Mobile carriers increase subsidies on old phones

SK Telecom, KT and LG U+ have started the new year off by engaging in a fierce competition over smartphone subsidies, offering the Galaxy Note 3 for almost free with an 880,000 won ($808) subsidy.

At KT, the second-biggest carrier, consumers can get the Galaxy Note 3 for free if they sign up for a 99,000 won monthly plan. The smartphone, which was launched in September, usually goes for 880,000 won.

KT raised its subsidy on the Galaxy Note 3 from 250,000 won to 880,000 won on Thursday after No. 1 carrier SK Telecom said it will give a 725,000 won subsidy for the Note 3.

On a 51,000 won monthly plan, subscribers can purchase a phone for 360,000 won, which they then pay back as part of their phone bill over the next two years.

At SK Telecom, customers can purchase a Note 3 for about 50,000 won if they subscribe to a monthly plan of 100,000 won. A subsidy of 725,000 won comes from SKT and an extra 15 percent of that 725,000 won, or 108,000 won, is added on by the retailer.

The Article 4 of the Mobile Device Distribution Improvement Act states that mobile carriers can’t provide subsidies of more than 300,000 won, except in the case of older phones.

“Mobile carriers are increasing the amount of subsidies on smartphones that were launched 15 months ago or earlier, because they are not subject to the subsidy ceiling of 300,000 won according to the Mobile Device Distribution Improvement Act,” said the owner of an SK Telecom retail store surnamed Park. “SK Telecom and KT are offering the Galaxy Note 3 and Note 2 at the lowest price possible to attract new subscribers, but for the Note 2, there is not much inventory left because it was launched in September 2012.”

Samsung Electronics is attempting to clear out its inventory of older phones before it launches its 3band LTE-A smartphones, such as the Galaxy Note 4 S-LTE, this year.

The huge discounts are common after the new fiscal year starts, as mobile carriers tap into their refreshed marketing budgets.

LG U+, the third-biggest carrier, was the first to raise its discounts on the Galaxy Note 3 on Dec. 24, from 300,000 won to 650,000 won with an 89,900 won monthly plan. SKT announced its subsidy hike on Dec. 27 and KT followed on Thursday.

BY KIM JUNG-YOON [kjy@joongang.co.kr]