Telecom market heats up over S8 subsidies

By Lee Min-hyung

The nation’s telecom market is overheating, with mobile retailers offering excessive subsidies for Galaxy S8 smartphones.

Since its launch late last month, tens of thousands of cell phone users here have changed carriers to get the new Samsung handset with cheaper payment options. This comes as wireless operators seek to lure more subscribers from rivals through big subsidies.

The Korea Communications Commission, the telecom watchdog, considers a market “overheated” when inter-operator switches exceed 24,000 in a day.

The S8 is priced at 935,000 won ($826.12) for the 64-gigabyte (GB) internal storage model. But mobile retailers from three major carriers -- SK Telecom, KT and LG Uplus -- are accused of offering up to 600,000 won in illegal subsidies. This has allowed users to get the new premium handset for less than 200,000 won.

The information went viral online, allowing customers to visit some clandestine retailers offering excessive rebates.

“It will be very tough to regulate these vendors in order to root out the illegal subsidies, as the transactions are made in a very secretive way,” a mobile industry source said.

For this reason, the Ministry of Science, ICT and Future Planning introduced the Mobile Device Distribution Improvement Act in October 2014, setting an upper limit on handset subsidies. It worked to some extent but illegal subsidies remain prevalent online at retail stores.

Customers have stepped up their criticism of the ministry, as the act raised overall mobile charges and fattened the profits of mobile carriers.

“It remains to be seen whether the act will be scrapped or revised when the new government starts next week, but for the time being, illegal mobile paybacks will likely continue to prevail in the mobile industry,” the source said.

After the Constitutional Court’s decision to oust former President Park Geun-hye in early March, a new president will be elected on May. 9.

Two front-running presidential candidates -- Moon Jae-in of the Democratic Party of Korea and Ahn Cheol-soo of the People’s Party -- have pledged to cut household mobile telecom costs.

In particular, Moon, who has dominated recent opinion polls, said he would revise the act to make mobile carriers offer more subsidies.