Phones That Borrow Mobile Telecommunication Businesses’ Lines But Do Not Receive Benefits from Them Are at Crossroad

Phones that borrow mobile telecommunication businesses’ lines but do not receive benefits from them(Al Ddeul Phone) were able to get over 10% in mobile telecommunication markets after 4 years.

They have contributed a lot in reducing telecommunication fee in households and started to make profits also. However it is still too early to celebrate since future is still unclear for them. It is interesting to see which way will phones that borrow mobile telecommunication businesses’ lines but do not receive benefits from them decide to take in upcoming year.

◊Huge Contribution towards Reducing Telecommunication Fee but Also Feels Sense of Crisis on Its Growth

South Korean Government officially introduced phones that borrow mobile telecommunication businesses’ lines but do not receive benefits from them in July of 2011. After 4 years and 4 months, phones that borrow mobile telecommunication businesses’ lines but do not receive benefits from them were able to get over 10% (5.84 million people) in mobile telecommunication markets’ shares. This is 2 years faster than France and Spain that have similar mobile telecommunication environments as South Korea. South Korean Government’s supports such as reduction of wholesale price, exemption from fees for using radio wave, sales by post offices brought great help. ‘10%’ is considered as a symbolic number that is able to grow naturally in markets and this means that this kind of phone has become a respectable member in mobile telecommunication markets

Effect from reduction of households’ telecommunication fees was huge. APRU (Average Revenue Per User) that a member pays to mobile telecommunication business is $30.92 (36,481 KRW) while it is only $13.58 (16,026 KRW) for Al Ddeul Phone. Al Ddeul Phones are about 46% cheaper which means that one can save $203.41 (240,000 KRW) per year if he or she switches to Al Ddeul Phone.

There was also profit from Al Ddeul Phone. Certain small and medium businesses that have started on this business even before Al Ddeul Phones were introduced are likely to make surplus this year. It is estimated that 6 businesses will make about $84,961 ~ $1.7 million (100 million to 2 billion KRW) in surplus and there will be a surplus business from a huge corporation. This is all because they’ve collected early amount of investments from distribution network and business data processing. However most of businesses are making losses. It is estimated that there will be $50.6 million (59.6 billion KRW) in loss per year, but it is comforting that amount of loss was greatly reduced from last year $81.8 million (96.5 billion KRW).

Although there is fast growth, sense of crisis on growth being stagnant starting from New Year is significant. Looking at countries that have introduced Al Ddeul Phone earlier than South Korea, their shares remain at beginning of 10% as England, France, and Spain have 12%, 11%, and 12% respectively. As a country that surpassed 10%, there is not much room to grow. Merging of SK Telecom and CJ Hello Vision is one of most important variables, and industries requested for additional support so that they can achieve 15% in shares.

“If we look at process of growth of foreign markets on phones that borrow mobile telecommunication businesses’ lines but do not receive benefits from them, it usually tends to reach its peak and stabilize itself somewhere below the peak.” said an executive from an Al Ddeul Phone industry. “Because we need to maximize our peak, we really need South Korean Government to actively support us even in 2016.”

◊Al Ddeul Phone Businesses Look for Way Outs through LTE and Diversification of Business

South Korean Government is planning to keep supporting Al Ddeul Phones even in 2016. Ministry of Science, ICP and Future Planning, which is a competent authority, is planning to provide foreign roaming service for Al Ddeul Phones sometime in January or February. Because roaming requires contracts with foreign telecommunication businesses, it was difficult to provide roaming service to Al Ddeul Phone industries. It is expected that if roaming service that costs about $8.48 (10,000 KRW) per day is provided, it will greatly contribute in improving images of Al Ddeul Phones.

Al Ddeul Phone industries are looking for way outs through expansion of LTE members and diversification of business. LTE’s profitability is very good since its fee is high. To attract young-aged members, 3 mobile telecommunication businesses need LTE. To increase LTE members which are about 14% of all members, they are going to start variety of marketing such as releasing new rate system and others. LTE payment in advance rate system that was first introduced in September and October by KT and SK Telecom respectively will also be expanded.

They are currently working on diversifying businesses. Especially there are many services in IoT field that are connected to Al Ddeul Communication. OKPOS, which is number 1 in Point of Sales System (POS), changed its communication line to Al Ddeul Phone since November. Fine Digital, which is a navigation industry, will release navigations and vehicle control services that use Al Ddeul Communication in first half of 2016. Current Al Ddeul Phone industries such as Eyesvision, Free Telecom and others are also planning to enter IoT field even more.

A possibility of M&A is being brought up as additional M&A other than CJ Hello Vision is expected. Number of businesses that sold Al Ddeul Phones increased from 27 last year to 38 this year. However members were heavily leaning towards one side. 6 major small and medium industries took 478% of small and medium businesses.

“It is true that there are too many businesses compared to size of markets.” said a person from Al Ddeul Phone industry. “A process of eliminating industries with no competitive edge will start soon.”

Staff Reporter Kim, Yongjoo | [email protected]