Thrifty phone carriers thrive with suspension

Since the Ministry of Science, ICT and Future Planning imposed business suspensions on the nation’s three mobile carriers for offering illegal subsidies, consumers have flocked to thrifty phone stores.

Korea Post in Gwanghwamun, central Seoul, was crowded yesterday morning with consumers looking for thrifty cell phones and service that is about 40 percent cheaper than existing mobile carriers.

“I heard there is no inconvenience in using the thrifty phones and they cut mobile communication costs in half,” said a 54-year-old consumer surnamed Cho.

“My contract term with KT is about to end and I need to get a new smartphone, but since thrifty phones also offer different kinds of the latest smartphones, I thought I would go for a thrifty phone rather than the expensive smartphones offered by SK Telecom or LG U+. I do not usually use much data.”

“The demand for thrifty or altteul phones in Korea has been steadily increasing,” said an officer in charge of the thrifty phone business at Korea Post. “On March 13, the first day of the suspension for KT and LG U+, the number of subscribers to thrifty phones increased by about 3,500 and has posted a rapid growth ever since.”

According to the mobile communications industry and the Science Ministry, the three thrifty phone operators - CJ Hello Vision, SK Telink and KCT - attracted an average of 4,139 new customers per day from March 13 to 20. That is a 52.4 percent increase from an average of 2,715 new customers per day from March 1 to 12, before the sanction took effect.

However, SK Telecom, the only one of the three major carriers accepting new subscribers, has not benefited much. Its suspension begins April 5.

Thrifty phones operate on mobile virtual network operators (MVNOs). MVNOs provide wireless communication services by leasing network infrastructure from the larger mobile carriers.

SK Telecom recorded 13,101 new subscriptions per day from March 13 to 20, a 42.5 percent decrease from its average of 22,799.

The number of subscribers moving from other carriers to SK Telecom and getting a new smartphone also dropped by 61.7 percent from 13,423 per day from March 1 to 12 to 5,139 per day since the suspension took effect.

Meanwhile, the number of subscribers is plunging at KT and LG U+ with almost no new customers, except for those subscribing to M2M (machine-to-machine) communications services.

Industry sources expect that until early June, when the business suspension of all three mobile carriers will end, the movement from mobile carriers to thrifty phones will continue.

Some MVNOs say that even though sales of thrifty phones have increased since the beginning of the business suspension, they have not met expectations.

“Sales of thrifty phones plunged when the three large mobile carriers poured out subsidies, offering the latest smartphones for free, early this year. Now, sales of thrifty phones have only just recovered to the previous level,” said a thrifty phone salesman.

“Considering the current number of subscribers moving from the big carriers to MVNOs, it is expected that the number of thrifty phone subscribers will be a maximum of about 80,000 a month. It falls short of the earlier expectations that it would increase to 100,000.”

BY KIM jung-yoon [kjy@joongang.co.kr]