“More discount” vs “Not any more”… Sub brand phones in unyielding skirmish
Jung Ye Lin | yeslin@ | 2018-05-18 10:56:52

By Yonhab News

The Korean government and mobile carriers have begun negotiations on the wholesale price of MVNO. However, it is expected to pose a considerable amount of labor until the conclusion is reached within this year. The government argues that the price should be cut to increase competitiveness of the mobile phone industry. On the other hand, mobile carriers are expected to keep on saying that they are unlikely to be able to afford it due to the pressure on telecom tariffs due to cost cuts and promotion of universal fare plans.

According to the Korean government on May 17, the Ministry of Science and Technology, Ministry of Information and Communication and the mobile carrier started negotiations last month to decide the wholesale price of the mobile phone network. The government annually negotiates with SK Telecom, a mandatory provider on behalf of the mobile phone industry, to set wholesale prices.

"We have gathered opinions from the media industry in the middle of last month," stated an official at the Ministry of Information and Communication. "We have met with SK Telecom three times and with KT and LG U Plus once or twice. The Ministry of Information and Communication (MIC) is planning to lower wholesale prices and wholesale prices for revenue sharing this year In light of the difficulties of the mobile phone industry. Lee Ha-bong was reportedly suffering from the opinions of the Ministry of Information and Communication. This is why the wholesale price has been lowered. In fact, the price has been cut from 2011, when the wholesale price was calculated, until last year. The voice decreased 60% from 65.9 won to 26.4 won, and the data decreased 97% from 141.91 won to 4.51 won in the case of mass wholesale price. The wholesale price of the revenue distribution also decreased every year, so the average fell to 56.4% in 2016 and to an average of 49.2% last year.

The mobile phone industry is still burdened with wholesale prices. It is arguable that the mobile carriers have the capacity to cut costs even in this situation. In fact, if data providers provide 10GB of data per month at 16,500 won per month, the data cost is 1.46 won per 1MB in the case of tablet PC plans, and the cost per 1MB of the mobile phone is too high at 4.51 won. A related official said, "We do not estimate the wholesale price of mass-exclusively for a specific rate plan." He replied, "The logic is that the wholesale price is calculated by applying a discount rate to the average retail price of MNOs."

Meanwhile, mobile operators are expected to take the hands of the mobile phone industry in the Ministry of Information and Communications in relation to the wholesale price. It is an analysis that the flat phone industry is expected to offer a countervailing claim claiming that it faced a survival crisis as a universal payment plan initiated by the Ministry of Information and Communication. In fact, the Ministry of Information and Communication (MIC) has promised the exception of the price of wholesale phone to legislate the universal fare system. This will be applied in a way that cuts the net fee only for some segments that are expected to be lost due to the universal fare system, apart from the wholesale price of the sub brand phone network. Chun Jung-bae, director general of the Ministry of Information and Communication, said, "If the wholesale price ratio for some sectors falls to 30%, the mobile carriers will pay a fee for 30,000 won.”

On the other hand, some raise questions about whether it is right to lower wholesale prices. The deficit in the mobile phone industry has been caused by large companies` subsidiaries, and other mobile phone companies have reached a surplus or a break-even point. Indeed, KT Mobile and Media Log, which are subsidiaries of large conglomerates, posted operating losses of 40.8 billion won and 14.6 billion won, respectively. The operating loss of the two companies is 57.2 billion won. This is due to the two companies have over-priced low-priced plans to increase subscribers. One mobile carrier specialist said, "If the operating loss of the flat phone industry is caused by certain companies, it will not be seen as a problem of wholesale price."

The Ministry of Finance and Economy is expected to accelerate negotiations on the wholesale price this year. Last year, negotiations that started in May concluded only in November because of delayed agreement on wholesale price of profit distribution. Kim Jung-ryul, director of the Ministry of Information and Communication, stated, "This year, we will finish negotiations as soon as possible."

By Jung Ye Lin yeslin@

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