With Financial Sector's Successive Entry into the Budget Phone Market... Industry Issues 'Warning for Cutthroat Competition'

KB Kookmin Bank Followed by Woori Bank in Pursuing MVNO Business
Financial Sector: "More Large Banks Entering Means Market Share Up"
MVNO Small Operators Express Concerns About Competition Feasibility

Following KB Kookmin Bank, Woori Bank has also unveiled plans to enter the budget phone (alttel phone) business. While the financial sector views the emergence of new players as an opportunity to expand the market share of budget phones, existing budget phone operators are concerned about the possibility of cutthroat competition.

According to industry sources on the 3rd, Woori Bank recently selected LG Uplus as the preferred negotiation partner for wholesale network provision for budget phones and plans to sign a contract next month. Woori Bank is preparing for the launch of its budget phone service in the second half of the year by organizing a new business promotion committee.

The financial sector's entry into the budget phone market was made possible when KB Kookmin Bank officially received recognition from the Financial Services Commission in April for budget phone business as an ancillary service. Through a regulatory sandbox, KB Kookmin Bank has been offering financial and telecommunications bundled services using budget phone business as an ancillary service since April 2019. KB Kookmin Bank’s mobile service, KB Live Mobile, currently has a total of 420,000 subscribers. Through this, the bank aims to introduce innovative financial services combining finance and IT while securing customer data.

The financial sector believes that banks entering the budget phone business will also help improve long-term profitability. A banking industry official said, "The budget phone business is based on price competition compared to the three major mobile carriers, and the more major players enter the market, the greater the interest will be," adding, "The budget phone market pie will also expand."

On the other hand, existing budget phone operators have voiced strong concerns. Cutthroat competition is inevitable to compete with financially strong banks. In particular, they pointed out that KB Kookmin Bank did not keep its promise to create plans with wholesale rates of over 90% when it was designated as an ancillary service provider. An industry insider emphasized, "The government should establish guidelines for fair competition to prevent cases where companies operate at a loss based on their capital." In response, a KB Kookmin Bank official said, "We plan to stop selling four products with wholesale rates below 90% by August at the latest."

Plans priced below wholesale rates are not the only issue. Another industry insider said, "Even if the plans are not priced below cost, banks can aggressively promote based on their credibility and financial strength," adding, "There are concerns about whether small and medium-sized budget phone operators can withstand marketing competition."

The government considers it premature to directly or indirectly regulate banks that have entered the budget phone business. A Ministry of Science and ICT official stated, "Considering the subscriber trends and the low number of number portings from small operators, it is not yet the stage to intervene," adding, "We are closely monitoring the situation."