The government has rolled out a series of support measures for mobile virtual network operators (MVNOs), including expanded spectrum fee discounts and lower wholesale rates, but the market mood remains challenging. As the three major mobile carriers push integrated 5G and LTE plans and handset purchase support measures, the market formula that "low price equals MVNO" is also being shaken.

Support measures expand but MVNO subscribers decline net; handset subsidy competition adds burden

The government is expanding support measures to reduce cost burdens for smaller MVNOs, the telecoms industry said on July 13. The Ministry of Science and ICT recently decided to raise the spectrum fee discount rate for smaller MVNOs to 90 percent from 50 percent and extend the discount period by 3 years. Spectrum fees are costs borne by telecoms operators in exchange for using radio waves. Smaller MVNOs received discounts of 20 percent last year and 50 percent this year, and were set to pay the full amount next year.

Wholesale rates were also cut. Through a previously announced plan to strengthen MVNO competitiveness, the ministry decided to lower wholesale data rates and expand bulk purchase discounts. As a result, the pay-as-you-go wholesale data rate fell to 0.82 won per 1MB from 1.29 won. The ministry said adding the bulk purchase discount could deliver an effective cut of up to 52 percent.

An MVNO industry official said the spectrum fee discount and wholesale rate cut help reduce burdens for smaller MVNOs, but added that easing costs has not immediately led to a recovery in subscribers or an improvement in profitability.

An outflow from MVNOs has recently emerged in the number portability market. In last month's number portability market, MVNOs recorded a net outflow of subscribers to the three major carriers. Subscribers at SK Telecom, KT and LG Uplus rose by a net 12,118. Over the same period, MVNOs fell by a net 12,118.

The background to the MVNO outflow lies in competition over handset purchase support. The industry 분석es that a smartphone purchase promotion run by Samsung Electronics from early June stimulated demand for handset upgrades. It also attributes the trend to strengthened handset purchase support policies and intensified competition among carrier retail channels to attract subscribers, leaving smaller MVNOs with weaker financial capacity behind in marketing competition.

A telecoms industry official explained that the number portability market is sensitive to handset upgrade demand and competition in marketing expenses, including subsidies. The official said MVNOs find it difficult to compete with the three major carriers in handset support and offline distribution networks.

Major carriers expand unified plans, shaking MVNO price competitiveness

MVNOs also do not have a clear competitive edge in pricing plans. LG Uplus introduced unified 5G and LTE plans last month, and SKT and KT also entered a unified plan structure from this month. The three carriers removed the distinction between 5G and LTE and simplified plans around data allowances and speed. They also provide a data safety option (QoS) as standard even in low-priced plans.

MVNOs have the advantage of lower basic fees, but they lag the three carriers in handset purchase support, bundled wired and wireless services, membership programmes, customer centres and security investment. In particular, customers using family or internet and IPTV bundles may not see large real savings if they switch to an MVNO. As the three carriers expand benefits down to lower tiers through unified plans, MVNOs' core competitive strength of price appeal is expected to be further diluted.

An MVNO industry official said cheaper plans once made the reason to choose an MVNO clear, but added that MVNO price differentiation could weaken if the three carriers strengthen the competitiveness of products in the low-price segment.

Profitability is also a burden. Even if the government lowers wholesale rates and expands spectrum fee discounts, it is not easy for MVNOs to translate that immediately into aggressive plan price cuts. With competition in low-priced plans already intensifying, additional cuts could shrink margins. If they keep prices unchanged, they face a dilemma of weakening price differentiation against the three carriers.

The industry has pointed to the need for the MVNO market to move beyond simple low-price competition. It has also analysed that MVNOs need to strengthen brand trust, specialised plans, the convenience of online sign-ups and customer response capabilities. Some have also called for support measures that would enable plan price cuts for MVNOs, as the three carriers have introduced unified plans.

The government has signalled additional measures. The ministry plans to release measures to revitalise MVNOs next month. The industry expects the package to include expanded application of QoS and details related to introducing full MVNOs.

An industry official said MVNOs need support not only in low-priced plans but also in service reliability and differentiated product offerings to remain competitive.