Telecoms in NK Developing Well, for Now

South Korea’s Vice-Minister of Unification told a forum this morning that while the future of North Korea’s telecommunications sector is unclear, it is growing in both scale and user numbers and represents the establishment of the fundamental infrastructure for modern telecommunications in the country.

“It is still at the developmental stage,” Vice-Minister Uhm Jong Sik told the forum, The State of North Korean Mobile Telecommunications; Investment Opportunities and Strategy’, organized by Chosun Biz, “but we can say that the basic infrastructure has been established.”

“From when North Korea’s mobile telecommunications service was launched in December, 2008 in collaboration with Egypt’s Orascom until the end of last year, the number of subscribers had reached 450,000,” he added.

However, Uhm was quick to note the future will not be a smooth ride given the characteristics of North Korea itself, pointing out, “North Korea is closed and controlled, the authorities regard the circulation of information from the outside to be the main threats to the system and controls and crackdowns on the activities of the people are strong.”

“North Korea is focused on controlling the people and systemic unity, and so must be sensitive to the flow of information between people. Watching the spreading flow of Middle East democratization, there is the possibility that they will strengthen controls over elements which threaten the system even more,” he concluded.

However, another speaker at the forum, Angel Dobardziev of Ovum said that North Korea also recognizes the worth of good telecommunications, and will do its best to foster that.

“Since the North Korean authorities also know that the economic value of mobile telecommunications is excellent, in future they will pursue policies to develop it,” he said.

However, the level of services offered by Orascom will inevitably be circumscribed by the North Korean regime, and Dobardziev added he does not expect political changes to come out of the Orascom partnership.

“Orascom faithfully tows the line on what the North Korean regime wants,” he pointed out. “Since they would not do anything that could create a systemic crisis, North Korea chose Orascom. Not only that, Orascom has built up its know-how by offering the governments of politically restrictive markets it serves such as Tunisia, Egypt and Bangladesh a sort of ‘guarantee’.”

In addition, Orascom is particularly unlikely to want to rock what is apparently quite a profitable boat. According to Dobardziev, “The profitability of Orascom’s North Korea operation is exceedingly high. The EBITA margin of an emerging market is generally recorded at 30-35%, but in North Korea we know it to be around 64%. This is very high for an emerging market.”