      3798       5549       7299      9050      10801     12552
           12%                   1812      3486       5160       6834      8508      10182     11856
           13%                   1589      3190       4792       6393      7994      9595      11196
           14%                   1377      2909       4441       5973      7505      9038      10570
           15%                   1174      2641       4108       5574      7041      8508      9974
           16%                    981      2386       3790       5195      6599      8004      9409




                                                                                          Page 38 of 46
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                        APPENDIX – Financial Information
 Price Ratio Analysis
                                    2002       2001      2000
 P/E                                 15.80       5.89     11.15
 P/Book                               1.31       1.48      2.81
 P/Sales                              0.38       0.43      0.81
 P/CF                                 2.49       2.12      4.05
 P/EBITDA                             1.76       1.45      2.74

 Activity Ratios/Growth Potential
                                     2002      2001       2000
 Inventory Turnover                    21.96     26.34      48.71
 T12 Inv Turn-Day                      16.62     13.85       7.51
 A/R Turnover                           7.86      8.24       8.83
 T12 A/R Turn-Day                      46.45     44.30      41.45
 Gross Fixed Asset Turnover             1.39      1.22       1.05
 Net Fixed Asset Turnover               1.39      1.40       1.32
 EPS Year Change                      -64.55       NA      -94.14
 BVPS Year Change                       7.59   178.90      -72.75
 Asset Year Change                     12.49     22.41       3.52
 Working Capital                       22.84     17.76   -117.13
 Total Cap Exp Growth                   4.26    -18.17       7.52
 Depreciation Change                   21.52    -30.00    113.83
 Cash flow/share growth               -19.04   243.41         NA
 FCF/share growth                        NA        NA       61.64

 Profitability
 #'s in %                           2002       2001       2000
 Gross Margin                         10.34     20.07      -11.80
 Sales Yearly Change                   6.82     14.65       28.66
 Net income growth                   -52.98       NA     -173.64
 Operating margin                      7.84     17.43      -14.53
 Pretax margin                         4.56     10.51      -20.34
 Effective Tax Rate                   29.70     30.80      -17.53
 Profit margin                         3.20      7.28      -23.90
 Return on assets                      2.47      6.14      -19.91
 Return on equity                      8.59     30.42      -94.40
 Return on cap.                        6.13     13.76      -13.83




                                                                    Page 39 of 46
Creative Consulting Group


 ROE Decomposition
 #'s in %                    2002         2001      2000
 Return on equity              8.59        30.42     -94.40
 Tax burden                   70.30        69.20    117.53
 Interest burden              58.14        60.32    139.97
 EBIT margin                   7.84        17.43     -14.53
 Asset turnover                0.77         0.84       0.83
 Financial leverage            3.48         4.95       4.74



 Debt Factors
 #'s in %                    2002       2001        2000
 Debt to assets                53.13      49.93       65.38
 T debt/Com equity            188.72     169.63      735.85
 LT debt/Com equity           131.76      56.66      350.85
 Total Debt/EBITDA              3.37       2.20       15.03
 Com equity/assets             28.15      29.43        8.88
 Com equity/Total Cap          34.64      37.09       11.96
 Total debt/Total Cap          65.36      62.91       88.04
 LT debt/Total Cap             45.64      21.01       41.98
 CFO/Debt                       0.21       0.31        0.08
 Net debt                   1,643.37   1,075.79    1,416.47
 Net Debt/Share Equity        187.30     132.13      705.49

 Per Share Data
                                2002         2001       2000
 Cash Flow/Basic share         1,659.61     2,049.99     596.95
                                                              -
 FCF/share                       -33.84       425.79   1,577.62
 Sales/share                  10,849.15    10,156.43   9,705.02
                                                              -
 Op income per share             850.16     1,770.43   1,410.22
                                                              -
 Pretax Income per share         494.25     1,067.84   1,973.88
                                                              -
 Cont income per share           347.46       738.94   2,319.81
 Book value/share              3,159.32     2,936.39   1,052.86
                                                              -
 EPS before XO items             262.00       739.00   2,320.00
                                                              -
 EPS after XO items              262.00       739.00   2,320.00
 A verage # shares for EP          0.21         0.21       0.19
 EPS Year change                 -64.55          NA      -94.14
 Cash/Share                       35.42     1,101.24     319.68
 Dividends/share                   0.00         0.00       0.00




                                                                  Page 40 of 46
Creative Consulting Group


 Employee Data
 Thousands: (Year Only)            2002       2001         2000
 # of Employees                       NA     1,207.00    1,253.00
 Employee Yearly Change               NA         -3.67      20.25
 Net Income/Employee                  NA       127.90     -353.04
 Sales/Employee                       NA     1,757.89    1,476.97
 Assets/Employees                     NA     2,291.77    1,803.54
 Personnel expenses                 69.78       62.49         NA



 Liquidity Analysis
                                   2002         2001      2000
 Cash ratio                          0.01         0.21      0.05
 Current ratio                       0.46         0.50      0.33
 Total Debt/Total Cap ratio         65.36        62.91     88.04
 Cash & equiv/Current Assets         2.02        41.58     13.73

