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Telecom AI Revolution in South Korea

General Report December 1, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Overview of AI Contact Centers (AICC)
  3. Current Strategies of Telecommunications Companies
  4. Competitive Landscape and Market Dynamics
  5. Case Studies of AICC Implementation
  6. Financial Impacts and Market Predictions
  7. Conclusion

1. Summary

  • The rapid expansion of AI Contact Center (AICC) services is transforming the telecommunications landscape in South Korea, with major players such as SK Telecom, KT, and LG Uplus at the forefront. This report provides an overview of how these companies are integrating AI technologies into customer service, highlighting the resulting increase in market demand and the competitive environment that has emerged. Significant technological advancements, including AI, big data, and cloud computing, are driving this growth, with market projections estimating a substantial expansion in both domestic and global sectors. Each company employs unique strategies and partnerships to bolster their AICC capabilities. LG Uplus focuses on a customized AI model, KT leads with an established VOC management system, and SK Telecom aims to innovate through AI collaborations. The overall AICC market is set to grow at an annual rate of up to 25%, with financial performance revealing strong revenue growth from this sector.

2. Overview of AI Contact Centers (AICC)

  • 2-1. Definition and Functionality of AICC

  • AI Contact Centers (AICC) are intelligent customer service centers where AI technologies, such as AI call bots and chatbots, respond to customer inquiries. AICC automates customer consultations through tasks such as voice recognition and sentence analysis. This automation enables businesses to address simple inquiries and enhance the quality of customer consultations.

  • 2-2. Technological Components of AICC

  • AICC combines new digital transformation technologies like AI, big data, and cloud with traditional Internet Protocol Call Centers (IPCC) technology. This combination significantly improves time and cost efficiency. The telecommunications companies in South Korea are utilizing their vast customer data and operational know-how to develop tailored AI models, with LG Uplus leveraging its self-developed lightweight large language model, 'IXGEN,' to provide customized AI models.

  • 2-3. Market Growth and Demand for AICC

  • The demand for AICC is rapidly increasing, with projections indicating that the domestic AICC market will grow at an average annual rate of 23.7%. Research indicates that it could reach a size of approximately 600 billion to 6000 billion won. The global AICC market is expected to expand by 25% annually, potentially reaching about $36.1 billion by the following year. The main telecommunications companies, SK Telecom, KT, and LG Uplus, recognize AICC as a pivotal component for innovation in customer service and cost-saving solutions.

3. Current Strategies of Telecommunications Companies

  • 3-1. LG Uplus's Approach to AICC

  • LG Uplus is focusing on the AI Contact Center (AICC) as a core aspect of its B2B business expansion. The company has developed a lightweight large language model called 'Ixi-GEN' to provide customized AI models. By 2028, LG Uplus aims to achieve 2 trillion won in revenue from its AI B2B business. Additionally, LG Uplus operates an AI-based consultation content analysis system named 'VOC Lab,' enhancing operational efficiency. The time taken to verify consultation details, which previously exceeded 10 minutes, has been reduced to under 30 seconds.

  • 3-2. KT's Market Position and Offerings

  • KT launched its AICC product 'Aicen Cloud' in 2022, marking its entry into the AICC market. In the previous year, KT reported AICC contracts exceeding 250 billion won, with a goal to reach 300 billion won in revenue for the current year. KT has established a VOC integrated management system called 'AI-VOC Portal,' allowing swift responses to customer issues based on its experience transitioning its customer service to AICC. The company aims to leverage its extensive operating experience from managing Korea's largest call center, which has 8000 seats, to enhance AICC offerings in various sectors including banks, universities, and credit card companies.

  • 3-3. SK Telecom's Innovations in AICC

  • SK Telecom plans to apply its 'Telco LLM,' developed through a collaboration with the Global Telecommunications AI Alliance (GTAA), to its AICC services. The company is currently conducting tests with the goal of commercialization within the year. Furthermore, SK Telecom is working with PersonaAI, a domestic AICC development company, to advance joint business initiatives in the AICC sector. The integration of AI technologies such as voice recognition and sentence analysis allows for the automation of customer consultations, significantly increasing service efficiency and meeting the growing demand from various enterprises.

