The South Korean government is ramping up its efforts to boost the sales of budget phones or phones run by Mobile Virtual Network Operator (MVNO).
MVNOs rent networks from existing operators such as KT, SKT and LG Uplus to offer mobile services at a lower price.
MVNOs were first launched in South Korea by the government in its efforts to reduce household communications expense. They can provide cheaper services by not spending much on advertising or marketing unlike telecom operators. The phones are also sold in convenient stores, large supermarkets or post offices, which already have distribution channels. While communications expense of the three telecom operators averages 36,000 won per month in South Korea but that of MVNOs stands at 15,000 won. Per year, users can save 240,000 won.
According to the Ministry of Science, ICT and Future Planning, if the number of budget phone users reaches 5 million in South Korea, the public communications expense will be slashed by 57 percent.
Currently, 27 MVNOs are selling budgets phones in South Korea. The number of users jumped to 580,000 in 2012 from 580,000 in 2011 with the government financial support and through the word of mouth. Last month, it reached 5 million and the number is expected to surge to 10 million by 2020, according to industry watchers.
Despite the popularity, however, the operators have been running at a deficit for the past years. The sales have increased from 239 billion won in 2013 to 455 billion won in 2014, but they have still been losing money due to investment in infrastructure and marketing spending. The accumulated deficits came to 240 billion won during the period of 2011 to 2014.
The government said on Thursday that it would financially support MVNOs. MVNOs will also adopt the plans based on data which three telecom operators unveiled recently to provider cheaper services.
The government’s latest plans to support the industry is part of its efforts to grow the industry and thus to reduce the household communications expenses.
“Through the plans unveiled, we are aiming to help improve MVNOs’ management, develop differentiated products, secure online distribution channels and improve consumer credibility,” said Cho Kyu-jo, the Ministry’s communications policy division.
“We are planning to expand the business to secure over 10 percent market share in the local telecom market,” he added.
By Yeon Choul-woong
