About a month has passed since the Mobile Device Distribution Improvement Act (MDDA) was abolished, but the so-called 'subsidies war' has not occurred. Consumers expect that mobile carriers will increase their support funds to attract customers when Apple's iPhone 17 is released. However, the telecommunications industry is trending towards investing in artificial intelligence (AI) businesses instead of allocating marketing expenses to their main operations, forecasting that the phenomenon of excessive subsidies will continue to be absent in the future.
◇ One month after the abolition of the MDDA... it's hard to find the latest free mobile phones
According to the telecommunications industry on the 26th, as of the 23rd, a month after the MDDA was abolished, it was difficult to find 'free phones' at mobile distribution points referred to as 'holy places'. At a distribution point in Yeongdeungpo-gu, Seoul, customers must pay 360,000 won, 240,000 won, and 200,000 won to purchase the Samsung Electronics Z Flip 7 when switching numbers among SK Telecom, KT, and LG Uplus, respectively. For the Z Fold 7, 1,260,000 won, 1,160,000 won, and 1,120,000 won were required. In this case, consumers must maintain high-end plans costing 100,000 to 110,000 won for more than six months with each mobile carrier.
Both consumers and sellers noted that the trend of subsidy distribution has not changed significantly before and after the abolition of the MDDA. An office worker surnamed Park, 35, who postponed changing his mobile phone since the abolition, said, "I kept using my old phone because I thought I could get the latest phone for free. I check the market price in communities, but I'm disappointed that the subsidies are not as much as I expected." A seller operating a distribution point in Seongdong-gu, Seoul, explained, "The only thing that seems to have changed is that we can comfortably mention the subsidies that were previously given illegally."
Some consumers expect that mobile carriers will release more subsidies around mid-next month when Apple launches the iPhone 17. Since Apple's existing customers are highly loyal, there could be competition among carriers to attract subscribers wanting to purchase the new products. Apple is expected to hold a new product launch event on the 9th of next month. According to the industry, Korea has been selected as a primary launch country, with pre-orders starting on September 12 and sales commencing on September 19.
◇ The industry says to avoid a bleeding competition in marketing expenses... focusing on AI businesses
The telecommunications industry forecasts that while there may be a temporary increase in subsidies in September, long-term competition in subsidies is unlikely. This is because the industry is avoiding a bleeding competition through expanded marketing spending and is investing in new businesses centered around AI. SK Telecom has announced plans to increase its total revenue to 30 trillion won by 2030, with 35% of that projected to come from AI. KT has introduced self-developed AI models such as 'Confidence 2.0' and 'GPT-K' developed in collaboration with Microsoft. LG Uplus is expanding its AI data center (AIDC) business and enhancing its AI calling app, Exio.
During the second quarter earnings announcement this year, KT projected that "communication companies should currently focus on investment in AI and IT fields and new businesses," and that "competition in the wireless communication market will not be fierce in the long term." LG Uplus also stated that "while a short-term marketing competition may occur due to the upcoming iPhone new model launch or competitors' subscriber recovery attempts, we will defend against excessive competition while retaining subscribers through digital channels."
◇ Civic groups say the oligopolistic behavior will worsen... policy supplementation is needed"
Civic groups argue that if telecom companies continue collusion on subsidies, the meaning of abolishing the MDDA will be diminished. They assert that policy supplementation is necessary to alleviate the burden on consumers and activate competition among companies, in line with the original intent of the MDDA's abolition.
Shin Cheol-won, head of the Consumer Sovereignty Citizen Council, stated, "In the case of SK Telecom, there is a possibility of increasing benefits to recover customers lost due to hacking incidents, but over time, the oligopolistic phenomenon will become solidified," adding that "the 'one-won discount' business among the three telecommunication companies will only continue."
He added, "It is now time for the government to revisit policies, such as expanding the discount rates for long-term customers or reducing installment fees for devices."