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KT dropping fees in bid to win back subscribers

Apr 25,2014
The nation’s second-largest mobile carrier, KT, will resume operations on Sunday for the first time since March 13, while LG U+ and SK Telecom will begin the second part of their suspensions.

KT lost some of its market share during the 45-day suspension and marked its first time below 30 percent.Since the three companies entered the telecom market, the market shares have been roughly 50 percent for SK Telecom, 30 percent for KT and 20 percent for LG U+.

According to the Ministry of Science, ICT and Future Planning, KT had 30 percent of the market in February before its suspension, compared to SK Telecom’s 50.1 percent and LG U+’s 19.9 percent.

As of March, KT was down to 29.9 percent of local subscribers, whereas SK Telecom hit 50.4 percent and LG U+ was at 19.7 percent.

An influx of consumers from KT and LG U+ to SK Telecom was further inflated by the release of Samsung’s Galaxy S5 at the end of March.

In an effort to reclaim customers, KT announced yesterday an unusual plan to poach customers from the two suspended carriers while keeping existing subscribers.

The company’s plan is to waive remaining monthly payments on a contract for customers who do not want to switch to a new phone because of the payments they must still make on their current contract.

If a subscribers want to switch to a new smartphone at their current carrier or another carrier, they usually have to wait until the two-year contract has come to an end. Almost all customers choose to sign the two-year contracts because they come with a monthly discount on the subscriber’s phone bill.

Analysts said the plan could work to KT’s advantage because handset manufacturers are scheduled to release premium smartphones such as Pantech’s Vega Iron 2 and Sony’s Xperia Z2 in May when SK Telecom and LG U+ will still be suspended from operating until the middle of the month.

With new phones hitting the market, KT’s policy may keep the company from losing any more customers and could encourage customers to switch carriers in order to get a discount on a new device, which is usually smaller than the benefit of the policy.

However, KT’s plan is only alluring to those who initially subscribed to a costly monthly package.

In order to be eligible for the benefits, a customer is required to have been subscribed to his or her current plan for at least a year, meaning the customer would have already paid more than half the price of the phone.

The customer also would have paid cumulative monthly usage fees worth at least 700,000 won ($673). To meet the one-year condition, a user has to be subscribed to a monthly plan in which they pay at least 77,000 won.

Customers who subscribe to cheaper packages have to wait longer to reach the 700,000 won mark. Those with 67,000 won a month have to wait until they reach the 14th month of their contract, a person with a 55,000-won plan would have to wait 17 months, and a 45,000-won plan would take 21 months to fulfill, a KT spokesman explained.

KT will continue operating through the remainder of the suspension period, which ends on May 19.

BY KIM JI-YOON [jiyoon.kim@joongang.co.kr]






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