Affordable Phones Surpass 10 Million... Major Carriers' Subsidiaries Face Market Share Limit Review

Subscriber Growth Trend Since the Introduction of Budget Phones

[Asia Economy Reporter Koo Eun-mo] The budget phone sector has reached 10 million subscribers on its 11th anniversary. The government plans to review restrictions on the combined market share of subsidiaries of the three major telecom operators to ensure continuous growth of budget phones, and support the creation of competitive plans such as lowering wholesale prices.

Budget Phones Surpass 10 Million Subscribers

The Ministry of Science and ICT announced on the 24th at a ceremony celebrating the achievement of 10 million budget phone subscribers that the number of budget phone subscribers in Korea has exceeded 10 million. The budget phone system was introduced in September 2010 to reduce household communication expenses, and as of the 21st, the number of subscriber lines reached 10.07 million. Among them, 5.98 million are mobile phone subscribers (1.63 million prepaid and 4.35 million postpaid), and 4.35 million are Machine-to-Machine (M2M) subscribers.

Introduced in September 2010 to alleviate household communication costs, the budget phone system surpassed 5 million subscribers in 2015 and reached 10 million in the first week of November this year, 11 years after its introduction. This is an increase of nearly 1 million subscribers in about 10 months compared to the end of last year (9.11 million).

At the event, Minister Lim Hye-sook of the Ministry of Science and ICT said, "This year marks a very meaningful achievement as budget phone subscribers have exceeded 10 million, 11 years after the system was introduced. We hope the budget phone industry will unite to take a step forward by providing diverse and innovative services that the three major telecom operators do not attempt, in addition to price competitiveness, and the government will not hesitate to provide necessary support for this."

Budget phones (MVNOs, Mobile Virtual Network Operators) are telecom services that rent networks wholesale from existing mobile network operators (MNOs) such as SK Telecom, KT, and LG Uplus, and provide services under their own brand. They offer the same communication quality but reduce sales, distribution, and advertising costs, resulting in lower prices.

Recently, unlike traditional telecom companies, the freedom from contract restrictions combined with unlocked devices has accelerated subscriber growth. The perception that purchasing unlocked devices from e-commerce platforms like Coupang and 11st and combining them with affordable budget phone plans is a reasonable choice is spreading mainly among younger generations.

Government Tightens Controls for Sustainable Growth: "From Lowering Wholesale Prices to Introducing Mobile e-SIM"

The government announced activation measures to diversify services and expand user accessibility to maintain the competitiveness of budget phones continuously.

First, to prevent excessive concentration of the budget phone market in subsidiaries of the three major telecom operators, the government is reviewing limiting the combined market share of these subsidiaries. Contrary to the original intent to promote competition, the budget phone market is increasingly becoming another battleground led by subsidiaries of the three major telecom operators. The market share of telecom subsidiaries in the budget phone market, which was about 37% in 2019, has increased to 46.6% as of last July.

The government will also create an environment where budget phone companies can launch more competitive plans. First, it will lower the wholesale prices for metered budget phone services. The metered wholesale price is the fee that budget phone operators pay to telecom companies based on usage of voice, data, and SMS. Data wholesale prices will be reduced from 2.28 KRW per MB to 1.61 KRW, and voice from 10.61 KRW per minute to 8.03 KRW. Data wholesale prices have entered the 1 KRW range for the first time this year after a 22.8% reduction last year and a 29.4% reduction this year, and voice wholesale prices have been lowered by 24.3%.

To enhance competitiveness in the LTE market, the main market for budget phone businesses, the revenue-sharing rate for SK Telecom’s T-Plan will also be reduced by 2 percentage points. For example, the wholesale price for a 69,000 KRW plan offering 100GB of data will be reduced from 62% (42,780 KRW) to 60% (41,400 KRW), creating conditions for budget phone operators to offer more affordable plans.

Additionally, starting next month, the comprehensive portal site ‘Budget Phone Hub’ will operate a device damage insurance for unlocked phones at 4,750 KRW per month to strengthen the combination of budget phones and unlocked devices.

The government will also improve benefits for budget phone users. Since budget phones are mainly activated online, subscriber acquisition has been difficult due to limited online identity verification methods, which were restricted to universal public certificates and credit cards. However, since the revision and enforcement of the Electronic Signature Act in December last year, various private electronic signatures have been expanded as identity verification methods, and from the third week of next month, many budget phone operators will be able to adopt Payco certificates, Naver certificates, and others.

The introduction plan for mobile e-SIM will also be prepared within the year after industry consultations. Currently, when subscribing to a budget phone online, users receive a physical SIM by courier and must contact a call center, which can take 2 to 3 days for activation. The introduction of e-SIM services is expected to alleviate some of the inconvenience of SIM activation for budget phones, which are mainly activated online. Additionally, KB Kookmin Bank and the KMVNO Association will open an additional dedicated promotional center called ‘Budget Phone Square’ next year to expand the market base.

This content was produced with the assistance of AI translation services.