“Sub brand phone will face end unless situation changes.” “It is order to give up on business.”

The sub brand phone industry is in difficulty with the new government pushing to abolish telecommunication funding. If the abolishment of the basic fee is realized, the price competitiveness of the sub brand phone, which introduced the so called `half-price communication fee`, will disappear and it will be a direct hit to related business. So far, the sub brand phone industry, which has played a role as a leader in reducing household communication cost, is extremely now in trouble.

According to the related industry sources on June 8, the Ministry of Science & Technology and the Ministry of Science & Technology announced that it is necessary to prepare countermeasures against dismissal of the basic fee as the re-report of the National Planning and Advisory Committee approaches.

On June 7, the National Planning Commission requested the Ministry of Science, ICT and Future Planning to submit a comprehensive telecommunication cost reduction plan including the abolition of the basic fee which is planned on June 10. This is a strong criticism that the Ministry did not show the authenticity of telecommunication cost cuts. Besides, regarding the abolition of the basic fee, which was the promise of President Moon Jae-in, "the basic fee is included in 2G, 3G and some LTE rate plans, and it is said that it will be eliminated."

Sub brand phone business is now in panic. Sub brand phone business is in trouble as the pressure to abolish the basic fee has become stronger. Sub brand phone has borrowed the mobile carrier`s network to provide telecommunication services, and has increased its subscriber base by using low-cost telecommunication charges. There were 7,071,685 subscribers in the sub brand phone as of April. This is about 11.4% of all mobile subscribers.

The problem is that 75.4% of all sub brand phone subscribers are 2G and 3G subscribers. 2G and 3G subscribers totaled 5,337,144. The industry expects that there will be no reason for consumers to choose a sub brand phone in the case of the basic fee of KRW 11,000 per month is lost in the 2G and 3G plan of the mobile carrier. An industry expert said, "I wonder if the in-depth analysis of the effects of the abolition of the basic fee on the related industries was preceded. In the current situation, eliminating the 2G and 3G basic fee is the same as closing the cheap phone business.”

The recent slowdown in growth, the chronic deficit, and the expiration of the termination fee for radio use, which ends in September, are also a concern in addition to the abolishment of basic fee. Sub brand phones have grown rapidly since 2012, and their subscribers have grown more than doubled every year. However, the rate of growth fell to 30% in 2015. It increased only 16% last year. The total sub brand phone industry recorded an operating loss of KRW 31.7 billion last year.

Therefore, it is said that wholesale price cuts and extension of radio wave fee reduction are being discussed in and out of industry. However, it is difficult to guarantee this. In the case of radio wave fee, consultation with the Ministry of Strategy and Finance is necessary as it corresponds to tax revenue. It has already been extended twice, so whether it will be extended this year is unknown. The smartphone industry expects to pay an additional KRW 34 billion on annual basis in the case of it charges the usage fee. It is also burdensome that there is a point of view that "if the government supports the sub brand phone, it will only work for big companies."

The sub brand phone association is expected to collect opinions on the abolition of the basic fee, and submit it to the national planning. A representative of the Association said, "We are arranging the position from the inside and planning to submit it to the National Planning. We are expecting the government to provide an alternative to the sub brand phone."


By Jung Yoon Hee yuni@


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