Mobile Carrier 3's MVNO Wholesale Price Cut... Eyes on LG Uplus

SKT Takes First Step to Lower 5G Wholesale Prices
KT Also Follows Suit
Leading MVNO LG Uplus "In Negotiations"
Overall MVNO Market Reaches Record High

[Asia Economy Reporter Cha Min-young] The wholesale rate for MVNOs, known as the 'network lease fee' provided by the three major mobile carriers, has dropped to an average of the 60% range. With SK Telecom and KT applying maximum reductions of 7 and 13 percentage points respectively, expectations are rising that LG Uplus, the market share (MS) leader in the MVNO market, will announce an even larger rate cut.

How Much Will LG Uplus Lower Rates Following SKT and KT?

According to industry sources on the 22nd, LG Uplus has been conducting voluntary negotiations with the Ministry of Science and ICT since December last year to reduce wholesale rates this year. Compared to the early February last year when negotiations to reduce wholesale rates were completed and reflected in new plans, it appears that the talks are now in their final stages. The wholesale network fee is the cost that the three major carriers charge MVNO operators for leasing their networks.

The general industry consensus is that LG Uplus will implement the largest wholesale rate cut among the three carriers. Earlier, SK Telecom, which is obligated to provide wholesale services, reduced its 5G wholesale rate by up to 7 percentage points compared to the previous year. For the 9GB plan, the rate dropped from 66% to 62%, a 4 percentage point decrease, and for the 200GB plan, it fell from 75% to 68%, a 7 percentage point reduction. The LTE wholesale rate also decreased slightly from 62.5% to 62% for the 100GB plan, a 0.5 percentage point drop. KT also cut its 5G plan rates by up to 13 percentage points, from 75% to 62% for the 10GB plan, and to 68% for the 200GB plan. LTE plans reportedly saw reductions of up to 2.5 percentage points.

LG Uplus was the catalyst for the wholesale rate reduction competition within the MVNO market. Last year, during its acquisition of MVNO operator LG HelloVision (formerly CJ Hello), LG Uplus secured a condition to lower wholesale rates, becoming the first among the three carriers to reduce the 5G wholesale rate for MVNOs from 75% to 66%, a cut of about 12 percentage points. In response, KT temporarily launched short-term promotional offers.

MVNO Subscribers Expected to Increase Further

LG Uplus's 'iPhone + Altteul Phone Perfect Combo' promotion held in December last year

The three major carriers' move to reduce MVNO wholesale rates was driven not only by the government's policy to foster the MVNO industry but also by growing consumer interest in MVNO services. According to the Ministry of Science and ICT's wireless communication service subscriber statistics, as of the end of December last year, the number of MVNO subscribers reached 536,413, marking the highest figure since subscriber tracking began in July 2015.

The second and third largest telecom operators are also actively participating. KT's affiliate KT M Mobile reflected the wholesale rate cuts by lowering prices on three LTE unlimited plans called 'Moduda Mamkkeot Anshim' by up to 4,000 KRW. KT's 'Moduda Mamkkeot Anshim 2.5GB+' was recently revised to 13,200 KRW, 15% lower than before. LG Uplus sells SIM cards necessary for MVNO activation at its branches. At the end of last year, it led the influx of consumers in their teens and twenties with the 'iPhone Honey Combo' promotion coinciding with the launch of the iPhone 12.

The Ministry of Science and ICT, the supervising authority, has been implementing policies to promote the MVNO business since August last year to facilitate the spread of affordable 5G plans. This is expected to expand user choice and reduce household communication expenses. Consequently, consumers who use less than 100GB of data have been drawn to the MVNO market instead of the limited options of the three carriers' 5G unlimited data plans priced around 60,000 to 70,000 KRW on average.

An industry insider from the MVNO sector said, "Wholesale rate reductions are happening rapidly across the market overall," adding, "Since LG Uplus took the initiative with a significant cut last year, expectations are high for this year as well."