Increased Smartphone Lifespan… Targeting Customers Who Have Fully Paid Off Their Device Installments
Subscription Rate to Budget Phone Association Only at 33%… Pushing for Expansion of Member Companies
“If Side Effects from ‘Ex-Post Regulation’ Emerge, It Will Justify Promoting ‘Ex-Ante Regulation’ Legislation”
“My goal during my term is to increase the share of budget phones from the current 10% of all mobile lines to 30%. To achieve this, we plan to guide customers who have completed their two-year contracts and fully paid off their device installments with telecommunications companies (MNOs) towards budget phones.”
On the 4th, Ko Myung-soo, the newly appointed chairman of the Korea Budget Telecom Operator Association (hereinafter referred to as the Budget Phone Association), met with reporters at a location in Jongno-gu, Seoul, and stated the above.
Chairman Ko commented, “These days, smartphone specifications have improved and their lifespan has lengthened, allowing customers who have paid off their device installments over two years with telecommunications companies to use their devices for another 2-3 years.” He added, “We will work to draw such customer groups, who would benefit from low-cost plans, towards budget phones.” Though the number of budget phone subscribers is approaching 10 million, he estimates that the share of mobile lines purely on budget phone plans, excluding IoT and others, is currently between 10-15%. He aims to increase this to over 30% during his term.
Chairman Ko emphasized partnering with the government to enhance the competitiveness of the budget phone industry. He stated, “As my initial step post-inauguration, I plan to meet with representatives from the Ministry of Science and ICT,” asserting that creating a policy environment favorable to the budget phone industry is of utmost importance.
Ko also addressed the issue of freeloading within the budget phone industry. He noted that “out of approximately 60 budget phone companies, only 20 are members of the Budget Phone Association. Benefits generated by the association are being shared across the entire industry, intensifying the freeloading problem.” He plans to work with the government to draft ordinances that protect the rights and benefits for companies that join the association. He mentioned that more than 40% of the annual dues paid by the association members are borne by mobile carrier subsidiaries within the budget phone sector (SK Telink, Medialog, LG HelloVision, KT M Mobile). He stressed the necessity of expanding membership to advocate for the interests of smaller budget phone companies.
Chairman Ko expressed concerns over the spectrum usage fee levied on small budget phone companies (a management fee for using the nation’s radio resources) and the shift to “ex-post regulation” for wholesale price negotiations. Starting this year, budget phone companies would be subject to spectrum usage fees, and from April, negotiations for wholesale prices are set to switch to an ex-post regulation model. Previously, the government had exempted small budget phone companies, excluding the subsidiaries of the three major telecommunications firms, from spectrum usage fees. Starting this year, these companies need to pay 20% of the fee, increasing to 50% by 2026, and the full amount by 2027. The industry expects an added cost of about 2000 KRW per line from 2027. From April, budget phone companies will negotiate directly with telecom operators regarding wholesale prices, with the government overseeing the process afterward. Chairman Ko assured that even after the shift to ex-post regulation, the government would monitor if price negotiations remain within a reasonable range. If any negative outcomes, like excessive wholesale price hikes, occur, it would serve as grounds to push for a return to ex-ante regulation through legislation.
Ko, also the CEO of budget phone company Smartel, was elected as the new chairman during the Budget Phone Association’s general meeting on February 4. His term runs until February 4, 2027.