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| The Galaxy S20 series slated for release March 6. The three telecom companies are expected to drastically reduce discounts for the 5G phones. Courtesy of Samsung Electronics |
By Kim Hyun-bin
The country's three telecom carriers faced a substantial drop in profits last year due to heavy investment in commercializing the fifth-generation (5G) wireless network and higher marketing expenses to attract more customers.
SK Telecom, KT and LG Uplus are seeking to cover the losses through significant cuts in their marketing spending, acknowledging the need to reduce unnecessary competition.
After the initial commercialization of the 5G network in the second quarter of last year, SK reported an operating profit of 1.11 trillion won, KT posted 1.15 trillion won and LG Uplus 686.2 billion won. The figures were down 7.6 percent, 8.8 percent and 7.4 percent, respectively.
The primary reason was their heavy spending on widening the nationwide 5G network service, which was worth trillions of won in capital expenditure. Hefty spending on marketing and promotional expenses was cited as another factor as they had no option but to provide more subsidies to encourage phone users to buy tech-enriched 5G phones.
Around 2 trillion won was spent on 5G marketing expenses among the three companies last year. Customers benefited the most as they were able to purchase the Galaxy S10 5G and LG V50 at a tenth of the cost, when the factory price for the mobiles was around a million won.
The situation will be a lot different this year for the Galaxy S20 series, scheduled to be released on March 6. At the announcement of first-quarter earnings, SK Telecom, KT and LG Uplus vowed to "halt excessive competition" and released a joint statement to fulfill that pledge.
"To prevent user inconveniences and confusion, we have agreed to enhance the pre-order structure for newly released mobiles," the statement said. "The pre-order period will be set for one week and will not reveal sales incentives and commissions during the period."
The release of the statement is aimed at reducing excessive competition.
"The three telecom companies want to stabilize the market and prevent excessive marketing among them," an industry expert said. "So it will be different from last year's 5G smartphone launches and likely to take a more passive approach."
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