As the 'Subscriber Battle' Disappears... People Paying More for Cell Phones

Mobile Phone Users Drop to 300,000
Subsidies Decrease as Telecom Companies Stop Competing

[Asia Economy Reporter Lim Hye-seon] The number of mobile phone users switching carriers has dropped to an average of 300,000 per month, causing the fierce competition of 'stealing subscribers' among telecom companies to fade away. While telecom companies have increased their profits by reducing marketing costs used to attract subscribers, consumers are facing reduced subsidies for devices.

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On the 20th, the Korea Telecommunications Operators Association (KTOA) announced that the number of mobile number porting among the three major telecom companies and MVNOs last year was 4,529,524, down 552,176 (11%) from the previous year (5,081,700). The monthly average was only 377,460.

The monthly average number of number porters, which approached 1.05 million in 2012, fell to 580,000 in 2015 due to the implementation of the Device Distribution Improvement Act (DDA) that restricted subsidy competition among telecom companies. It then maintained the 500,000 range for three years before dropping to the 400,000 range in 2018.

By carrier, the number of users who ported to SK Telecom was 1,038,500, down 222,624 (17%) from the previous year (1,261,124). Compared to 2012 (5,510,874), it is about one-fifth. SK Telecom’s number porting dropped to the 1 million range after recording 2,051,321 in 2019.

KT had 713,243 porters, down 201,655 (22%) from the previous year (914,898), and LG Uplus had 800,979, down 169,242 (17%) from the previous year (972,111). Both have not recovered after their number porting fell below 1 million last year.

The telecom industry expected the number porting market to be more active than usual last year due to the effect of new smartphone releases, the introduction of eSIM, and 5G mid-tier plans. However, the results fell short of expectations.

[Image source=Yonhap News]

Despite record sales of Samsung Electronics’ Galaxy and Apple’s iPhone, the number porting market remained quiet. The reason is that telecom companies reduced marketing expenses to strengthen profitability. The effect of the eSIM system, which allows two numbers on one phone, was also negligible. The government’s ambitious 5G mid-tier plan, aimed at reducing household communication costs, failed to increase switching among carriers.

Since the implementation of the DDA, the subsidy competition among telecom companies has subsided, easing the 'user discrimination' where only a few users benefited.

However, this has led many users to buy phones at higher prices. Instead, the benefits went to the three major telecom companies. With subsidy competition no longer overheated as in the past, the three telecom companies have posted strong earnings every year. Ultimately, only the telecom companies have profited, while the burden of communication costs on the public has increased. The entire nation has become 'Hogang' (a portmanteau of 'Hogu' meaning sucker and 'customer').

Last year, the operating profit of the three major telecom companies is expected to reach 4.5 trillion won. The high-priced 5G plans increased the average revenue per user (ARPU). According to Daishin Securities, SK Telecom’s wireless ARPU rose 1.3% year-on-year to 31,100 won.

KT and LG Uplus increased by 3.8% and 0.3% to 33,000 won and 30,400 won, respectively. An increase in ARPU means users paid more money to telecom companies. This is why some users argue for abolishing the DDA to create an environment where autonomous competition is possible.

[Image source=Yonhap News]

On the other hand, the number of people switching to MVNOs increased. The combination of USIM plans and unlocked devices is popular among young people in their 20s and 30s who want to reduce communication costs. MVNO plans are up to 30% cheaper than existing telecom fees.

Last year, the number of number porters to MVNOs was 1,976,802, slightly up from 1,935,467 the previous year. MVNO porters accounted for more than 40% of the total. The number of users porting to MVNOs has been increasing annually: 865,696 in 2019, 1,193,017 in 2020, and 1,935,467 in 2021.

The number of MVNO subscribers surpassed 10 million in 2021 and exceeded 12.63 million as of November last year. MVNOs account for 16.4% of the entire mobile market and are eyeing LG Uplus’s position.

However, MVNOs have little impact on the profits of the three major carriers, which focus on 5G services, since most MVNO users use LTE plans.

From the telecom companies’ perspective, it is more efficient to protect existing subscribers and increase revenue rather than investing in marketing. They believe attracting users with high-priced 5G plans that include various value-added services is a profitable strategy. A telecom industry official said, "The more intense the competition among telecom companies, the more benefits consumers receive," adding, "It is time to trigger competition in the telecom market."

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