"Since COVID-19, sales have been cut in half as online and direct-operated channels became more active. These days, except for 'holy ground' locations, a dealer that sells 50 units a month is considered to be selling a lot. With a monthly rent of 4 million won and two employees, fixed costs come to about 11 million won. We can only operate the store if we receive additional incentives paid by the carriers. Now that device prices are rising too, the number of units sold will drop further." (A telecom dealer in Seoul)
"The days of making a fortune by running an offline mobile telecom dealership are gone. These days it feels like we are fighting for survival just to keep the enterprise going. It has never been this hard. Headquarters committed the mistake of getting hacked, and even the management fees we earned through hard work were cut off. Carriers are handing out sales incentives in a way that favors online and direct channels. The device replacement cycle is getting longer, and with device prices rising too, the bad news never stops." (A telecom dealer in Seoul)
Mobile telecom dealers are lamenting as setbacks keep piling up. The fallout from hacking reduced management fees, and as device prices rose, consumer sentiment weakened. Management fees are paid by carriers to dealers for subscribers acquired by the dealer for five years, but payments stop if the subscriber leaves the dealer. With the policy waiving penalties implemented after last year's hacking incidents at SK Telecom and KT, customers they had signed up switched carriers in large numbers. SK Telecom lost more than 700,000 subscribers, and KT lost 310,000.
Although the Mobile Device Distribution Improvement Act was abolished on July at the end of the month last year, the sales incentives paid by carriers have not changed much. A device distributor representative said, "The purpose of eliminating the act is to remove restrictions on competition among carriers to reduce users' phone bills and help the household economy, but there has been little change in the market."
According to the Korea National Mobile Distribution Association on the 13th, the sales incentives paid to dealers when selling the latest flagship devices from the three carriers were unchanged or even decreased compared with before the abolition of the Mobile Device Distribution Improvement Act.
In SK Telecom's case, in March last year, dealers received a 350,000 won incentive for acquiring a number-transfer subscriber on the 109,000 won plan for the Samsung Electronics Galaxy S25 Ultra. But in March this year, they received 170,000 won for acquiring a subscriber on the same plan for the Galaxy S26 Ultra.
In March last year, dealers received a 250,000 won sales incentive for acquiring a number-transfer subscriber on the 109,000 won plan for the Apple iPhone 16 Pro Max, but in March this year, only 100,000 won went back for acquiring a number-transfer subscriber on the 109,000 won plan for the iPhone 17 Pro Max. The association explained that SK Telecom provides a monthly integrated incentive to retail shops, so the figures were compared based on the basic retail incentive.
Dealers say carriers have set sales incentives to focus on high-priced plans to maximize their profits. In fact, a look at carriers' incentives shows a large gap between plans around 100,000 won and low-cost plans. In the end, to receive more incentives, dealers have no choice but to recommend expensive plans to customers, which leads to household burdens and further depresses consumption, they said.
One carrier dealer said, "Carriers effectively give much more incentive for plans over 100,000 won, so from a dealer's standpoint, we have no choice but to recommend those plans to consumers," adding, "Carriers give more incentives for low-cost plans online or at direct-operated stores, creating a structure that disadvantages dealers." The dealer added, "Carriers keep the base incentive low while increasing incentives that are paid only when you hit certain sales counts."
Another dealer said, "Carriers should compete by loosening the common subsidy (the subsidy each of the three carriers assigns per device), but unless there is an 'event' like hacking, the common subsidy is similar to a collusive level," adding, "They are shifting the competition burden onto dealers."
Carriers say they are in a bind too. Profits are down due to the costs of dealing with the hacks, and they have limited capacity to add subscribers. The combined operating profit on a consolidation basis for the three carriers—SK Telecom, KT and LG Uplus—in the first quarter this year was 1.2926 trillion won. That was down 14.5% from a year earlier. Their combined revenue was 14.9744 trillion won, down 0.5% from the same period last year.
On top of that, Samsung Electronics raised prices for new devices and increased prices for products released a year ago, including the Fold 7 and Flip 7, so the smartphone replacement cycle is expected to lengthen further. As customers keep their lines longer, carriers see slower performance in new subscriptions and device upgrades, which also ties into profitability.
An official at the Korea National Mobile Distribution Association said, "Although the Mobile Device Distribution Improvement Act was abolished on July at the end of the month last year, carriers' sales incentives have not changed much. In fact, in many cases, management fees have decreased as customers left due to hacking incidents," adding, "With device prices recently rising as well, customers' demand to replace their devices is likely to shrink even more."