South Korea has scrapped a law banning operators from subsidizing smartphones. At a time when prices for premium models have skyrocketed, the country's authorities have decided to once again authorize this business practice.
On the one hand, subsidized smartphones allow a reduction in the purchase price of the device, even if operators recover their investment (and sometimes even more) throughout the life of the subscription to which the subscriber commits. This practice, which is very classic almost everywhere in the world, was banned in South Korea in 2014.
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Subsidies return to Korea
At that time, the aim was to create a level playing field between mobile phone providers: by preventing discounts on smartphones to attract customers, all retailers were on equal footing. The largest operators, who have significant financial resources, were therefore not at an advantage. Samsung and LG, the two regional players at the time, also benefited from this, as the end of subsidies also reduced pressure on margins.
But now the world has changed. “As the smartphone industry shifts to high-end models and smartphone prices continue to rise, it is time to reduce the burden of device purchase costs on consumers,” the Korean government said earlier this week in a statement provision abolished. Without subsidies, low-income customers are clearly financially unable to buy the most expensive cell phones.
Is that good or bad? Ultimately, these customers are only better off because they will probably have paid significantly more for their smartphone at the end of the subscription period. In any case, the lifting of this ban should allow greater competition between operators and manufacturers.
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Source: The Register