Brutal competition to lure, maintain customers

The first day of spring on the traditional calendar began with snow. But the mobile communications market is already hot as midsummer.

Since the nation’s biggest mobile carrier, SK Telecom, was ordered to suspend taking on new customers temporarily, competition among carriers has stepped up to grab customers.

SK Telecom, which was banned from signing up new subscribers or subscribers from other mobile carriers until Feb. 22 - a punishment for offering excessive discounts in the past - it introduced new membership benefits for its subscribers Sunday.

It has allowed subscribers to receive membership benefits from all of their mobile devices. In the past, they could only receive benefits from one.

For instance, when a subscriber had VIP status, or 100,000 points, on one device and Gold status, or 70,000 points, on another, he or she could use only 100,000 membership points. Now all 170,000 points can be used.

The company estimated that around 4.5 million SK Telecom users will be able to receive the new benefits.

SK also introduced a “Good Change” program, which provides long-term customers who wish to change their mobile devices with 270,000 won ($248.94) in subsidies.

The new policies are meant to prevent subscribers from defecting to another carrier during its business suspension period.

Since the suspension of SK Telecom, the number of its subscribers moving to SK Telink quadrupled.

SK Telink, a subsidiary of SK Telecom, was authorized to enter the thrifty phone market, or the reseller market, last May. SK Telink is not allowed to use the distribution network of SK Telecom.

The number of SK Telecom subscribers moving to SK Telink, which was less than 200 a day, surged to 800 on Jan. 31 and Feb. 1 as SK Telink introduced the Galaxy Note 2 on a 490,000 won installment plan and the Optimus G on a 250,000 won installment plan.

Competitors say it would have been impossible for SK Telink to offer such discounted prices without the unfair support of mother company SK Telecom.

“The number of SK Telink subscribers increased because since Jan. 18, LTE service became available on thrift phones,” said a spokesman at SK Telecom.

Other carriers are also offering new deals, taking advantage of the absence of the No.1 mobile carrier. The industry estimates subsidies by mobile carriers to subscribers moving from their existing carrier to be worth 800,000 won to 1 million won.

KT gives 270,000 won in discounts to subscribers who purchase iPhone 5 devices and return any kind of used device. The competition and subsidies are so fierce that carriers are hurting on the bottom line.

LG U+ saw its sales reach 10 trillion won last year, but its operating profit dropped in half. KT also posted record high sales of 23.8 trillion won last year, but its operating profit declined 30 percent compared to the previous year.

By Ko Ran [kjy@joongang.co.kr]