SIM-free phones, budget plans gain popularity in Korea

[Image source: Gettyimagesbank]

Three out of 10 South Koreans buy open-market mobile devices and separately subscribe to mobile plans from major telecom carriers or mobile virtual network operators (MVNOs).

According to the Ministry of Science and ICT (MSI), the nation’s subscriber identity module (SIM)-free devices usage rate was 28 percent in the nation as of June 2023, up by about 10 percentage points from the 18.9 percent in June 2021 and indicating an increasing popularity in SIM-free devices.

SIM-free devices refer to open-market devices that users purchase directly without going through a telecom carrier, enabling them to choose the desired communication service. Without the restriction of a telecom carrier, there are no pre-loaded applications specific to each carrier, providing more user convenience. The separation of the payment for the device and monthly mobile bills also results in lower monthly communication expenses for consumers.

Behind the increasing popularity of SIM-free devices lies budget-friendly mobile plans from MVNOs. By carrier category, the utilization rate of SIM-free devices accounted for only 17.2 percent at the nation’s three major carriers—SK Telecom Co., KT Corp., and LG Uplus Corp.—as of June 2023, while the rate reached 91.9 percent among budget-friendly mobile plans. As of October 2023, the number of subscribers to budget mobile plans (based on online subscriptions) hit 8.6 million, increasing by more than 1.3 million compared to 2022. This significant growth in budget plan users can be attributed to increased consumer burden due to inflation and high household communication expenses.

Another contributor is believed to be the growth of online shopping malls that contributed to the activation of SIM-free device distribution, with online channels growing amid the decline of offline retailers during the Covid-19 pandemic. Many consumers also preferred to make reservations through online shopping malls ahead of the release of new iPhone models in particular.

The continuous increase in SIM-free device numbers is not positive for the three major carriers as they cannot lock the user in through carrier-specific devices compared to traditional subscriptions. “While SIM-free devices have the advantage of lower subscriber acquisition costs, there is a problem with the reduced influence of telecom companies, such as not having pre-installed apps,” an industry insider said.

But from the consumers’ perspective, it offers the advantage of increased consumer choice and convenience even if the use of SIM-free devices may not directly contribute to reduced communication costs. “The growth of the SIM-free device market is positive for the growth of the budget-friendly mobile plan market and enhances competition between telecom companies,” MSI said, predicting that the ratio of using SIM-free devices would continue to increase.

An increase in low-cost devices, as promoted by the government, combined with affordable budget plans, can lead to communication cost savings, with the availability of low-cost devices that can be used with SIM-free plans still limited in 2023.

Samsung Electronics Co. released four low-cost devices below 800,000 won ($608) in Korea in the same year, but only two of them were available as SIM-free devices while the other two were carrier-specific phones. Although Samsung plans to launch four more low-cost devices in the first half of 2024, whether the range of available SIM-free devices will continue to expand is an important variable to watch.