With KT implementing a waiver of early termination fees for canceled customers through the 13th of this month as a follow-up measure to its hacking incident, competition among carriers to attract subscribers is expected to intensify. Unlike the past pattern centered on device subsidies, carrier membership partnership discounts are also emerging as an important tool to attract subscribers.
SK Telecom said it will provide coupons totaling 20,000 won to customers who newly sign up (number portability) for T Membership from the 1st to the 15th of this month. The new sign-up benefit consists of a 10,000 won discount coupon for Cheogatjib Yangnyeom Chicken, a 7,000 won discount coupon for Paris Baguette, and a free Americano (2,000 won) coupon for Mega Coffee. In effect, it serves as an additional subsidies-like payment given to customers who port their number to SK Telecom. A telecom industry official said, "SK Telecom appears to be focusing on retaining customers leaving KT by emphasizing enhanced membership benefits in addition to device subsidies," adding, "This move is expected to lead to a membership discount war among carriers."
The reason SK Telecom can offer membership discounts limited to number-porting customers is that the Mobile Device Distribution Improvement Act was abolished at the end of July last year. During the period of the act, users could not be discriminated against not only with device subsidies but also with membership discounts that had the same effect as providing subsidies. An Jeong-sang, adjunct professor at Chung-Ang University Graduate School of Communication, said, "With the repeal of the act, discriminatory membership discounts based on subscription type (device upgrade, number portability) became possible. Even if membership discount benefits are raised to 100,000 won, 200,000 won, or 300,000 won by applying them only to number-porting customers in a pinpoint manner, it is no longer illegal," adding, "Instead of device subsidies, which are a one-time expenditure expense, membership discount policies that keep subscribers for a long period can emerge as a new tool to attract customers."
Earlier, in July last year, SK Telecom announced a 50% membership discount compensation plan. From August to December last year, for five months, it offered 50% discounts at Paris Baguette, Starbucks, and VIPS, among others. At the time, KT and LG Uplus also significantly strengthened their membership discount policies, setting a precedent for expanding carriers' membership benefits for users. Whereas the main competition then was membership discounts for all subscribers, this time the focus is likely to shift to strengthening benefits limited to number-porting subscribers.
With SK Telecom preemptively launching a policy that offers membership discounts limited to number-porting customers, KT, which needs to defend against it, faces an inevitable dilemma. With the early termination fee waiver, the industry expects KT to first announce a membership discount policy for all subscribers to protect its base of existing customers. Meanwhile, following SK Telecom, there is growing expectation that LG Uplus will also focus on strengthening membership discount benefits targeting number-porting customers.
On the first day of KT's early termination fee waiver on the 31st of last month, 10,142 subscribers left KT. That was more than double the 3,865 subscribers who left on the first day of SK Telecom's early termination fee waiver in July last year. KT has not yet announced specific details about membership partnership discounts to stem customer churn. Attention is on whether KT will present a differentiated defensive strategy beyond expanding subsidies. A telecom industry official said, "In the case of device subsidies, if one company suddenly raises the amount, others have no choice but to follow at a similar level to defend their customers. That is why membership benefits can emerge as a second, differentiated competitive factor."