The 2nd LiveM Launch... Budget Phone Industry Concerns Over Easing Geumsan Separation

Financial Services Commission Chair Nominee Expresses Willingness to Ease Regulations
Concerns Over Increased Entry of Banks into Budget Mobile Market
KB's Bold Pricing Plan Acts as a 'Catalyst'
Existing Industry Reacts, Saying "It Threatens Stability"

[Asia Economy Reporter Cha Min-young] As calls for easing the separation of banking and commerce (Geumsan Separation) grow louder in the banking industry under the new government, the MVNO (Mobile Virtual Network Operator) sector is expressing concerns about the potential emergence of a ‘second Liiv M’.

According to industry sources on the 27th, with Kim Ju-hyun, the nominee for Financial Services Commission chairman, showing a willingness to ease Geumsan Separation to promote banking innovation, there is growing anticipation both inside and outside the financial sector that domestic banks will accelerate their entry into non-financial businesses such as telecommunications, distribution, and delivery. Geumsan Separation is a principle that prohibits financial capital and industrial capital from owning or controlling businesses in each other’s sectors.

The MVNO industry is worried that if the Geumsan Separation system is relaxed, large financial groups like KB Kookmin Bank will actively enter the MVNO market, similar to Liiv M. Launched in 2019 through a regulatory sandbox, KB Kookmin Bank’s MVNO brand Liiv M has become a ‘disruptor’ shaking up the telecommunications market with its aggressive pricing plans.

The industry points to the issue of extremely low rates offered at the cost of huge giveaways and losses. When Liiv M launched its service in 2019, it offered an unlimited plan with a network usage fee of 33,000 KRW at a minimum price of 22,000 KRW for two years. This means a loss of about 10,000 KRW per subscriber, but it is not a losing business for KB Kookmin Bank as it can sell various financial products to its customers. Other telecom operators offer similar voice and data plans at 44,000 KRW, making it impossible to compete on price. A representative from the Korea MVNO Association said, "From the perspective of operators relying solely on the MVNO business, the banks’ stance of not intending to make money from MVNOs is even more frightening."

There are also concerns that the entry of financial sector ‘disruptors’ threatens the existing industry in the absence of institutional measures to develop the MVNO market. Article 38 of the current Telecommunications Business Act stipulates that the wholesale price calculation method should exclude avoidable costs such as marketing and advertising expenses from the retail price (including 100% operating profit) of the wholesale provider. The association argues that this method results in wholesale prices being set high enough to fully preserve the mobile carriers’ operating profits. Additionally, Article 2 of the supplementary provisions related to MVNOs in the Telecommunications Business Act applies a sunset clause to the wholesale provision obligation of mobile carriers (wholesale providers), which also needs improvement.

Meanwhile, the Korea Mobile Distribution Association (KMDA), a group of distributors, has also voiced opposition to banks operating MVNOs. In April, KMDA sent a protest letter to Yoon Jong-kyu, chairman of KB Financial Group, demanding an immediate halt to KB Liiv M’s ‘golden marketing’ tactics that poach subscribers from small distribution networks and calling for withdrawal from the MVNO business.

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