New rental market for high-end smartphones opens in Korea

Starting Friday, consumers will have an option to borrow new high-end smartphones with slightly lower monthly payments instead of buying one.

SK Telecom, the country’s largest mobile operator by number of subscribers, said Thursday it will start renting out three latest smartphone series models -- Galaxy S9, iPhone 8 and iPhone X -- with lower monthly rental fees than installment payments for purchasing a new premium phone among the models.

Named “T Rental,” the new program offers a 64-gigabyte Samsung Galaxy S9 smartphone with a monthly rental fee of 34,872 won ($32) for 24 months.

When buying the same model with a price tag of 957,000 won, consumers have to pay 43,372 won per month on a two-year installment contract to fully own it. 

The rental fee for a 64-GB iPhone X is 47,746 won, 12,500 won cheaper than purchasing the phone under the same contract.

No additional fee is required to subscribe to the T Rental service, while the contract is fixed at 24 months.

Borrowers can later decide to own the rental phones, if they pay the rental fees in lump sum.

SKT will run the rental program as the first among Korean mobile carriers in partnership with asset management firm Macquarie.

Macquarie will finance funds for securing a pool of new devices for rentals. The financier will take in returned phones and set values for the used ones to sell them overseas after refurbishing them.

“The rental service will be particularly appealing to early adopters who are eager to use new high-end phones with price tags over 1 million won,” said an SKT official. “Considering a dominant trend that avid tech lovers continue switching to a new high-end phone every other year, there will be significant demand for the new smartphone rental market.”

According to the retail industry, the total rental market for consumer appliances and other electronic devices is rapidly growing and is expected to reach 40 trillion won by 2020.

Smartphone rentals are becoming a global trend. Similar programs are already being run by T Mobile in the United States and Telstra in Australia.

About 20 percent of T Mobile subscribers are using the rental program that was introduced in 2015, while 30 percent of Telstra subscribers are renting phones since the program’s launch in 2016, according to the mobile industry.

Another Korean mobile carrier KT is also preparing to introduce a similar rental service, according to company officials, although they could not comment on the timing yet.

LG Uplus, meanwhile, said it is not considering to provide such a service at the moment.

“Rather than seeking additional profits from the new rental service, we try to provide new experiences and value for our SKT customers,” the official said. “But we do expect the new service to attract new subscribers if successfully launched.”

SKT will also provide insurance dubbed “T All Care” for rented phones, with additional monthly payments of less than 10,000 won, reducing the burden on users if borrowed phones are broken or lost.

By Song Su-hyun (song@heraldcorp.com)