South Korea operators lost momentum in 5G business against China

Mobile operators in South Korea have lost their momentum in the 5G business due to less demand for the new technology from customers because of high cost and quality concerns, a Reuters report indicated.
SK Telecom 5G powers TV broadcast in Korea
SK Telecom, LG U+ and KT launched the world’s first 5G services exactly a year ago. Samsung Electronics, mobile phone manufacturer, launched the first 5G phone around the same time.

But after an early growth spurt driven by generous subsidies for 5G smartphones, the hype has almost vanished as customers question the value of pricier handsets and sometimes-spotty 5G services, Reuters reported.

Telecom operators such as AT&T and Verizon Communications had also claimed that they were the first to launch 5G mobile services in the world. But AT&T and Verizon could not make much progress in the 5G business due to spectrum issues.

China Mobile says its 5G subscriber base reached 15.399 million in February 2020 as compared with 6.736 million in January 2020.

South Korean carriers added about 400,000 new 5G customers in February, government data showed, an increase from 290,000 in the preceding month. But analysts saw that as a subdued number given the launch of Samsung’s S20. And it was less than half the 880,000 recorded in August.

The 5G market started slowing in November as operators curtailed marketing spending and customer complaints grew about choppy network connections and a lack of differentiated content.

Analysts said operators and handset makers have to rely on fresh subsidies to revive demand, eroding their bottom lines

Now the coronavirus crisis is hitting demand hard.

Sales of Samsung’s new 5G-ready Galaxy S20 phones, which were launched at the end of February with prices as high as 1,595,000 won ($1,308.81), are down about 30 percent in South Korea compared with early sales of its previous model S10 series.

The 5G slowdown in South Korea shows how the coronavirus could hobble the take-off of the technology globally. Smartphone makers, including Apple, which is currently scheduled to launch 5G phones in the fall, had been counting on 5G for a sales boost after two years of industry-wide contraction.

Plans for futuristic services such as self-driving cars and fully automated factories and cities could also be affected by 5G delays. Spain, Italy, France and Austria have postponed auctions for 5G spectrum because of the coronavirus.

China’s 5G sales, by contrast, are expected to recover in the second quarter, boosting Chinese companies including Huawei, said Tom Kang, an analyst at research firm Counterpoint.

Xiaomi, which recently unveiled a new flagship 5G smartphone, said it is seeing signs of a sales recovery in China as the country starts to return to normal following the coronavirus lockdown.

Samsung has only a small presence in China and sells most of its premium 5G phones in other markets.

Samsung had counted on South Korea to take an early lead in the 5G phone market last year. It was expected to expand 5G phone sales in other major markets like the United States and Europe, ahead of Apple’s iPhone launch, but the coronavirus is setting back such plans, analysts say.

U.S. retailers are already offering about 20 percent discount for online sales of the S20, which was launched in America just a month ago. Samsung’s unlocked S20 devices are being sold at $799.99 on Best Buy and, about $200 discounts from its original $999.99 price.

Samsung plans to launch more affordable 5G smartphones such as the A71 series in Korea in the first half of this year.

“Consumers are cautious about buying new phones, because of little perceived differences between 4G and 5G phones and price hike from 4G phones, especially with the virus dampening consumer sentiment,” said Kim Hoi-jae, an analyst at Daeshin Securities.