Citizens visiting the Samsung Electronics Delight Shop in Gangnam-gu are examining the products. Photo by Mun Honam munonam@
[Asia Economy Reporter Seolgina Jo]"Strike while the iron is hot."
The budget phone industry, approaching the era of 10 million subscribers, is making a bold move in the 5G market by emphasizing so-called ‘Godseongbi (God+Cost-effectiveness).’ The surge in unlocked phones, which has become a growth catalyst for budget phones, continues, and the contract expiration period for early 5G mobile subscribers who started using the service in April 2019 has arrived. About 270,000 subscribers will be freed from contracts with the three major carriers this month alone, becoming ‘free agents.’ The budget phone industry has also begun to flood the market with mid-to-low priced 5G plans targeting these users.
◇270,000 Subscribers with Expired Contracts: Will They Choose Budget Phones?
According to the telecommunications industry on the 13th, the number of subscribers in the first month of 5G commercialization was identified as 271,686. Since a significant portion is estimated to have joined 5G with a two-year contract, it is now time for at least 200,000 subscribers to weigh whether to stay with the three major carriers or switch to budget phones.
Especially from this month, budget phone providers such as KB Kookmin Bank, Sejong Telecom, and Smartel have launched their own 5G plans that are more than 30% cheaper than those of the three major carriers, intensifying the subscriber acquisition battle. Seven budget phone plans are confirmed for release in April and May. Sejong Telecom’s 5G plan, offering 1.5GB of data, 50 minutes of voice calls, and 50 texts, costs only 4,950 KRW per month (to be released in May). KB Kookmin Bank’s 5G plan, which provides 30GB of data, 300 minutes of voice calls, and 100 texts, is also much cheaper at 44,000 KRW compared to the three major carriers.
An official from the Korea Budget Phone Operators Association said, "While the existing carriers’ plans are priced around 75,000 KRW, budget phone plans are being launched in the high 40,000 KRW range," and predicted, "Number portability to budget phone operators will become active in the 5G market following LTE." Another industry insider also commented, "You have to row when the water comes," evaluating that "the period when two-year contracts start to expire is a major turning point for budget phone operators to establish their position in the 5G market."
◇Filial Piety Phones Are a Thing of the Past... Budget Phones Are Gaining Popularity
Just a year ago, the budget phone market was frozen solid, but now it is on the verge of reaching 10 million subscribers. This is a result of the popularity of the ‘sweet combination’ of unlocked phones and budget phone plans, triggered by the release of the Apple iPhone 12 in the second half of last year. According to the Ministry of Science and ICT, as of the end of February this year, the number of budget phone subscribers in Korea surpassed 9.27 million (including 7,036 5G subscribers). After dropping to the 7 million range last year from 8 million in the first year of 5G commercialization, the number has been increasing for seven consecutive months recently.
The number of number porting cases is also surging. According to the Korea Telecommunications Operators Association (KTOA), the number of subscribers switching from the three major carriers to budget phones in March alone reached 164,375. On an annual basis, it surpassed 1.19 million last year, showing a 38% growth compared to the previous year. Meanwhile, the number of subscribers porting to SK Telecom, KT, and LG Uplus decreased during this period. Coupled with the switching movement of 5G contract-expired customers, if the current trend continues, the number of number porting cases to budget phones is expected to surge this year.
At the center of the recent budget phone boom is the MZ generation, who are digitally savvy and value practicality. The growth of budget phones, once known as filial piety phones or ‘daepo’ phones, is now being led by the 10s and 20s age group. According to market research firm Consumer Insight, the proportion of users in their teens and twenties among budget phone users increased from 12% in 2017 to 22% last year. Consumer Insight analyzed, "Budget phones have emerged as a reasonable alternative for young people who prioritize cost-effectiveness and practicality."
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