News Analysis; Abolition of Handset Subsidies Leave Sales Outlets Scrambling for Ways to Survive

Korea Times (Seoul, Korea), June 3, 2000 | Go to article overview

News Analysis; Abolition of Handset Subsidies Leave Sales Outlets Scrambling for Ways to Survive


As the ban of handset subsidies went into effect from Thursday, distribution outlets and local sales shops are undergoing a drastic change in market conditions that would reshape the mobile-phone industry at large.

In a surprise move, the Ministry of Information and Communication slapped the controversial ban on subsidies in a bid to cool off the overheating mobile market late last month, which would affect 10,000 distribution channels of mobile-phone handsets.

Thanks to the ban, local distribution channels are scrambling to tackle the dwindling demand since the handset price hike of as much as 300,000 won is throwing a cold water on the new subscription figure.

Analysts said the decade-old distribution structure, which relied on the exclusive contract between sales shops and mobile-phone carriers, may lose its ground.

The initiative maintained by mobile carriers in marketing certain mobile handset models are also subject to change as manufacturers are forced to act aggressively to grapple with the slackening demand from users.

Handset manufacturers used to be the happiest free riders of the feverish growth of the mobile market since they recouped sizable revenues and profits as carriers poured marketing money in the form of handset subsidies to boost the number of new subscribers.

The giddy period for handset makers may be over since they have to find new channels to handle the growing inventory.

Last week, major distribution outlets across the nation adopted the obvious stop gap measure to hedge against the much-feared dry-up of demand.

A host of sales shops opened temporary subscriptions without having users sign up for the mobile service. The measure was to secure as many as cheaper handsets with subsidies before the ban went into effect and the initial subscription fee skyrocketed.

The problem, however, remains unsolved as the ministry's decision was not a simple reduction of handset subsidies but an outright scrapping.

From now on, new subscribers will be required to foot the bill for the pricey handset models up front, a burden that will choke the mood for handset subscriptions in a fatal way.

It is understandable that distribution outlets are almost panicking to seek ways to steer out of the crisis. …

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