LG Uplus's subsidiary LG HelloVision recently announced its withdrawal from the Korea Mobile Virtual Network Operator Association (hereinafter referred to as the MVNO Association). The association represents the interests of small and medium enterprises, which is not beneficial to the interests of its own corporation, a subsidiary of a large enterprise. This has led to criticism that the division between large and small enterprises in the MVNO sector, which is already struggling with a decline in subscribers and deteriorating performance, is only deepening.
According to industry sources on the 15th, last week the MVNO Association sent an official document to LG HelloVision, which expressed its intention to withdraw, urging them to reconsider their departure. However, unless LG HelloVision retracts its intention to withdraw, the exit from the MVNO Association is expected to be processed soon.
LG HelloVision is an MVNO with 750,000 subscribers and is a core member of the MVNO Association. While a small enterprise named Joytel withdrew from the association last October, the departure of a subsidiary from a large enterprise is unprecedented. What could be the reason for LG HelloVision's sudden announcement of withdrawal from the association?
LG HelloVision noted that it judged that the association found it difficult to represent the interests of the business. The deepened conflict between subsidiaries of large enterprises and small and medium-sized companies within the association is seen as the cause of this situation. Recently, the National Assembly and the government have been pushing for amendments to the Telecommunications Business Act to limit the market share of subsidiaries of large enterprises in the MVNO market to 60%, leading to complaints that the MVNO Association has only represented the interests of small and medium-sized companies and failed to properly represent the positions of subsidiaries of large enterprises.
According to the Ministry of Science and ICT, the market share of MVNOs under the three major telecommunications companies' subsidiaries (SK Telink, KT M-Mobile, KT Skylife, MediaLog, LG HelloVision) was 47.9% last year. When combining KB Kookmin Bank's KB Livem and S-1, a subsidiary of Samsung, the market share of subsidiaries of large enterprises in the MVNO sector is 52.7%, already approaching 60%.
An MVNO industry official said, "Within the association, views are diverging regarding the legislative amendment that limits the market share of subsidiaries of large enterprises to 60%," adding, "The operating expenses of the association are mostly covered by the subsidiaries of large enterprises, yet because the board structure guarantees more voting rights for small and medium-sized companies, it seems that there is significant dissatisfaction among the subsidiaries of large enterprises." He warned that LG HelloVision's exit from the association could signal a departure of other subsidiaries from large enterprises.
Currently, there are a total of 19 member companies in the MVNO Association. Among them, 10 companies constitute the board. Only four subsidiaries of large enterprises (LG HelloVision, SK Telink, KB Livem, Korea Cable Telecom) participate in the board. If LG HelloVision completes its withdrawal, the number of subsidiaries of large enterprises on the board will decrease to three.
Some in the industry analyze that LG HelloVision has decided to withdraw from the association to cut costs due to recent deteriorating performance. LG HelloVision's operating profit last year was 13.5 billion won, a sharp drop of 71.5% compared to the previous year.
The MVNO sector is struggling due to a continuous decline in subscribers. In the first quarter of this year, the net increase in mobile number porting for MVNOs was 106,423, a 43% drop from the previous year. Starting in April this year, the wholesale price regulation for network use changed from prior regulation to post-regulation. As a result, individual MVNOs must negotiate wholesale prices with telecommunications companies instead of with the government. The industry's unity has become more urgent to strengthen negotiating power with telecommunications companies.
Koh Myung-soo, chairman of the MVNO Association, expressed concern that, "The withdrawal of LG HelloVision could spread the exodus of subsidiaries of large enterprises," noting, "Since it is possible to receive benefits without paying association fees and not participating, there is a perception that it is unnecessary to maintain membership. It is necessary for the government to push for institutional support so that the association can provide rights or benefits to its members."