Already 'Half-Price' Budget Phone Communication Fees... Even Financial Benefits? [Chosun Price Chronicles]

(21) High Inflation Increases Communication Costs... More Users Choose Budget Phones
KB Budget Phone's 'Youth 0-Won Plan'

As communication costs increase in the era of high inflation, the popularity of budget phones emphasizing price competitiveness continues. The number of budget phone subscriptions has surpassed 9 million, increasing its market share to 16% of all mobile phone lines. Among them, as the financial sector expands its entry into the budget phone market, expectations are growing for plans with added financial benefits.

KB Kookmin Bank's budget phone service 'Liiv Mobile' is running a promotion until the 30th of this month, offering LTE 15GB+ (100 minutes of calls/100 texts) and LTE 15GB (300 minutes of calls/300 texts) plans for up to 0 KRW to customers who hold a KB Youth Leap Account or Youth Housing Dream Subscription Account and complete new or number-porting activations.

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Specifically, the monthly base fee for LTE 15GB+ (100 minutes of calls/100 texts) is 26,000 KRW, but all eligible subscribers receive a promotional discount of 7,000 KRW, and users of the KB Liiv Mobile affiliated card can apply an additional discount of 21,000 KRW. This makes it possible to have a '0 KRW plan' with a base fee lower than the three major carriers, plus affiliated card discounts and bundling benefits. Even if the plan is not this one, additional benefits such as friend bundling and KB Dundeun discounts based on KB Kookmin Bank transaction performance can be received if certain conditions are met.

Three Major Carriers vs. Budget Phones... What’s the Price Difference?

Budget phones (MVNOs) can be used at about half the price of mobile network operators’ (MNOs) plans. According to the report "South Korea Mobile Price Map: Diversity and Bias," published in April by the Media Future Institute (MFI) and Digital Future Institute (DFI), the average price of products offered by MNOs was 47,097 KRW, while budget phones (MVNOs) averaged 23,963 KRW. This means budget phones are about 23,000 KRW cheaper on average than MNOs.

As a result, the number of people seeking budget phones is steadily increasing. According to the Ministry of Science and ICT’s wireless communication service statistics, as of the end of the first quarter this year, the number of budget phone (MVNO) mobile subscriptions was 9.16 million. While SK Telecom, KT, and LG Uplus have 22.88 million, 13.27 million, and 10.82 million subscriptions respectively?more than budget phones?the three major carriers’ subscription numbers are either declining or stagnant, whereas budget phones have shown growth, with 8.84 million in January and 8.91 million in February this year.

KB Kookmin Bank is a pioneer in the 'financial sector budget phone' market. The bank officially started the business in April 2019 after being designated as the first innovative financial service by the Financial Services Commission. KB Kookmin Bank’s Liiv Mobile differentiated itself by operating a 24-hour customer center, which had been a problem in the budget phone industry, and by offering various services, it has attracted 420,000 subscribers to date. Consumer satisfaction is also high; in the semiannual satisfaction survey by market research firm Consumer Insight, it has ranked first five consecutive times since the second half of 2021.

Of course, there is criticism from small and medium-sized budget phone operators regarding low-price marketing. They argue that banks, leveraging their financial power and brand recognition, are engaging in aggressive marketing that induces cutthroat competition. In response, KB Kookmin Bank has stated that it will not launch plans priced below 90% of the plan cost (network wholesale price). The network wholesale price is the fee paid to mobile carriers for leasing their network and represents the cost of budget phone services.

However, with the financial sector’s full-scale entry into the budget phone market, consumers are hopeful for greater benefits in reducing communication costs. Currently, Woori Bank is preparing to launch a budget phone service in the second half of this year, following KB Kookmin Bank.

"Expect More from Financial Sector Budget Phones... New Entrants May Face Challenges"

The key to the financial sector budget phone business seems to be whether it can offer better benefits than existing budget phones. Consumer Insight conducted a survey from the 3rd to the 7th of last month targeting 1,010 mobile phone users aged 20 to 64 to assess awareness and expectations regarding financial sector budget phone services. The intention to use financial sector budget phones ('somewhat likely + very likely') was 38%, about two out of five consumers, which was the same as the intention to use general budget phones (38%).

However, the intention to use varied depending on which financial company operated the service and what benefits were offered. If it was a budget phone operated by the financial institution the consumer transacts with, the intention increased from 38% to 48%, and if preferential interest rate benefits on financial products were provided, it jumped from 48% to 60%.

Consumer Insight analyzed, "Although consumer intention to use financial sector budget phones is not higher than general budget phones, expectations are greater. Consumers want prices to be about half those of the three major carriers and also expect interest rate benefits for subscribers. The official government approval of Liiv Mobile will be a significant challenge for financial companies aiming to enter the market."