Budget Mobile Carriers Struggling

Adding fuel to the fire was a 25 percent mobile plan discount policy widely adopted by the major South Korean mobile carriers, dealing a severe blow to MVNOs that heavily rely on price-sensitive customers. (Image: Yonhap)

SEOUL, Nov. 15 (Korea Bizwire) – South Korean mobile virtual network operators (MVNO) are struggling to survive amid growing competition, with Homeplus set to pull out of the industry later this month.

There are fears that Homeplus’s announcement that it was withdrawing its MVNO service Plus Mobile from next month will cause a chain reaction in the industry, as growing competition with major telecom companies has seen budget telecom providers struggle to stay afloat in recent years.

Plus Mobile, which relies on the KT and LG Uplus networks, stopped accepting new users in June 2015.

With some 4,000 users remaining, most customers have switched to other telecom companies.

The same trend is being observed industry wide, as the latest figures show that more people switched from MVNOs to major telecom companies than vice versa.

Considering over 20,000 people switched to MVNOs during the first quarter of this year, industry experts believe a number of factors have played into the recent downfall of budget mobile services, including a lack of price competitiveness and a series of releases of flagship smartphones such as the Galaxy Note 8.

Adding fuel to the fire was a 25 percent mobile plan discount policy widely adopted by the major South Korean mobile carriers, dealing a severe blow to MVNOs that heavily rely on price-sensitive customers.

With the wholesale price of network services set higher than expected, the budget network industry is expected to continue losing customers to major telecom providers, particularly over high-data mobile plans with where discount rates are thought to be a mere 1.3 to 3.3 percent.

“The wholesale price for data-heavy mobile plans hasn’t changed after factoring in the abolishment of the minimum monthly charge. As this year’s discount rates for the per unit wholesale price of 2G and 3G networks have remained static, the market isn’t expected to change much,” an industry source said.

Since the businesses first launched in 2011, many MVNOs have been in the red in South Korea, with accumulated net operating losses estimated to be over 30 billion won.

South Korean mobile virtual network operators (MVNO) are struggling to survive amid growing competition, with Homeplus set to pull out of the industry later this month. (Image: Yonhap)

One carrier facing financial difficulties, EG Mobile, faced criticism from customers over poor access to its customer service center.

Against this backdrop, an official from the Korea Mobile Virtual Network Operators Association said the group will meet with a special committee from the Ministry of Science and ICT to discuss ways to revitalize MVNOs.

 Hyunsu Yim (hyunsu@koreabizwire.com)