4. Competitive Landscape and Market Dynamics

  • 4-1. Competition Among Major Telecom Companies

  • The competitive landscape in South Korea's telecommunications sector regarding AI Contact Centers (AICC) has intensified among the three major operators: SK Telecom, KT, and LG Uplus. As reported, AI technology integration has significantly accelerated competition, with customers transitioning to AICC due to the operational burdens faced by traditional call center staff. Notably, KT has emerged as a frontrunner in AICC solutions, boasting a contract performance of 250 billion KRW in 2022 and further aiming for a revenue target of 300 billion KRW in 2025. Meanwhile, LG Uplus has successfully acquired 1,000 new members for its AICC service, 'U+AICC,' since its launch last year. As per the data, the market grows at a remarkable rate of over 20% annually, indicating a rapidly expanding sector.

  • 4-2. Collaborations and Partnerships in AICC Development

  • Collaboration among telecommunications companies and various sectors has been pivotal in the expansion of AICC services. Multiple companies from diverse industries such as finance, insurance, healthcare, and travel are partnering with the major telecom operators to establish AICC solutions. LG Uplus, for example, leverages its affiliated group companies, including LG CNS and LG AI Research, to enhance its AICC offerings. This collaboration is indicative of a broader trend where telecommunications firms are aligning with various sectors to meet the growing demand for AI-driven customer service solutions. Additionally, KT's introduction of the cloud-based AICC product, 'KT A'Cen Cloud,' reflects the companies' adaptation to technological advancements and shifting customer needs.

  • 4-3. Market Growth Rates and Future Projections

  • The AICC market in South Korea is witnessing robust growth rates, expanded through innovative technologies and business models adopted by the service providers. According to market research, the overall AICC market is expected to grow to between 400 billion to 600 billion KRW next year. Moreover, global market growth for AICC is projected at 25% annually, with estimations placing it at approximately USD 36.1 billion by next year. The shift towards subscription-based models is already demonstrating profitability, with significant revenue contributions noted from AI integration within existing telecom operations. Unlike traditional models, the subscription-based approach allows for immediate revenue generation, greatly benefiting the telecom organizations involved.

5. Case Studies of AICC Implementation

  • 5-1. Successful AICC Deployment by LG Uplus

  • LG Uplus has made a significant entry into the AI Contact Center (AICC) market through a partnership with LG CNS, launching their AICC solution named 'U+AICC' in September 2023. Following its release, LG Uplus secured 1,000 new client lines within a year. This development indicates a successful response to the growing trend of integrating AI technology into traditionally manual call center operations. The AICC employs advanced technologies such as voice recognition, speech synthesis, text analysis, and conversation engines, moving beyond the conventional text-based AI chatbot systems. LG Uplus aims to target various industries, with a particular focus on the financial sector, leveraging their expertise and technology in collaboration with LG CNS. They plan to enhance the precision of their AICC services by training AI on financial terminology and dialects. LG's corporate base business group head has emphasized that AICC can meet the demands of various sectors, including home shopping and logistics, highlighting its broad application potential.

  • 5-2. KT's B2B AICC Solutions

  • KT has focused its AICC solutions primarily in the business-to-business (B2B) sector. In the third quarter of 2023, KT highlighted AICC as a key component of its B2B strategy during earnings presentations. The company established a dedicated AICC division under its AI and Big Data department, strategically preparing for expansion. KT operates the largest call center in South Korea, with up to 8,000 seats, using this experience alongside AI and big data technologies to offer AICC solutions to banks, universities, and credit card companies. Looking ahead, KT plans to expand its services to areas like public health and governance while exploring international markets through a partnership with global enterprise Genesis. Recent collaborations with Amazon Web Services (AWS) are also underway to enhance their integrated call center services. The head of KT Enterprise reported that AI has begun automating approximately 20% of call center operations, improving efficiency and reducing wait times for customers.

