Reaching the 5 million mark means that mobile virtual network operators (MVNOs) are hitting their stride as meaningful competitors in the mobile carrier market. (image: Korea Bizwire / Kobiz Media)
SEOUL, May 4 (Korea Bizwire) – According to a May 3 announcement from the Ministry of Science, ICT and Future Planning, the number of budget phone service subscribers surpassed the 5 million mark as of April 21.
Reaching the 5 million mark means that mobile virtual network operators (MVNOs) are hitting their stride as meaningful competitors in the mobile carrier market, which is currently dominated by SK Telecom, KT and LG Uplus.
If they keep growing and increase their market share to between 10 and 15 percent, they could spur competition in the market and offer a viable alternative to customers who are sick of expensive phone bills.
Currently, 27 MVNOs are increasing their subscriber bases by contracting with one or multiple mobile network operators at wholesale rates, and offering independent retail prices usually cheaper than those offered by the top three carriers.
The mobile carriers are under pressure to keep their subscribers, and are competing with one another to attract more MVNOs to indirectly increase their customer bases. According to industry experts, the mobile carriers are currently spending 8 trillion won (US$ 7,416 million) every year to keep that 1 percent in their user pools.
SK Telecom has lowered its wholesale rates for three consecutive years, and KT opened its direct distribution network to the budget phone service operators. LG Uplus came up with a program offering liquidity to installment bonds for devices. The ICT ministry expects that competition will help grow the budget phone service market.
In the meantime, the post-paid rate system and an increase in the number of LTE service subscriber buoyed the expansion of the MVNOs. The number of post-paid rate system subscribers more than tripled in only two years with 332 percent growth, and more than 11 percent of all budget phone service subscribers are LTE users.
In addition, the MVNOs are offering special services which cannot be seen at the top three operators, such as discounted phone bills when users shop at online partner sites, and personal safety services.
With these efforts, sales revenues of the MVNOs almost doubled to 455.5 billion won in 2014 from 239.4 billion won in 2013. However, their operating losses have snowballed, from 4.6 billion won in 2011, 56.2 billion won in 2012 and 90.8 billion won in 2013 to 96.5 billion won in 2014.
In a bid to help budget phones services establish themselves in the industry and make a leap forward, the ministry is expected to keep a reduced spectrum fee policy and urge the mobile network operators to lower their wholesales rates.
By John Choi (johnchoi@koreabizwire.com)
