Posted : 2009-11-27 21:33
Updated : 2009-11-27 21:33

IPhone Debut Triggers Smart Phone Price Wars

A model shows Samsung Electronics’ latest smart phone, T-Omnia II, which the company claims as an “iPhone killer.” Samsung and SK Telecom, the wireless carrier that is releasing TOmnia II, is lowering the prices of the handset to better compete with iPhone, to be released by wireless carrier KT Saturday.
/ Korea Times
By Kim Tong-hyung
Staff Reporter

The popularity of feature-packed mobile phones looks to be ripe for an explosion as they get better and cheaper, industry watchers say.

The massive buzz generated by the iPhone, which will make its much-awaited debut on local shelves Saturday, is triggering a fierce price war among premium phones, with local handset giants Samsung Electronics and LG Electronics finally moving to lower the hefty prices on their flagship devices.

KT, the mobile telephony operator that is releasing iPhone, hopes that Apple's do-it-all smart phone will help them put up a more convincing challenge against its industry rival, SK Telecom, the top wireless carrier with a 50 percent-plus market share.

It is estimated that KT gathered more than 50,000 advanced orders for the iPhone, which seems to have already booked its place as the most popular imported premium phone before officially hitting the market.

Obviously, SK Telecom has no intention of surrendering its dominance, and is now presenting a united front with Samsung to defend against a possible ``iPhone invasion.''

The crown jewel of SK Telecom's smart-phone lineup has been Samsung's T-Omnia II, which had been priced like a full-blown laptop computer with the 4-gigabyte models fetching 924,000 won (about $796).

However, Samsung lowered the price to 880,000 won recently, and the price of the 8-gigabyte models was also adjusted to 924,000 won from 968,000 won.

Considering that SK Telecom is doubling its handset subsidies and offering further discounts for users subscribing to monthly fixed-rate data plans, Samsung's gorgeous but excessive phone has suddenly become more affordable.

In fact, T-Omnia II will be provided free to SK Telecom subscribers signing up to the carrier's premium monthly data plan that charges 95,000 won per month.

The decision to lower T-Omina II prices is bringing SK Telecom both praise and complaints. Despite the outrageous prices, SK Telecom sold more than 18,000 T-Omnia II handsets since its release last month.

The mobile carrier is now facing angry reactions from the early buyers and its sales offices are reporting a wave of canceled orders.

The reason for the dramatic price cut is simple ― both SK Telecom and Samsung seem convinced that T-Omnia II is their best bet for becoming a potential ``iPhone killer'' and the companies can't afford cost to become an obstacle in sales.

KT is projecting the sales of iPhones to fall anywhere between 200,000 to 500,000 units, which will be more than enough to compete with the leading high-end devices of Samsung and LG.

LG Electronics, Samsung's bitter industry rival, is also considering settling on an ``entry-level'' price for its Windows Mobile-powered smart phone, SU210, which is expected to hit the market next month.

Although the company has yet to make a final decision, the device is expected to be priced around the 600,000 won level.

Other handset vendors, including Sony Ericsson, Nokia and HTC, are also likely to be forced to lower the prices of their smart phones sold in the local market.

``Mobile operators are now increasing their spending on handset subsidies on smart phones. Although the increasing costs are a concern, there is a reason to think that consumers will benefit,'' said an official from the Korea Communications Commission (KCC)'s policy bureau.

KT has set the price of the 32-gigabyte iPhone 3GS at 369,000 won for customers subscribing to monthly plans based on the basic rate of 45,000 won.

Subscribers paying 65,000 won in basic rates can have the iPhone for 264,000 won, while premium users signing up for monthly plans based on a 132,000 won basic rate could have the phones for free.

The 8-gigabtye iPhones were priced at 132,000 won for subscribers signed on the 45,000 won monthly plans.

Smart phones, which support a wealth of Internet and multimedia features such as e-mail, videos, games and music, are critical in the business strategies for device makers, as they provide larger margins than conventional handsets.

Mobile telephony operators are hoping that smart phones will also allow them to get better return from their massive investment in third-generation (3G) and other mobile Internet networks by bumping up data revenue.

But so far the devices have been slow to take off here, hampered by their cost, lack of software content and also the expensive data rates set by mobile carriers.
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