Handset Subsidy: A Force for Good or Bad?

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1Q 2013 | IN-1015873

South Korea Prohibits Three Mobile Operators from Signing New Subscribers



South Korea made telecom news recently, as a spat over “excessive handset subsidies” emerged between mobile operators; the regulator, the Korea Communications Commission (KCC); and handset manufacturers. The KCC even slapped approximately one-month “no new subscriber sign-up” prohibitions on all three mobile operators, SK Telecom, KT, and LG Uplus.

On the face of it, handset subsidies look pretty straightforward: the subsidy reduces the barrier for end-user handset ownership, and the operator recoups the subsidy through the lifetime of the contract. Yet handset subsidies do have their consequences. The end-user tariff has to recoup the handset subsidy, generate revenue for the running of the network, secure future cash flow for capital investment, be competitive against other tariffs in the market, and, just as importantly, make a profit for the operator’s invest...

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