Next Up For Carriers: Owning The Handsets?
By Mike Masnick, Mon Jun 28 21:15:00 GMT 2004

There's an ongoing battle between mobile carriers and handset makers over who "owns the customer." SK Telecom is looking to end that battle by owning everything.

For many years, the handset providers owned the customer. As much as the mobile operators believed they were promoting their own services, customers still came into the stores asking for "that new Nokia phone." Operators that didn't offer the latest and greatest phones lost out on business.

In the last year or so, that's been changing. The operators realized that many "handset makers" were actually outsourcing development to ODMs, and started to approach them about branding phones under their own name as well. This strategy has worked well, and many carriers have successfully taken back control over the customer experience, though the handset makers continue to fight back.

Over in South Korea, however, dominant mobile phone company SK Telecom is tired of the battle for customer ownership. Instead of having to push and pull against their handset providers, they think it's time to control the whole game. Claiming that providing mobile phone service alone is not enough, they're now looking to buy up some handset makers. Considering that SK Telecom (and others) just got slapped down by regulators for too heavily subsidizing mobile phones, this can really be seen as a move to cut their own subsidy expenses while still offering cheaper mobile phones to users. The idea, of course, is that the overall package will be much cheaper since there will only be one company to support. That may not actually be true, because the cost structure doesn't change that much. Besides, if regulators weren't happy about cut-rate subsidy pricing on handsets, they're unlikely to be pleased about SK Telecom owning handset makers outright.

However, even more importantly, by taking full control over handset makers, SK Telecom may do more harm than good to their own business. They'll certainly upset other handset makers who won't be as interested in competing directly with SK Telecom. At the same time, SK Telecom customers will now have a more limited selection. If a hot new phone is designed by LG or Samsung, and SK Telecom will no longer carry them, SK Telecom may find subscribers leaving to operators who offer those popular phones. Overall it seems like a risky move that is likely to be frowned upon by regulators, current handset partners and customers alike.