Korean telecoms preparing large-scale iPhone 6 launch events

[kylera]

Some background: In the beginning of October, a new law came into effect which forced cellphone manufacturers and telecoms to a set subsidy limit of up to the equivalent of $300, and that too only available if a user signed up for the most expensive monthly plan ($140 after taxes, unlimited calls and texts, 25GB of LTE data, followed by unlimited at 3G speeds). This has resulted in a lot of people saying if they're going to pay out the nose for a smartphone, they might as well get the iPhone, as the iPhone in Korea historically has had little subsidies to begin with, so only Apple fans or regular users opted for them. On top of that, Apple is currently the only manufacturer that sells off-contract unlocked phones in Korea, so anyone seeking alternatives often have to purchase phones outside Korea and bring them in, or sign a 2 or 3-year contract.

The telecom market in Korea is a tri-poly consisting of SK Telecom, KT and LG U+ (U plus). SKT has a 50% market share, followed by KT's 30% and LG's 20%. There are low-cost MVNOs that rent spectrums from these three, but they are irrelevant in the article.

Korean article source: http://news.naver.com/main/read.nhn?mode=LSD&mid=shm&sid1=105&oid=028&aid=0002251343

Translated article:

The three major telecoms have entered stiff competition to woo the hearts of the estimated 3 million iPhone diehards. Following the first round of preorders on October 24, a second round of sales will take place on October 31. Amidst planning extravagant launch events, the three telecoms are now conducting psychological warfare, trying to scope out how much each of them will provide in subsidies.

LG U+ (U plus) will hold a launch event at 3 locations simultaneously. The first person to sign a contract will walk away with a giveaway bag of goods worth $2000, and the first 800 to sign up will be eligible for a lucky draw of goods such as a 47-inch television worth $1000 and a projector worth $800. One location in Seoul will feature an autograph and fan event with a popular girl group.

At the same time, KT will hold a launch event in Seoul. KT has invited 200 people who have pre-ordered an iPhone, and everyone will be given iPhone 6 accessories. Six people will be chosen at random and given MacBook Airs or Mac Minis. All participants will be given refreshments while they're waiting.

SK Telecom will hold a launch event in Seoul titled "Getting 6 while Lying Down." Doors will open at 5:30AM on the 31st, and all customers will be given an iPhone case designed by fashion designer Jeremy Scott. The first 177 customers will be eligible for a lucky draw of digital cameras, coffee machines and beam projectors. As part of minimizing discomfort for people waiting in lines, SKT employees will provide single-seat sofas and refreshments.

Meanwhile, behind the scenes, the telecoms are now surreptitiously scoping out what their competitors are doing regarding subsidies, which will be unveiled early in the morning on October 31. One telecom official said, "As LG is willing to practically give away the phone for free, competitors will be forced to match that." LG recently unveiled what it called the "Zero Club," where customers who have pre-ordered will be able to purchase the phone at cheaper rates, trade their older phones in, and sell their iPhones back to the telecom after 18 months and pay very little in the long run.

Another telecom official said, "This is all part of winning as many of the 3 million iPhone fans as possible. Telecoms postulate that iPhone users will be swayed by newer iPhone models. SKT and KT will be fighting to keep their subscribers from switching carriers, while LG will be fighting to bring customers over."

 

[benzslrpee]

interesting.

i noticed your location is in Seoul so maybe you're a good person to ask this question to... i've always read / been told the reason Apple had low market share in Korea was due to nationalistic pride?

never knew about the substantial price differential due to subsidies offered which makes way more economic sense

 

[kylera]

interesting.



i noticed your location is in Seoul so maybe you're a good person to ask this question to... i've always read / been told the reason Apple had low market share in Korea was due to nationalistic pride?



never knew about the substantial price differential due to subsidies offered which makes way more economic sense

I wouldn't necessarily say nationalistic pride. There is some element of that, but it's not the sole or primary factor.

Historically, Apple in Korea has had low market share because of high price and lack of compatibility with Windows. We're talking about the pre-Intel days here, though this still somewhat applies today. Macs were in a niche market for publishers and designers, so anyone who had a Mac was considered a publisher, designer or someone who simply had too much money to spend.

(As an aside, publication is also why G4s still command a hefty price here - a decent one can go for anywhere between $400 to $800 depending on specifications - and almost every publication house still to my knowledge uses QuarkXPress)

Another factor is that Samsung has an immense service network. At least in Seoul, you are always about 20 minutes away from a service center by public transportation. So people thought Samsung is great because they can get their stuff easily serviced compared to other companies. In comparison, Dell has only one service center in the entirety of the nation. Apple's network, albeit third party, has been expanding thanks to iOS.

Now, numerous factors are playing against Samsung and local brands. The first is the Internet. More and more people are buying stuff off of Amazon and other online shops based in the US because even after shipping, handling and customs, the same thing is cheaper than if they bought it in Korea. They feel that Samsung is treating them as foolish sheep in Korea while undercutting prices abroad.

On a related note, the Internet has also generated awareness for other brands. For example, the furniture market here went into red alert when IKEA announced they would open a flagship store in the outskirts of Seoul. People were getting fed up with overpriced, substandard furniture, and when they learned about Ikea, they started to go that direction.

The second factor, specifically for smartphones, is the subsidy laws. Samsung was able to secure such a dominating presence because they funneled money and commissions to stores and telecoms. Apple didn't do that, so iPhones were treated as luxury, extravagant phones - why pay out the nose for something when you can get something that does the exact same thing for a fraction of the price - this was the thought process of customers.

But a combination of low subsidies, fueled by knowledge that people in the US could get a flagship Samsung for 200 dollars out of pocket with any choice of plans AND the fact that the MSRP of the same phone had a substantial difference in Korea and the US changed people's perceptions. They realized that between a Samsung Galaxy S5 and an iPhone 6, if they are going to pay out the nose for ANY phone, might as well go Apple.

Either Apple, or lower-cost phones made by Huawei and Xiaomi.