Mobile carriers face end to 20-year boom

Mobile carriers face end to 20-year boom

Mobile telecommunications has been one of those golden-goose industries that has produced several trillion won in annual profit over the past 20 years.

That may change this year when sales of the nation’s three major mobile telecommunications companies – SK Telecom, KT and LG Uplus – are expected to fall from 2014, industry sources said.

“Following a sales drop from the wired communications business, such as home phones and ultra-high-speed Internet, the mobile telecom business will likely shrink in size this year, reducing sales of all three major carriers for the first time,” an industry expert said.

The sales of market leader SK Telecom are estimated to remain at about 17 trillion won ($14.8 billion) this year, down slightly from 17.1 trillion won in 2014. Nos. 2 and 3, KT and LG Uplus, have seen their sales fall compared with a few years ago, and the downturn is expected to continue this year, sources said.

The domestic mobile market is saturated. The number of mobile phone service subscribers has reached 53.28 million, exceeding the nation’s population of 51.43 million, forcing carriers to resort to zero-sum competition of eroding the customer base of one another. A critical blow came with the introduction of the optional fee discount system in April, which allows subscribers to choose between a subsidy at the time of purchasing phones or a monthly fee discount of 20 percent for two years. Most users are choosing the latter.

The industry expects the number of consumers who opt for discounted fees to top 10 million in two years, pulling down the telcos’ combined sales by 1 trillion won. The three carriers are moving to make up for the losses by curtailing investment to around 6 trillion won this year from 8 trillion won a few years ago.

Experts advise otherwise. “If the industry reduces its investment, the nation’s mobile communications that boast a world-famous connection speed will see its competitiveness sharply weaken,” Lee Sang-chul, vice chairman of LG Uplus, told the Chosun Ilbo daily. “It’s time for domestic carriers to actively develop new revenue sources, including the Internet of Things and video services, instead of remaining content with income from monthly subscription fees.”


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