Lower subsidy and higher price for new iPhones

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Lower subsidy and higher price for new iPhones

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Prospective buyers of iPhone 6s line up in front of the KT headquarters in Gwanghwamun, central Seoul, on Friday. The increased cost of the new phones wasn’t enough to deter these anxious buyers who lined up for the latest Apple release. [KANG JUNG-HYUN]

Apple’s latest iPhone 6s made headlines earlier this week when preorder sales sold out in a record seven minutes. But the smartphone and the larger iPhone 6s Plus are being sold with a subsidy that is roughly 40 percent less than the previous model that went on sale a year ago.

The new phones are also 20,000 won ($18) to 30,000 won more expensive than the earlier release.

The nation’s three mobile carriers - SK Telecom, KT and LG U+ - unveiled on Friday the subsidies and price of the latest Apple smartphones as they started official in-store sales of the iPhone 6s and iPhone 6s Plus.

The mobile carriers set the maximum subsidies on both models between 120,000 won and 130,000 won - much less than the subsidy provided on the iPhone 6 last year, which was in the 100,000 won to 200,000 won range. In the case of KT, the maximum subsidy it provided on the iPhone 6 last year was 250,000 won.

The slashed subsidies went against earlier market expectations of substantial subsidies on Apple’s new smartphones due to keen competition among mobile carriers to hijack one another’s customers.

Mobile carriers and the Korean manufacturer gave different answers for reasons why subsidies have been slashed almost in half.

“It was largely the result of Samsung Electronics’ influence to keep Apple in check,” said a mobile carrier official, who requested anonymity due to the sensitivity of the issue.

The mobile carriers said the Korean smartphone maker made an unofficial request to limit the subsidies on iPhones, and the mobile carriers can’t refuse because Samsung Electronics is the biggest smartphone supplier.

However, Samsung Electronics said the manufacturer has to please the mobile carriers when releasing a new product.

“It’s not like we didn’t ask them to limit the subsidies, but it is more correct to say that it was the mobile carriers’ own decision to lower the subsidies,” said a Samsung Electronics spokesman.

Another industry insider pointed fingers at the government.

“The ones that find themselves in an uncomfortable position is the Korea Communications Commission [KCC] when the market once again becomes restless due to Apple’s new product,” said the industry insider, who requested not to be identified.

“The mobile carriers themselves lowered the subsidies to please the KCC.”

It has been suggested that the reason preorder sales of the iPhones were suddenly delayed from Oct. 16 to three days later was largely due to a “recommendation” from the KCC, which was concerned about overheated competition.

There are even rumors that the three mobile carriers held a meeting where they decided not to raise the subsidies, as there is no reason for cutthroat competition that would only result in shrinking their profits since Apple’s smartphones sell well in the early stages due to huge demand from Apple followers. Among the three carriers, the smallest, LG U+, is offering the largest subsidy. It is offering a 137,000 won subsidy when subscribing to its most expensive mobile service plan with a monthly payment in the 100,000 won range. KT is offering a maximum 135,000 won, while SK Telecom is offering a top subsidy of 122,000 won.

The smallest subsidy of 41,000 won is offered by KT and LG U+ when subscribing to its cheapest product with a monthly payment of 29,000 won. SK Telecom is offering a slightly higher subsidy of its cheapest product at 32,000 won.

For the mid-level mobile service products whose monthly bill is between 40,000 won and 50,000 won, SK Telecom has set the subsidy on the latest iPhones at 49,000 won, while LG U+ has set the price at 64,000 won and KT a little higher at 68,000 won.

The iPhone 6s and iPhone 6s Plus were priced 60,000 won cheaper by the mobile carrier than the initial price set by Apple.

The iPhone 6s 16-gigabyte model is priced at 869,000 won, the 64-gigabyte model at 999,900 won and 128-gigabyte model at 1,130,800 won. The iPhone 6s Plus 16-gigabyte model is priced at 999,900 won, the 64-gigabyte model at 1,130,800 won and 128-gigabyte model at 1,261,700 won.

The price Apple released earlier for Korea was 920,000 won for the iPhone 6s 16-gigabyte model, 1.06 million won for the 64-gigabyte model and 1.2 million won for the 128-gigabyte model. The iPhone 6 Plus 16-gigabyte model was 1.06 million won, 64-gigabyte model 1.2 million won and 128-gigabyte model 1.34 million won.

Including the subsidy and subscribing to the most expensive mobile service agreement, the cheapest price a customer can get on the latest iPhone 6s, with the smallest storage capacity of 16 gigabytes, is 700,000 won.

For a KT customer, when purchasing an iPhone 6s with 16 gigabytes, the lowest price tag is 713,800 won when adding a 135,000 won subsidy and an additional discount of 20,200 won from the 869,000 won price tag. The store that sells the smartphone, including online retailers, can provide a maximum 15 percent of their own discount when selling the product.

A 999,900 won 64-gigabyte iPhone 6s can be bought for 844,700 won.

But there are options for customers. When purchasing the latest iPhones, customers can choose a 20 percent discount on their mobile service instead of the limited subsidy. For some mobile service agreements with a monthly bill in the 100,000 won range, when applying for the 20 percent discount, they can get the latest smartphone with a 528,000 won discount on a two-year contract. For the 59,900 won monthly bill program, they can get a discount of 316,800 won under the same two-year contract.


BY HAM JONG-SUN [lee.hojeong@joongang.co.kr]

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