Cell Phone Market in South Korea Faces a Bang

By Narayan Bhat

TMCnet Contributing Editor

 

 

Prices of cell phones are likely to reach a record low over the coming weeks in South Korea as mobile operators are vying among themselves to sign up a greater number of subscribers.

 

However, South Korean Times reported that telecom carriers are struggling to retain their existing consumer base, rather than add more subscribers.

 In a country where cell phone purchase is subsidized, the mobile market is shrinking and operators are finding themselves taking part in a rat race.

“Those who want to buy cellular phones are likely to take action this month with Korea's mobile operators ready to open up their wallets in a bid to sign up new subscribers,” the newspaper reported.

South Korea’s cell phone makers announced Tuesday that the domestic market had shrunk to 1.76 million units in April, down 11.6 percent from the month of March.

The decrease has been inevitable as the country's three wireless carriers spent a mind-boggling sum of money throughout the last month, attempting to rope in new clients or to retain existing ones.

For instance, the second-biggest mobile telephony service provider, KTF, went all-out to jack up the user pool of third-generation offerings featuring high-speed downlink packet access (HSDPA).

``People expect handset prices to go down further this month. And they didn't snap up new phones even though they were offered at a throw away price last month,'' the newspaper quoted an LG Electronics (News - Alert) spokesperson as saying.

``We expect things will be different in May because mobile carriers have announced the increase of legal handset subsidies. Sales are likely to rise,'' he said.

Government subsidy appears to be a primary reason behind the sudden slum in the market. In Korea, local telecom companies can provide subsidies to those who buy new cell phones after reporting the amounts in advance to the government.

``With major mobile operators setting out to shell out a big sum of money to sell their products, customers have good reason to wait for cell phone prices to go down in May,'' analysts noted.

 

Today in Korea, Samsung (News - Alert) Electronics is the leader in the mobile market.

 

According to local newspaper reports, Samsung Electronics accounted for 50.3 percent, followed by its competitor LG Electronics with 26.7 percent.

 

For mobile operators in South Korea, games are the only weapon left in their armory to strengthen their subscription base.

 

The Korea Game Development and Promotion Institute, a non-profit ancillary of the Ministry of Culture and Tourism, forecasts the market value of mobile games will increase to over 300 billion next year, up from 218 billion this year.

 

Whatever the fate of mobile operators, the mobile gaming industry is booming.

 

About 500 domestic game developers introduced over 80 games a month-- 1,000 a year in total, with several mobile games hitting a record high over the years.

 

Since the first inception of a mobile game in 2000, three main carriers-- SK Telecom, KTF Co. and LG Telecom Co. have been offering mobile games and related services to subscribers in a bid to develop new sources of income together with game developers.