MEX

While the European mobile operators are all either trying to cut down on mobile phone subsidies in general, or move them away from pre-paid phones to the much more lucrative post-paid business customers, the Korean mobile operators got hit with a ban against subsidies on mobile phones, that came into effect from June 2000.

Nine months later, the two largest Korean mobile operators merged with the two smallest operators, bringing the number of operators down from 5 to 3. [To have] three mobile operators is unusual in a country with a mobile penetration of 61% and around 30 million mobile subscribers – but, together with the subsidisation ban – this has paved the way to three financially healthy mobile operators. This consolidation of mobile operators will be a necessary step for many European countries, where there are simply too many operators competing for customers and basically not making money.

The solution that all three Korean mobile operators went for, was to split their subscription offerings into sub-brands, specifically targeted at different age and gender segments of the mobile users. And we are not just talking about different price plans here, as we have seen in Europe – but actual brands with their own portals, marketing, content- and services offerings and of course price plans, for pre-teens, teens, young adults, women and so on…

The results have been unique! After the first year since the ban on phone subsidies, over 9 million mobile customers had switched to 2.5G mobile phones, ARPU has risen dramatically as the new mobile services and content in the different sub-brands is used regularly by almost all mobile users and the mobile operators EBITDA margin rose to between 30 percent and 40 percent, where it had been in red figures for two of the operators only the year before. The unique combination of the sub-brands and the vast amount of content and mobile services that the sub-brands can offer have been instrumental in getting the mobile users to discard their 2G mobile phones and buy the new non-subsidised 2.5G mobile phones.

The ban on mobile phone subsidies, the new sub-brand strategies and the results after the first year of 2.5G in Korea, are all described in detail in Strand Consults most comprehensive report to date ‘The Korean Mobile market, a window to 3G’.