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Apple's iPhone 6 Sales are on Fire in South Korea and it has Government Regulators Screaming Foul Play

10. News
Last Wednesday we reported that Apple's thrashing of Samsung on its home turf could translate to outselling the Galaxy Note 4 by tenfold. On Saturday we noted that loyal Apple fans stood in the cold rain in Korea to get their hands on the iPhone 6. That kind of news could definitely get under Samsung's skin and did. After a great weekend of Apple iPhone 6 sales, the government promised to punish Apple resellers for illegal subsidies.


It's being reported today that South Korea's three telecommunications companies are expected to again face punitive measures by communications regulators for allegedly providing subsidies over the legal limit for Apple's iPhone 6 and 6 Plus.


The new iPhone created a stir as soon as it hit Seoul last Friday, with die-hard Apple fans waiting in long lines in front of telecom retail stores in the wee hours to get their hands on the device.



The report notes that SK Telecom, KT and LG Uplus saw the new iPhone as an opportunity to shake things up in the telecom market in which the three companies struggled to attract new customers with Samsung Electronics' Galaxy Note 4 or Galaxy S5.


Chinese low-cost phones such as the Huawei X3 may have grabbed attention, but not enough yet to gain momentum in the market.


Amid the waning popularity of LG Electronics' G3 and the enactment of a new law on mobile phone subsidies to regulate telecom subscriptions, the iPhone 6 came to the rescue as the first iPhone did in 2007, and again as the U.S. tech giant launched its third-generation smartphone in 2009.


Apple's iPhones have not only changed the way people communicate, but have also boosted the value of the telecom industry following its standstill during the 2G communication era.


However, the new iPhone 6 has come at a price to the industry as the three companies went back to old habits ― overusing hype, ignoring the law and competing to give unfair subsidies to new customers.


The Ministry of Science, ICT and Future Planning and the Korea Communications Commission immediately summoned and warned executives of the three telecom companies over the weekend after discovering irregularities. Their joint statement read: "Despite numerous warnings against illegal subsidy payments, they have done it again. We will take follow-up measures by either imposing fines against telecom retailers or file a complaint with the prosecution after a thorough investigation." They added that they would strengthen their monitoring of the industry to ensure service fairness for consumers.


Under the new law on mobile handset subsidies, consumers cannot receive subsidies of more than about US$320 for the iPhone 6 with a 16-gigabyte capacity. Some retailers have been found to give US$465 subsidies through various payment schemes both offline and online.


However, the companies denied direct involvement and said that it is impossible to watch and confirm all the illegal practices committed by dealerships.


A public relations official at SK Telecom said "We will try to protect our customers. But it is difficult to monitor all the illegal provisions of excessive subsidies because many of these illegalities are done outside our surveillance."


A statement from a KT spokesman stated that "Some retailers and dealers provide the incentives the company provides in order to encourage good performances as subsidies which, in many cases, become illegal. We will do what we have to do as a company in the local telecom industry as we promised to at the recent KCC meeting. But it is difficult to monitor all of them."


Choi Nam-gon, an analyst at Yuanta Securities stated that "The current law stipulates that smaller retail stores other than official franchise outlets of mobile carriers be subject to punishment in case of any illegalities. This means that even the chief executive officers may fall under criminal charges, stripping them of their positions." He added that "In terms of the matter of responsibility, it is obviously the mobile carriers' because the subsidy must have come from them, not from the private purse of small retailers or dealers."


It's hard to believe that the maximum amount in question here is a differential of US$145. At some outlets the subsidy amount over the legal limit was much less. To a certain degree it sounds political. I'm sure that Apple's iPhone 6 would have sold as many units without this little extra subsidy that some dealers were offering. But with Samsung's own smartphones not selling well, there had to be a reason for it and they're trying to blame it on the illegal subsidies. Give me a break.


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