Budget smartphones see steady growth

SEOUL - The demand for budget smartphones has been steadily on the rise, according to industry sources.

Samsung recently launched the Galaxy S4 Mini at 550,000 won (US$640), almost half price of the 899,000 won Galaxy S4.

"Samsung has rolled out low-end handsets such as the Galaxy S3 mini and S4 mini, along with its flagship models, Galaxy S3 and S4. The Galaxy S4 mini will be available at retailers soon," Samsung spokesperson Koh Ho-jin said.

In Korea, end users usually buy phones at telecom agencies or dealers. Handsets available at retailers or electronics stores are generally low-end products, and users can choose the telecom operator they prefer.

The are 15 such phones on the local market, including Samsung's Galaxy M style, LG's Optimus L9, Apple's iPhone 4S, iRiver's Ulala, and Google's Nexus 4.

Launching low-cost phones appears to be a global trend. Apple is also widely believed to be unveiling its budget iPhone 5C on September 10. Targeting emerging countries like China, the phone is estimated to be around US$450 (S$570), according to an industry source, who added, "Depending on the deal with China Mobile, the price may go down further."

The number of subscribers using mobile virtual network operators has gradually risen. Instead of owning their network infrastructure, the operators rent networks from telecom operators such as SK Telecom, KT and LG Uplus, and provide mobiles services at a lower price.

According to the Ministry of Science, ICT and Future Planning, the number of MVNO users topped 2 million, or 3.7 per cent of total mobile services as of August 31. It has been 10 months since the figure hit 1 million last October.

Still, it will take some time for the low-end phones to take up a large segment of the mobile market. CJ HelloVision, which has the largest market share with 500,000 subscribers, is still operating in the red.

"For CJ HelloVision to break even, they should have at least 1 million subscribers. That looks set to take two more years," said Seoul-based Shinhan Investment Corp. analyst Sung Jun-won.

"Though the operator has offered the same services as other operators like KT and SK Telecom, users do not think that way."

The government has taken several actions to boost the MVNO businesses for the past years as part of measures to lower communications costs.

Last Wednesday, the Ministry of Science, ICT and Future Planning gathered MVNOs, phone makers and distributors to form a joint group where the operators can make a group purchase of handsets from manufactures at lower prices.

The director general of telecommunications policy bureau's Lee Dong-hyung said, "This joint group is expected to help resolve difficulties of MVNOs, and to expand the options of end users."