 Leverage Analysis
                                   2002       2001        2000
 Assets/Equity                        3.55       3.40       11.26
 LT debt/Total cap                   45.64      21.01       41.98
 Total debt/Equity Market value       1.37       0.60        2.22
 Total debt/Total cap                65.36      62.91       88.04
 Debt to assets                      53.13      49.93       65.38
 Total debt                       1,653.20   1,381.14    1,477.43
 Shares outstanding                   0.28       0.28        0.19



 Income Statement: Common Size
 % of Total Revenue                   2002         2001        2000
 Net sales                             100.00       100.00      100.00
 Cost of Goods Sold                     89.66        79.93      111.80
 Sell, Gen & Adm. Expense                2.50         2.64         2.73
 Operating Income (loss)                 7.84        17.43      -14.53
 Interest expense                        4.53         7.64         9.16
 Net non-op L (G)                       -0.72        -0.72        -3.35
 Income tax expense                      1.35         3.24         3.56
 Income before XO item                   3.20         7.28      -23.90
 XO L (G) pretax                         0.00         0.00         0.00
 Minority Interest                       0.00         0.00         0.00
 Net Income (loss)                       3.20         7.28      -23.90
 EBIT                                    7.84        17.43      -14.53
 Pretax income                           4.56        10.51      -20.34
 Total Cash pref. Dividend               0.00         0.00         0.00
 Total Cash comm. Dividend               0.00         0.00         0.00
 Reinvested earnings                     3.20         7.28      -23.90
 Depreciation expense                   13.74        12.08       19.78
 R&D expenditures                        0.62         1.01         2.18



                                                                          Page 41 of 46
Creative Consulting Group




 Income Statement: Trend
 Analysis
 % Change                        2002         2001         2000
 Net sales                           6.82    14.65        28.66
 Cost of Goods Sold                19.84    -18.04        36.87
 Sell, Gen & Adm. Expense            1.06    11.05        49.37
 Operating Income (loss)          -51.98        NM      -151.01
 Interest expense                 -36.68      -4.33         0.29
 Net non-op L (G)                   -6.91    75.23       -37.55
 Income tax expense               -55.37       4.16   NM
 Income before XO item            -52.98        NM      -173.64
 XO L (G) pretax                     0.00      0.00         0.00
 Minority Interest                   0.00      0.00         0.00
 Net Income (loss)                -52.98        NM      -173.64
 EBIT                             -51.98        NM      -151.01
 Pretax income                    -53.72        NM       -61.07
 Total Cash pref. Dividend           0.00      0.00         0.00
 Total Cash comm. Dividend           0.00      0.00         0.00
 Reinvested earnings              -52.98        NM      -173.64
 Depreciation expense              21.52    -30.00       113.83
 R&D expenditures                 -34.30    -47.10        40.33

 Assets: Common Size
 % of Total                      2002        2001         2000
 Cash & near cash                   0.24      9.27         2.70
 Marketable securities              0.07      1.77         0.00
 Acct & notes Receivables           9.54     10.12        10.40
 Inventories                        3.30      2.98         2.05
 Other current assets               2.48      2.41         4.50
 Current Assets                    15.64     26.55        19.65
 Gross fixed assets                52.95     58.08        83.26
 Accumulated depreciation           0.00      0.00        20.15
 Net fixed assets                  52.95     58.08        63.12
 LT Inventory & LT Receivables      6.33      7.38         4.14
 Other assets                      25.09      7.99        13.10
 Total assets                     100.00    100.00       100.00




                                                                   Page 42 of 46
Creative Consulting Group


 Liabilities: Common Size
 % of Total                 2002      2001      2000
 Accounts payable              7.50      4.12      8.27
 ST borrowings                16.04     33.25     34.21
 Other ST liabilities         10.34     15.77     16.75
 Current Liabilities          33.87     53.14     59.22
 LT borrowings                37.09     16.68     31.17
 Other LT borrowings           0.88      0.75      0.72
 Total liabilities            71.85     70.57     91.12
 Offered equity                0.00      0.00      0.00
 Minority interest             0.00      0.00      0.00
 Total common equity          28.15     29.43      8.88
 Shareholder equity           28.15     29.43      8.88
 Total Liability & Equity    100.00    100.00    100.00




                                                          Page 43 of 46
Creative Consulting Group


                                         WORKS CITED

Frank, Rudiger. “South Korea Index,” http://oefre.unibe.ch/law/icl/ks_indx.html. Jan 17, 2003.

Ghosh, Partha. “LG merges telecom unit,” Business Standard. March 27, 2003.

Lei, Tao Ai. “War jitters hit Asian IT exports,” Asia computer Weekly. Apr 07, 2003.

Sung-jin, Yang. “Korea leads internet usage rate in East Asia,” The Korea Herald. Apr 4, 2003

Sung-jin, Yang. “Domestic mobile carriers to offer diverse discount packages to year,”
http://www.mic.go.kr/eng. Dec 30,2002.

