How will KAFTA affect Australian Telcos?

The Korea-Australia Free Trade Agreement (KAFTA) could provide Australian Telcos with a boost where their Asian strategy is concerned, but there is some debate about whether this agreement will actually affect the industry in either country.

KAFTA will open up the market where telecommunications is concerned as well as law firms, agribusiness, and accountants, providing a boost of $653 million to the Australian economy.

What does KAFTA mean for the telecommunications industry?

Australian telcos will have a greater control over South Korean service suppliers. Within two years, Australian telcos will be permitted to own up to 100 per cent of the voting shares of a South Korean facilities-based telecommunications service provider.

Telstra owns network assets in South Korea already, according to a February 17 article in the Australian Financial Review.

Spokesperson Scott Whiffin told the newspaper the company welcomes the changes made under KAFTA and the improved market access for telcos.

However, Ovum research director David Kennedy told the Australian Financial Review that the South Korean telecommunications market was tough and competitive.

"I've heard no one express enthusiastic interest in entering the South Korean telecommunications market," he said, "anyone going over would be looking at years and years of losses before they got a foothold in the market. That doesn't sound like anything any Australian operator would be interested in."

However, Telstra CEO David Thodey told the same source that its half-yearly results indicate business in South Korea is continuing to grow.

"We're very pleased with . . . the sort of initiatives we're seeing quite a bit coming out of South Korea [and] that's why we're having to increase our coverage in the market," he said.

KAFTA lists provisions where transparency is concerned and provides for a review of regulatory decisions. It also aims to set out strong disciplines to prevent any anti-competitive conduct.

All players in the telecommunications market, whether they be Australian or South Korean, must ensure major suppliers provide the following services: resale of services, leased circuit services, interconnection and co-location of equipment on reasonable, non-discriminatory terms and conditions.

This is the best treatment Korea has agreed on with any trading partner and is on par with its agreements with the United States and Europe, which have had free trade agreements set up for some time.

While previously there weren't any restrictions preventing South Korean businesses from entering the Australian market, KAFTA makes it clear that they are welcome to invest in Australia and that Australia is open for business.

Posted by Richard West.