Thrifty phones boost LTE services

Kim In-young, 32, was surprised when she found out that thrifty phone companies can provide the latest smartphone models, such as Samsung Galaxy S5, Galaxy Note3 and LG G2.

“I thought only old models for kids or seniors are available for thrifty phones,” said Kim. She decided to terminate a contract with her mobile operator and use a thrifty phone instead. “Since the cancellation charge is cheaper than the communication expenses I save, switching to a thrifty phone is more beneficial.”

On 2G and 3G thrifty phone plans, users can reduce their monthly mobile phone costs by 30 to 40 percent.

Thrifty phone companies are also rising to compete with the top three mobile carriers’ LTE smartphone services that are 50 percent cheaper on a thrifty phone USIM card.

Samsung’s Galaxy S5 was available on a thrifty phone website on the day of its world debut, April 11, and the biggest companies are expanding their lines of new phones. The major thrifty phone companies are SK Telecom’s subsidiary, SK Telink, Shinsegae’s E-Mart thrifty phone, CJ’s CJ HelloVision, and a well-known drama production company, Annex Telecom.

“We’ve obtained Samsung Galaxy S5 to prove that thrifty phones are not always old models and the newest LTE smartphone bills can actually be affordable,” said Moon Sung-kwang, CEO of Annex Telecom. Thrifty phone businesses have admitted they can’t survive without LTE services. Out of 55.16 million domestic mobile phone users, 56 percent of them (30.87 million) are LTE smartphone carriers.

Unlike the top three mobile operators, thrifty phone businesses appeal to the public with unique service and marketing strategies. E-Mart phone users can get a discount when shopping at E-Mart.

SK Telink has reeled in 11,800 subscribers since March by selling their smartphones on a TV home shopping channel.

CJ HelloVision offers LTE payment systems that cover CGV theaters and Mnet streaming services. CJ HelloVision accounts for 23 percent of all thrifty phone users and 65 percent of its LTE service users are in their 20s to 40s.

But the cost of LTE at thrifty phone companies is not so thrifty. The companies’ 3G service is up to 40 percent cheaper than that of major mobile operators but its LTE is only 10 percent cheaper. Using a thrifty phone USIM in an LTE smartphone is popular because it’s the easiest way to use LTE at 50 percent cheaper than the top three mobile operators’ LTE plans.

A source in the thrifty phone business said, “Since LTE smartphone devices are expensive and nearly half of our earnings go to major mobile operators for network rental, we can’t offer an outstanding price option.”

Since thrifty phone businesses struggle to pay for network rental, the government has tried to solve the problem. The Ministry of Science, ICT and Future Planning negotiates with SK Telecom each year to determine the price of rental. This year the ministry is looking to reduce the cost network rental and encourage thrifty phones’ LTE plans.

“If thrifty phone businesses are caught up in the 2G service market for seven million users, over 30 million LTE smartphone users can’t enjoy the benefits of thrifty phones,” said Kim Kyeong-man, the telecommunications director at the ministry. “Once thrifty phones can offer cheaper LTE payment plans, the major three mobile operators will bring down their prices.”

The top three mobile operators seem uncomfortable about thrifty phone companies making the jump to the LTE market.

“Renting out the network for cheap leaves us with nothing,” a source working for one of the mobile operators said. “Thrifty phones are for those who don’t need LTE services, like young children or seniors. The furthest extent of its job is to satisfy them.”

But major mobile operators are laying the groundwork for their own thrifty phone companies.

LG U+ applied to register a business at the ministry in early April through its subsidiary MediaLog and KT is waiting for the right time to join in.

BY PARK SU-RYON, KIM HAE-YOON [haeyoonk1311@joongang.co.kr]