Affordable phone operators facing head-to-head competition with the top three telecommunication companies; is the government’s ‘consideration of affordable phones’ over?

Budget phone operators exempted from negotiations on radio wave usage fees and network wholesale fees
Goviona, government benefits will be phased out starting next year
Government sanctions against mobile carriers in full swing → Opportunity for budget phone operators?

The budget phone industry is expected to face worsening profits starting next year. This is because payment of radio wave usage fees, which had been exempted so far, will begin in earnest from next year. However, some predict that the government is likely to continue the so-called ‘policy of looking after small and medium-sized mobile phone operators’ to keep the three domestic telecommunication companies in check.

Starting next year, the advantage of being a budget phone operator will disappear

According to the industry on the 11th, the Ministry of Science and ICT will maintain the radio wave usage fee exemption that has been maintained since the introduction of budget phones until this year. Afterwards, small and medium-sized budget phone operators will have to pay 20% of the radio wave usage fee from next year, 2026% from 50, and 2027% from 100. The radio wave usage fee is a management tax levied on users of radio wave resources such as frequencies. Approximately 1,260 won is charged per subscriber per quarter, and the entire amount is borne by the business operator. It is the same price currently paid by mobile carriers (hereinafter referred to as mobile carriers). 

Due to the discontinuation of tax reduction benefits, a red light has been raised on the operating profits of budget phone operators. Currently, a small business with 10 subscribers must pay about 5 million won per year, and a business with 30 subscribers must pay about 15 billion won. According to the Budget Phone Association, as of July of last year, there were about 7 million small and medium-sized budget phone subscribers, and when calculating the annual radio wave usage fee, the total amount was about 381 billion won. Considering that the average annual operating profit of budget phone operators is 195 billion won, huge losses are inevitable.

In addition, negotiations with network wholesalers also encountered obstacles. Originally, the government took over the negotiation of network wholesale prices for budget phone providers, but starting next year, wholesale prices will be determined through individual negotiations between network providers and budget phones. The method has been changed to one in which the government intervenes when it is judged that fair competition has been impaired.

The budget phone industry is emphasizing that government support must not be cut off in order for the budget phone market, which has grown as a rival to large mobile carriers, to continue its growth. An official said, “Considering the average sales per subscriber, there is a significant difference in budget phones compared to the three domestic telecommunication companies. In order to increase the viability of the budget phone market, reasonable adjustments such as differential sharing of radio wave usage fees are necessary.” reported.

Radio wave usage fee exemption may be extended

However, hope is not completely lost in the budget phone industry. This is because the government’s sword has been hitting mobile carriers since President Yoon Seok-yeol directly pointed out price fixing and false advertising by domestic carriers last year. In fact, on the 11th, the Fair Trade Commission announced that it would soon take sanctions against mobile carriers for their alleged collusion of sales incentives. According to the industry, the investigation has already been completed and the review report is scheduled to be sent. In relation to this, an official in the telecommunications industry pointed out, “Considering that the government is actively promoting the creation of a fourth mobile carrier and is not stopping sanctions against the three domestic telecommunications companies, there is a possibility that the policy of exempting radio waves from budget phones will be extended.”

Some are mentioning the possibility that the ‘domestic mobile carrier price fixing case’ will ‘fizzle out’ as has been the case under previous governments, but considering recent trends in the banking sector, that possibility seems very slim. Currently, Korea’s four major banks are suffering from the ‘allegations of collateral loan collusion’ pointed out by President Yoon in February of last year. The Fair Trade Commission recently announced that it would send review reports corresponding to the prosecution’s indictment to the four major domestic banks, including KB Kookmin, Shinhan, Woori, and Hana Bank, and hold a deliberation as soon as possible to determine whether they violated the Fair Trade Act and the level of sanctions. . A political official said, “It is extremely rare for the Fair Trade Commission to send a review report in less than a year after starting the investigation in a large-scale case involving a bank belonging to a leading domestic company.” He added, “The government has made up its mind and drawn its sword.” I also interpreted it.