Industry Trend Analysis - Universal Mobile Package To Favour MVNOs - SEPT 2017

BMI View: A universal basic mobile package and fewer bureaucratic hurdles will largely benefit MVNOs, as their profits from basic services will be less impacted and barriers for new entrants will be lowered. This development will have a polarising effect, where MVNOs will remain most competitive in basic packages, while network operators will shift their focus to premiumisation and advanced services.

The South Korean government has adopted a 'universal' mobile package that all operators will have to offer in 2018, as part of its ongoing efforts to reduce the cost of mobile services. The revised telecommunications law describes a basic universal mobile package with a data allowance of between 1 to 1.3 GB to be priced at a fixed KRW20,000 (USD18) per month. This is a significant improvement for consumers, as the existing universal package is priced at KRW30,000 (USD27) with less data. Furthermore, the revision of the law will allow more firms to provide mobile and internet services, by simplifying the bureaucratic process to enter the market. These two key changes will increase competition, albeit mostly at the low-value end of the market.

We expect the revision of the telecommunications law and the move towards a new basic universal package to be a boon for mobile virtual network operators (MVNOs), as they specialise in provision of basic packages at cheaper rates. As such, we do not expect their profit margins to be heavily affected. Network operators are already under pressure from revenues per user (ARPUs) that have fallen from about USD35 in Q114 to USD31 in Q117 on average. They will see their slim margins on basic packages decrease further. Moreover, with bureaucratic hurdles simplified and barriers to entry lowered, we expect more MVNOs to be able to enter the market and be competitive.

3G/4G Still Holds Growth Potential
Mobile And 3G/4G Forecasts
f= BMI forecast. Source: operators, BMI

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