Selling agents in deficit due to sluggish negotiation¡¦ KRW 10,700 for mobile carriers out of KRW 3 million
Kang Eun Seong | esther@ | 2017-09-18 11:00:53

¡áSub brand phone stands on the edge

[Digital Times, Kang Eun-song] The bargain wholesale price negotiations are so called ¡®lost messenger¡¯. The deadline for negotiations to be completed by August is now in mid-September, and it is now a goal to complete the negotiations in September. The plans of the mobile phone companies that were trying to establish a marketing strategy in the second half of the year were also tied up based on the newly established wholesale price.

The Ministry of Science, Technology and Information, on September 17, revealed that it will do its utmost to make the conclusion of negotiations with the wholesale price of the wholesale phone this month. On May 14, Prime Minister Lee Nak-yeon announced that he would complete the wholesale price adjustment for improving the mobile phone industry without "hitching," but the negotiations are proceeding sluggishly. The industry expects it will not be easy to complete the wholesale price negotiations this month.

When the mobile phone operator leases the carrier network, the 3G network sets the price per voice, data and text message. Since the wholesale price negotiations have not yet been completed this year, wholesale phone companies pay wholesale prices for voice calls at KRW 30.2 n per minute, KRW 5.4 per MB for data, and KRW 6.2 for text messages as of last year.

The LTE network has a somewhat different wholesale price system. Since both voice and text are data services, they charge wholesale prices in the form of RS (Revenue Share) instead of calculating the price separately. Low-cost fares of less than KRW 30,000 will have 40% of the fare and 60% of the mobile phone companies. This rate is narrowed to 45% to 55% for mid-priced fares between KRW 30,000 to 50,000. In high-priced fares of KRW 50,000 or more, the carrier and the flat phone share half of the fare revenue equally. If voice unlimited service is added to this, it will be added to the telecommunication company as `basic fee` of the interconnection name, which is KRW 3000 ~ 5000 for low price, high price.

For example, if CJ HelloVision`s Hello Mobile has a subscriber of KRW 31,690 per month that provides 1GB of data to unlimited voice, then the wholesale price of data will add KRW 4,000 to the voice base fee of KRW 12,685. Twenty-two hundred and twenty-five hundred won will be paid to the carrier in wholesale price. CJ Hello Vision earned revenue of only KRW 15,901 after selling the plan. In the case of the carrier, CJ HelloVision is expected to pay KRW 15,901, which is the net wholesale cost, because it is the net wholesale cost. However, it should cover all of the sales, marketing, labor and distribution expenses. That`s why the smartphone industry is suffering from chronic deficits.

According to the Ministry of Information and Communication, a total of KRW 31.7 billion is recorded last year alone. Since the start of business in 2011, the accumulated deficit reached KRW 326.3 billion.

Hwang Seong-wook, vice chairman of the Korean Association of Sovereign mobile carriers, said, "The current profit distribution of the flat-phone industry is not enough to match the marketing expenses and operating expenses required to attract subscribers. Profit to be sustainable management, the current structure is difficult to guarantee the revenue.¡±

The Korean government is aiming to increase the revenue share of the mobile phone industry by 10 % points in this wholesale price negotiation. This is also part of the mobile phone cost reduction plan selected by the Planning and Advisory Committee of the National Assembly. If this plan is realized, the mobile phone industry is expected to improve its financial performance by increasing its profit somewhat. However, network leasing companies have been disagreeing with the "step-by-step" allocation, and negotiations are not proceeding smoothly.

By Kang Eun Seong esther@


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