  • 5-3. Integration of AI Technologies in SK Telecom's AICC

  • SK Telecom entered the AICC market in 2021 and has since seen growth in its enterprise business sector, which includes AICC, with a notable increase of about 10% year-on-year. While specific details regarding SK Telecom's AICC deployments and technologies have not been disclosed in the available documentation, their entry into the market suggests that they are leveraging AI technologies to enhance customer interaction and operational efficiencies. The competitive landscape illustrates that SK Telecom, alongside KT and LG Uplus, is part of a rapidly evolving AICC market in South Korea, focusing on AI innovations to secure a foothold in this promising sector.

6. Financial Impacts and Market Predictions

  • 6-1. Revenue Growth Associated with AICC

  • The revenue growth associated with AI Contact Centers (AICC) has been significant among South Korea's leading telecommunications companies. For instance, LG Uplus reported a 9.6% increase in its solutions business revenue in the previous year, amounting to 579.9 billion won, largely due to the impact of new AICC solutions and other B2B initiatives. SK Telecom also showcased strong revenue performance with its AI Pyramid strategy contributing to a marked increase in overall business income from B2B sectors, including AICC. The industry anticipates that AICC will serve as a major source of income moving forward, with AICC technologies proving to be cost-effective and time-efficient through their integration with existing internet protocols.

  • 6-2. Investment Trends in AI Technologies

  • Investment trends in AI technologies reflect a robust commitment from telecommunications companies in South Korea to enhance their services through AI integration. SK Telecom and KT have highlighted their focus on advancing AICC as a pivotal business area. KT has established a dedicated AICC business department under its AI and Big Data division, while also preparing to broaden its reach to various sectors, including healthcare and administration, backed by substantial investments. Partnerships, such as KT collaborating with Genesis for international expansion and LG Uplus teaming up with LG CNS to provide targeted solutions to the financial sector, indicate a strong focus on leveraging AI advancements to drive business growth.

  • 6-3. Projected Market Size and Growth Rate

  • The projected market size for AICC in South Korea is expected to grow significantly. According to industry estimates, the domestic market may expand to between 400 billion and 600 billion won within the next fiscal period. Globally, the AICC market is expected to experience a 25% annual growth rate, potentially reaching approximately $36.1 billion in the near future. This projection reflects the increasing acceptance of AICC technologies that merge AI, big data, and cloud computing, paving the way for a promising future in the telecommunications sector.

Conclusion

  • The comprehensive analysis within the report highlights a significant upward trend in the AI Contact Center (AICC) market in South Korea, buoyed by strategic investments and an emphasis on AI-driven customer service innovations. SK Telecom, KT, and LG Uplus each pursue distinct methodologies, with LG Uplus leveraging custom AI models and SK Telecom focusing on AI-driven innovation to enhance customer service practices. These developments signify a substantial positive impact on customer service automation and efficiency, translating into improved revenue streams for these companies. However, challenges persist, particularly related to technology integration and potential market saturation. Addressing these challenges will be crucial for sustained growth. In the future, expanding AICC services into new industries and international markets, as planned by KT and involved parties, is poised to accelerate global market expansion. The practical applicability of AICC technologies is evident, enhancing customer experiences and thus promising a thriving future for AI-driven solutions within and beyond the telecommunications sector.

Glossary

  • AI Contact Center (AICC) [Technology]: AICC represents a new wave of customer service solutions that utilize artificial intelligence for handling inquiries and support. This technology automates various customer interactions, improving efficiency and response times. AICC is becoming a critical component for telecommunications companies in South Korea as they seek to innovate and enhance their service offerings.
  • SK Telecom [Company]: SK Telecom is one of the leading telecommunications providers in South Korea, recognized for its innovative approaches in adopting AI technologies. The company has initiated various projects aimed at enhancing customer experiences through AI, positioning itself as a market leader in the AICC space.
  • KT Corporation [Company]: KT Corporation is a major telecommunications company in South Korea that has focused on integrating AI solutions into its customer service operations. By establishing specialized teams for AICC development, KT aims to expand its market share in the B2B sector.
  • LG Uplus [Company]: LG Uplus is a prominent telecommunications company in South Korea that is actively investing in AI technologies to enhance its customer service capabilities. The company has developed the U+AICC service, targeting various industries and aiming for significant revenue growth in the AICC market.

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