Even with More Mid-Range Phones... Why Are Budget Phones in a 'Gloomy Mode'?

Apple Passing Over Budget Phones Amid Ongoing Device Supply Shortage
Rapid Growth of Liv M and Aggressive Carrier Marketing

[Asia Economy Reporter Han Jinju] Although mid-range smartphones are being released one after another, budget phones are struggling to find a breakthrough. This is due to continued 'budget phone' passing by Apple and a series of adverse factors such as the rapid growth of KB Kookmin Bank's budget phone LivM.

According to the industry on the 22nd, despite expectations that the number of budget phone subscribers seeking affordable plans would increase with the successive release of mid-range smartphones such as iPhone SE 2, Galaxy A51 5G, Galaxy A31, and Velvet, the increase in budget phone subscribers is reportedly minimal. Except for KB Kookmin Bank's budget phone LivM, budget phone operators have not been able to supply the iPhone SE 2, the most popular among mid-range smartphones.

According to the Ministry of Science and ICT's wireless communication service statistics, the number of subscribers to Mobile Virtual Network Operators (MVNOs, budget phones) has been declining for nine consecutive months since June last year. As of the end of March, the number was 7.56 million, down 530,000 from nine months earlier. There are a total of 40 budget phone operators in Korea, with major operators including LG HelloVision (Hello Mobile), KT M Mobile, SK Telink (SK Seven Mobile), and MediaLog (U+ Budget Mobile).

◆ Pressured by carriers and heated price competition = Device supply issues are a sore point for budget phones. Manufacturers like Samsung and LG release mid-range devices for budget phones, but the iPhone is an exception. Without receiving iPhones for budget phones, they fall behind in subscriber competition. Moreover, mobile carriers have narrowed their position further by aggressively marketing, such as paying 300,000 KRW incentives to dealerships for attracting budget phone subscribers. A budget phone industry insider said, "Due to carriers' incentive attacks, budget phone subscribers have significantly decreased," adding, "It will take more time before the number of subscribers rebounds."

KB LivM, which entered the budget phone market and triggered price competition, is also an uncomfortable presence for the budget phone industry. Since last month, LivM has been offering an unlimited LTE plan for 22,000 KRW per month and has expanded a one-year free plan promotion for Kookmin Bank subscribers, actively attracting subscribers. LivM gathered more than 50,000 subscribers within five months of launching its budget phone service.

◆ The 'instability' of the budget phone system must also be resolved = Temporary support policies such as the calculation of wholesale prices for budget phones and exemption from radio usage fees are also problematic. The 'wholesale provision obligation system,' which requires carriers to provide networks mandatorily to budget phone operators, is operated as a sunset system. With the passage of the 'Telecommunications Business Act Amendment' in the National Assembly plenary session on the 20th, it has been extended until March 2022, but whether to extend it again after three years must be reconsidered.

A budget phone industry insider explained, "Since wholesale network prices are calculated annually, marketing must be done without knowing the production cost, leading to repeated difficult situations," and added, "Institutional measures such as legislating standards for wholesale price reductions should be supplemented to enable stable budget phone business operations."