As the 'Galaxy S25' unpacking (launch) event approaches in three weeks, some mobile communication agencies, known as 'sacred sites,' are distributing illegal subsidies (subsidies exceeding the published support limit) for the 'Galaxy S24.' This is interpreted as an effort to deplete the inventory of the older model, the Galaxy S24, in order to focus on sales of the new Galaxy S25. It has been confirmed that purchasing the Galaxy S24 from certain regional agencies can yield illegal subsidies of over 1.2 million won.
Industry sources reported on the 2nd that the Galaxy S24, with a retail price of 1,155,000 won, is being sold at a maximum discounted price of minus 680,000 won, particularly around the online and offline sacred sites in Mapo, Dongjak, and Yeongdeungpo districts. This means that if customers purchase the Galaxy S24 by switching their number and changing devices under the condition of using the SK Telecom '5GX Premium' plan at a monthly fee of 109,000 won for six months and signing up for additional services like credit card activation and coloring, they can receive 680,000 won back in cash.
Currently, the subsidies provided for the Galaxy S24 amount to a maximum of 530,000 won, while the additional subsidies (15% of the published subsidies) are 79,500 won. The sacred sites have set illegal subsidies for the Galaxy S24 at a level of 1,225,500 won (the sum of 545,500 won from retail price minus published and additional subsidies, plus the 680,000 won received in cash from the sacred site), effectively turning it into a 'subsidy phone.' A 'subsidy phone' refers to a phone purchased while receiving cash back, a term used in the industry to describe phones that give money under the pretext of subsidizing.
The top model, the Galaxy S24 Ultra, is also being sold at -220,000 won at some sacred sites. Considering that the total of the published and additional subsidies for the Galaxy S24 Ultra is 600,500 won, while its retail price is 1,698,400 won, it can be inferred that illegal subsidies of over 1.2 million won are also being given for the Galaxy S24 Ultra. Most online sacred sites are selling the Galaxy S24 as a free phone as well. Under the condition of using a high-cost 5G (fifth-generation mobile communication) plan in the 100,000 won range, they are adding 540,500 won in illegal subsidies to the total of 600,500 won in published and additional subsidies, effectively making it a free phone.
The reason for the aggressive competition over illegal subsidies, even at the risk of high expenses, is that demand for number transfers and device changes rises sharply when a new flagship smartphone is released. According to the Korea Telecommunications Operators Association (KTOA), the total number of number transfers among the three major communication companies (SK Telecom, KT, LG Uplus) reached 379,823 cases after the Galaxy Z Flip and Fold 6 were released last July. This reflects an increase of more than 11.6% compared to the previous month (339,553 cases).
Illegal subsidies stem from sales incentives paid by the three major telecommunications companies and phone manufacturers to these sacred sites. The industry estimates that these sites receive over 800,000 won in sales incentives for each phone sold. It is interpreted as practically recycling the entire sales incentive as illegal funds.
After the bill to improve the distribution structure of mobile communication devices (the Device Subsidy Act) passed last month, crackdowns on illegal subsidies are expected to weaken. With the enactment of the Device Subsidy Act starting from July this year, there will be no limits on the amount of subsidies the three telecommunications companies can provide. Typically, the Korea Communications Commission carries out crackdowns on illegal subsidies around the launch of major flagship smartphones and has issued consumer warnings in the past. The Commission issued a consumer warning last September regarding smartphone sales practices that induced substantial discounts and additional discounts through options and credit card partnerships, just before the launch of the iPhone 16.
Jeong Sang-an, a visiting professor at Chung-Ang University’s Graduate School of Communication, noted, 'As the Device Subsidy Act has passed, it is highly likely that the Communications Commission will not allocate personnel to crack down on illegal subsidies,' adding, 'It seems that the agencies will focus on depleting their inventory while the government's crackdown becomes lax.'