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MVNOs Benefit from South Korean Network Sales Ban

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The suspension order on South Korea's mobile networks for violating handset subsidy rules are having only a modest impact, as customers are choosing to buy from their MVNO partners instead.

According to the Korea Telecommunication Operator Association, since the KT and LG U+ sales suspension started March 13, subscriptions for MVNO services have surged.

Both CJ Hellovision, E-Mart and Homeplus all saw increases in their sales figures once the sales ban came into effect on the main mobile networks.

However, with sign-ups reaching just 6,572 on Monday, and that the MVNOs rent capacity from the bigger networks, the impact is expected to be minimal.

The main risk, as recently noted by in a research note by KIS, is if the MVNOs are able to raise their market share over time to more than 8 percent, at which point price pressure could intensify on the big three networks.

That threshold is not predicted to be reached until 2016 though. From that point, MVNOs should see the government's policy support weaken, subscriber churn go up and mobile carriers keeping them in check as rivals.

In the meantime, the MVNOs can benefit from a short burst of sales while the regulator intervenes to clamp down on handset subsidies.

On the web: JoongAng Daily

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Tags: mvno  Korea