[The Era of 1 Phone 2 Numbers④] "Subscribers Will Increase but Revenue Will Decrease"... Telecom Companies and Manufacturers' Concerns

The appearance of a typical USIM. An eSIM is embedded within the smartphone itself like this USIM.

[Asia Economy Reporter Lim Hye-seon] Smartphones released domestically from the second half of this year will support eSIM (embedded Subscriber Identity Module) services. As a result, users can separate the use of one phone for different purposes and also benefit from reduced communication costs. From the perspective of telecom carriers and device manufacturers, there is both anticipation for subscriber growth and strategic phone success, as well as ongoing concerns about potential revenue decline.

Annual 100 Billion KRW USIM Sales Revenue Disappears for the Three Major Telecoms

According to the telecommunications industry and the Ministry of Science and ICT, the three major telecom companies earn over 100 billion KRW annually from USIM (Universal Subscriber Identity Module) sales. The price of LTE and 5G USIMs sold by the three carriers is 7,700 KRW, with a cost price of about 3,000 KRW. In the case of eSIM, only a download fee of 2,750 KRW is required. Functions such as device unique identification number (IMEI) authentication and personal information storage remain the same, so the carriers’ lucrative revenue will be cut in half.

Using dual eSIM allows two numbers on one smartphone, which can be divided into personal and work use or overseas and domestic use. This protects personal life from incessant calls and text message spam. Users do not need to purchase two smartphones, saving device costs. A reduction in communication fees is also expected. Users can receive discounts based on the line, i.e., the IMEI. The IMEI is a unique number internationally assigned to communication terminal devices and is allocated per device or modem chip connected to the network. Dual SIM devices can activate two SIM cards, so they have two IMEIs.

It is also possible to receive phone subsidy discounts from SK Telecom and contract discount plans from KT. The contract discount plan is a system where users receive a 25% discount by agreeing to a contract period instead of receiving subsidies from the carrier when purchasing a phone. Users can maintain a 25% contract discount with SKT and subscribe to LG Uplus’s new plan to receive a 25% discount, thereby lowering their plan costs. Combining telecom carriers and MVNO (Mobile Virtual Network Operator) plans can also save communication expenses.

Subscriber Numbers Expected to Increase but ‘Intense Competition’ Begins

Telecom carriers and device manufacturers are calculating their strategies. The opportunity arises to increase the stagnant subscriber numbers by using ‘one phone with two numbers.’ According to the Ministry of Science and ICT’s wireless communication service line status, as of the end of May, there were 55,538,014 mobile phone lines, remaining flat for two years. If eSIM services become active, subscriber numbers will naturally increase and directly translate into revenue. On the other hand, USIM chip sales revenue will decrease, and in the long term, easier number portability will worsen revenue per subscriber.

Issues also arise when combining two telecom carriers. An industry insider said, "If one phone has two numbers, we are considering whether to provide benefits equivalent to two people’s status," adding, "Pre-installed application (app) installation is also an ambiguous situation." Pre-installed apps are those installed on a smartphone before it is ever powered on. Device manufacturers like Samsung Electronics and carriers such as SK Telecom, KT, and LG Uplus install these apps in advance.

There are also concerns that the MVNO market could take away market share. As the market grows and benefits increase, users may shift to MVNOs that offer significant communication cost savings.

Initial Replacement Demand Expected, but Secondary Phone Market to Disappear Long-Term

Smartphone manufacturers have high expectations for ‘strategic phone success.’ Domestically, Samsung Electronics’ fourth-generation foldable phone, to be unveiled on the 10th of next month, will be the first to offer eSIM services. A smartphone industry official said, "Many users have used old phones as secondary phones," and added, "We expect a surge in device replacement demand once eSIM services are implemented." However, from a long-term perspective, the decline in smartphone shipments is likely to accelerate. According to market research firm Canalys, global smartphone shipments in Q2 decreased by 9% compared to the previous year. Samsung Electronics reportedly reduced its sales target for this year by about 10% from the original 230 million units. Apple also adjusted the target shipment for the upcoming ‘iPhone 14’ in the second half to about 90 million units, a 10% reduction.