Sung-jin, Yang. “Mobile phone numbers portable in 2004,” http://www.mic.go.kr/eng. Dec
23,2002.

Sung-jin, Yang. “KT, KTF set to merge landline, Internet services,” The Korea Herald. Feb 12, 2003.

Thomas, Andrea. “South Korea wireless operations March subscribers up on month,”
http://sg.biz.yahoo.com. Apr 3, 2003.

Walsh, Bryan. “The cost of sunshine,” http://www.time.com. Feb 3, 2003.

Ward, Andrew. “LG shows the way with chaebol reform model,” FT.com/business/Asia-Pacific.
Apr 7, 2003.

“Volatile markets push Asia down,” http://edition.cnn.com/2003business. Apr 8,2003.

“KTF suggests W-CDMA partnership with SK Telecom,” RCR Wireless news. Apr 4, 2003.

“Wellink and Wi-Lan collaborate on development of broadband mobile wireless international
transportation systems products,” http://www.stockhouse.ca/news. Apr 1,2003.

“Wireless in South Korea,” http://www.emarketer.com/news. Apr 7,2003.

“Foreign Investment in South Korea Falls,” http://news.yahoo.com/news. Apr 4, 2003.

“LGT urges MIC to ease handset subsidy ban,” The Korea Herald. Apr 4, 2003.

“Telcos Profit Estimates Boosted,” KoreaNet News. Apr 3, 2003.

“Korea: LG Telecom adds net 56,380 subscribers for cellular services in March,” Afx Asia Newswire.
Apr 3, 2003.

“LG to expand presence in market through Hanaro,” The Korea Herald. Apr 1, 2003.

“KTF takes limelight in 3G roll-out,” The Korea Times. March 25, 2003.



                                                                                       Page 44 of 46
Creative Consulting Group


“SKT seals mobile internet deal with China Unicom,” The Korea Herald. March 21, 2003.

“Single mobile internet platform plan at risk,” The Korea Herald. March 10, 2003.

“Handset subsidy to be allowed from April,” The Korea Herald. March 10, 2003.

“Korea to allocate 3G access code,” The Korea Herald. March 5, 2003.

“Mobile service sector remains flat in February,” The Korea Herald. March 4, 2003.

“Korean KTF telecom to use new code in preparation for 3G service.” Asia Pulse. March 3, 2003.

“Korea: LG to launch LG Corp as groupwide holding co on March 1,” AfxAsia Newswire. Feb
28,2003.

“Ministry set to kickstart m-government project,” The Korea Herald. Feb 24, 2003.

“South Korea: Political Environment,”
http://www.tradeport.org/ts/countries/shora/political/html. 1995

“LG Telecom to exceed FY 370 bln won marketing budget after high Q3,” AfxAsia Newswire. Nov
9, 2002.

“LG Telecom Hemorrhages From Soaring Marketing Cost,” The Korea Herald. Nov 11, 2002.

“LG Telecom to decide on tariff cut mid-Dec, concerned over earnings impact,” AfxAsia Newswire.
Nov 19, 2002.

“KTF, LGT expected to follow SK in Mobile phone rates cut,” Aisa Pulse. Nov 18, 2002.

“LG Telecom outclasses KTF in mobile phone competition,” The Korea Herald. Dec 5, 2002.

“LG electronics promoting mobile phones among young, tech-savvy.” The Korea Herald. Nov 25,
2002.

“LG Group to invest its way to top in communications field,” The Korea Herald. Dec 11, 2002.

“Korea streamlines mobile access code,” The Korea Herald. Jan 20, 2003.

“Ministry to keep pushing flat rate for telecom services,” The Korea Herald. Dec 23, 2002.

“Korea: LG Telecom sets 2003 capex at 410 bln vs 358 bln in 2002,” AfxAsia Newswire. Feb 6,
2003.

“LG Telecom Sees Drop in Profits,” The Korea Times. Feb 6, 2003.

“LG Telecom fined W640 mil for illegal sales of mobile phones,” The Korea Times. Jan 20, 2003.



                                                                                       Page 45 of 46
Creative Consulting Group


“Minister denies favoring KTF over SK Telecom,” The Korea Herald. Jan 20, 2003.

“Korea pursuing global leadership in info-tech industry,” The Korea Herald. Jan 20, 2003.

“Mobile phone numbers portable in 2004,” The Korea Herald. Dec 23, 2002.

The Economist Intelligence Unit. “Country Report: South Korea.” Feb 2003.

RESEARCH REPORTS

Kim, Shawn. “Korea Handset Components.” Morgan Stanley Equity Research, March 2003

Scott, Alistair. “TV on Call.” Merrill Lynch Media-Telecom Equity Research, February 2003

Won, Kyunghee. “LG Electronics” HSBC Company Report, May 2002


WEBSITES

http://www.lgtel.co.kr

http://www.bloomberg.com

http://www.finance.yahoo.com

http://www.djinteractive.com

http://www.investext.com

http://www.onesource.com

http://www.images.google.com

http://www.countrywatch.com

http://www.standardandpoors.com




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