Korea Investment & Securities: "DanTongBeop Abolished Today, SK Telecom Poised to Recover Market Share"

On July 22, Korea Investment & Securities stated that the abolition of the "Act on the Improvement of Distribution Structure of Mobile Communication Terminals" (DanTongBeop), which has regulated the mobile communication terminal distribution market, is expected to lead to indirect reductions in household telecommunication costs in the future. The company also noted that this change could serve as a foundation for SK Telecom to recover its market share among the three major mobile carriers.

Kim Jungchan, a researcher at Korea Investment & Securities, presented several scenarios in the report "Wireless Communication - Expected Changes Following the Abolition of DanTongBeop," released on the day the law was repealed. These scenarios include an increase in sales commissions, a rise in number portability (MNP), enhanced competitiveness of mobile network operators (MNOs), and indirect reductions in household telecommunication costs. He maintained an "overweight" rating on the wireless communication sector.

The "Act on the Improvement of Distribution Structure of Mobile Communication Terminals" (DanTongBeop), which has regulated the mobile communication terminal distribution market for 11 years, was abolished on the 22nd. On the 21st, a signboard reading "DanTongBeop Abolished" was placed in front of a mobile phone store in Seoul. Photo by Yonhap News

First, Kim predicted, "Sales commissions will increase due to expanded subsidies and higher subscriber acquisition costs." He also noted, "In the short term, the market could become overheated as SK Telecom works to win back subscribers and KT and LG Uplus focus on retaining new subscribers, in line with recent changes in market share." However, he added that, given the already high penetration rate of 5G, the effectiveness of acquiring new subscribers is lower than in the past, so competition will likely be limited compared to the pre-DanTongBeop era in 2014.

He also projected that the number of monthly number portability (MNP) cases would increase slightly to 600,000?700,000. However, he noted that it would be difficult for this figure to return to the pre-DanTongBeop level of 1 million per month. Kim explained, "Subsidies are a key factor driving demand for MNP," but added, "Compared to the past, there are now more diverse incentives influencing MNP decisions, and the expansion of bundled products makes it difficult for MNP to increase significantly to pre-DanTongBeop levels."

He further pointed out that "expanded subsidies are disadvantageous for MVNOs (mobile virtual network operators)," and noted that since 2023, the trend in number portability has centered on the three major mobile carriers. With the abolition of DanTongBeop, the three carriers could become even more competitive in terms of subsidies, which may lead to more subscribers moving not only among the three carriers but also from MVNOs to the major carriers. Kim commented, "In this case, the government's intention to promote MVNOs could be at odds with market trends, making it more likely that the government will push for a reduction in wholesale network fees for MVNOs."

He also stated, "With the abolition of DanTongBeop, the burden of purchasing devices will be eased, which is expected to reduce household telecommunication costs," and added, "As a result, there will be less direct pressure to lower service rates."

By carrier, he analyzed that the impact would be felt across all three major carriers, but especially that SK Telecom could use this as a springboard to recover its market share. Kim explained, "If subsidy competition is based on absolute amounts, SK Telecom, which has a larger scale of revenue from both fixed-line and wireless services, will be the least affected in terms of earnings deterioration." He added, "Even if subsidies are balanced as a proportion of revenue from fixed-line and wireless services, SK Telecom, with its larger sales scale, will have the greatest capacity to offer subsidies." He also noted, "Although SK Telecom's cash reserves have decreased due to recent information leakage incidents, considering the downward-adjusted earnings and the expected cash dividends for 2025, the company's capacity for subsidy spending remains limited."

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