Starting next month, when activating a mobile phone at a mobile carrier retail outlet (company-run stores, agencies, and dealers), it will be mandatory to enter into the carrier's system the amount of any additional subsidy provided to the customer. The aim is to record additional subsidies—previously handled at the discretion of stores and executed through unofficial methods such as "payback"—in the system to manage the subsidy amounts and payment history transparently.
According to ChosunBiz reporting compiled on the 28th, SK Telecom, KT, and LG Uplus decided to manage the amounts of additional subsidies provided to customers at activation by entering them into each company's system at retail outlets nationwide starting Feb. 2 this year. Previously, only the common subsidy (formerly the posted subsidy) announced by carriers was reflected in the system, and additional subsidies—funded by sales incentives (rebates) and provided at the discretion of outlets—were difficult to grasp comprehensively at the carrier level.
Before the repeal of the Mobile Device Distribution Improvement Act, additional subsidies were capped at up to 15% of the posted subsidy, and any support exceeding that was considered illegal, leading to many cases where the funds were paid out as cash paybacks after activation. With mandatory system entry making additional subsidies officially recorded at the activation stage, cases in which outlets later deny or delay the promised support are expected to decrease.
A telecom industry official said, "Until now, outlets often only promised additional subsidies and then paid them later as paybacks, making it difficult for consumers to prove it when promises were broken," and added, "Going forward, records will remain in the carriers' systems, reducing the potential for disputes."
There is also hope that the tax burden could be eased. Although a court ruled that additional subsidies paid during mobile phone sales qualify as an "discount" that lowers the actual selling price and should be excluded from the tax base, if they were executed through unofficial methods such as cash paybacks, it was not easy to prove that they were "directly deducted" as discounts in the transaction process. The industry expects that once additional subsidies are managed in the system, the scale of execution and settlement structure will become clearer, increasing the room for tax base adjustments.
Kim Mi-jung, head of the Telecommunications Market Research Division at the Korea Media and Communications Commission, said, "Even though the Mobile Device Distribution Improvement Act has been repealed, to protect users, the amended Telecommunications Business Act (Article 32-15) includes a provision requiring major terms of contracts, such as device subsidies, to be specified in the contract," and noted, "This change is a voluntary, coordinated move by carriers to comply with the amended law, and if previously nontransparent additional subsidies are computerized and managed, it should have positive effects."