Mobile carriers up marketing ante in wake of SKT hacking

The competition among telecoms is surging as users switch from SK Telecom, the nation's largest, in the wake of its data hacking scandal, prompting new all-out marketing wars just days before the law limiting sign-up incentives is lifted.

A sign is seen at a telecommunications store in downtown Seoul on July 7, reminding consumers of the waived early termination fees for subscribers leaving SK Telecom. [YONHAP]

A surge in telecom competition has erupted in Korea after SK Telecom (SKT) began waiving termination fees for subscribers leaving the service in response to a recent hacking scandal, triggering aggressive marketing from rivals and record numbers of users switching carriers just days before a law restricting sign-up incentives is lifted.

On Thursday, a telecom store in central Seoul had a sign on its entrance that read, “Up to 2 million won [$1,450] support for porting.” Right next to it, another sign attempted to sway consumers with a reminder: “Full penalty waiver for SKT users.”

Also on Thursday, a store in Gyeonggi had a banner hung up that read, “Sign up for internet, television and mobile phone and receive up to 1 million won in cash, plus a television, cordless vacuum cleaner or air conditioner as a gift.”

One regional headquarters of KT recently instructed employees to change their KakaoTalk profile photos to content related to the “SKT penalty waiver.”

A customer service script reportedly distributed to some KT retail stores even included lines encouraging SKT users to transfer their number with phrases like, “If you wait, your whole life might be hacked.”

The telecommunications market is heating up after SKT, the country’s largest mobile carrier, announced it would waive early termination fees for customers who cancel their contracts by Monday as part of its efforts to take responsibility for the hacking incident in April.

A KakaoTalk profile photo of a KT employee showing content related to the SK Telecom penalty waiver [JOONGANG ILBO]

Since the 2014 implementation of the Mobile Device Distribution Improvement Act, overt illegal subsidies and blatant attacks largely disappeared, and competition was mostly limited to a few “hot spots” offering extra bonuses. But the SKT hacking incident seems to have reignited an all-out battle.

More than 75,000 users left SKT between July 5, when the penalty waiver began, and Thursday, according to industry sources. The total number of users porting during that period was approximately 130,000 — an average of more than 25,000 per day.

That’s more than double the average of 10,000 per day seen before the SKT hacking incident.

“I don’t understand how anyone can offer subsidies of 1 million or even 2 million won,” said a telecom store employee. “With the hacking incident setting the stage for competition, it feels like we’re back to the days of irresponsible marketing.”

A telecommunciations store in central Seoul with a sign on its entrance that reads “Up to 2 million won [$1,450] support for number transfer″ is seen on July 10. [JOONGANG ILBO]

As the situation escalated, the Korea Communications Commission summoned marketing executives from SKT, KT and LG U+ last Monday to ask them to refrain from excessive competition. But the overheated atmosphere on the ground has shown no signs of cooling.

Even after SKT’s penalty waiver ends on Monday, fierce competition for customers is expected to continue. Starting July 22, the Mobile Device Distribution Improvement Act will be repealed, removing the cap on discounts for subscribing.

In addition, preorders for Samsung’s new Galaxy Z Fold 7 and Z Flip 7 will begin on Tuesday.

Even when the Mobile Device Distribution Improvement Act was in effect, the release of new Galaxy or iPhone models intensified the so-called porting wars. This time, the combination of the SKT hacking crisis and the repeal of the law could push the competition even further.

“The Mobile Device Distribution Improvement Act suppressed competition, and there wasn’t much change in the market share of the three major carriers,” said an industry insider. “But now, the top player is in crisis, and the law is going away, so the challengers have a major opportunity. We could see an unprecedented level of competition.”

A sign is seen at a telecommunications store in downtown Seoul on July 7, reminding consumers of the waived early termination fees for subscribers leaving SK Telecom. [YONHAP]

Korea Ratings, a credit rating agency, echoed the sentiment in a telecom market outlook report released Thursday, stating, “As the leading carrier — with the most influence and financial resources in the industry — now has different interests than its competitors, it’s become very difficult to expect a mutually cooperative balance.”

While the intensifying competition between carriers may appear beneficial for consumers looking to buy new phones, concerns are also growing that past problems may re-emerge. These include false or exaggerated advertisements, or shady sales tactics that lure customers with subsidies only to lock them into expensive plans that are not actually cost-effective.

Another concern is the growing information gap, which was one of the reasons for implementing the Mobile Device Distribution Improvement Act in the first place. It could lead to some consumers suffering relative disadvantages, while heavy spending on marketing may ultimately result in price hikes or lower service quality in the long run.

“Telecom companies aren’t going to just lose money,” said a telecommunications store owner in Gyeonggi. “If marketing competition through subsidies and giveaways intensifies, they’ll obviously try to recover profits in other ways. Excessive competition is risky not only for consumers but also for small business owners like us who run retail stores.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY YUN JUNG-MIN [lim.jeongwon@joongang.co.kr]