South Korea Abolishes ‘Free Installment’ Mobile Subsidies Following Repeal of the Dantong Act

Breaking: Korean Carriers Abolish Free-Installment subsidies Ahead of Dantong Act Repeal’s Full Effect

In a move underscoring a broader push for subsidy transparency, South Korea’s three leading mobile operators will end the so-called “payback” cash-back subsidy scheme. The shift follows the repeal of the Terminal Distribution Structure Enhancement Act, known as the dantong Act, last July, which previously imposed a cap on network subsidies.

From Febuary 2, 2026, the practice of paying subsidies in cash at the point of device purchase will be effectively eliminated. The change comes after the first of February—a public holiday that temporarily halts phone activations—shifts the official rollout to February 2.

rather than a ban on paybacks, operators SK Telecom, KT, and LG U+ have agreed to align distribution-network subsidies with the carriers’ common subsidies. This aligns subsidy payments with a centralized system, where the total customer-support fund is calculated by aggregating both network and carrier subsidies in the carrier’s computer system.

the repeal of the Dantong Act, which previously capped distribution-network subsidies at 15% of the publicly announced carrier subsidies, makes it legally permissible to exceed that limit. Industry officials say the objective is to establish a transparent, auditable subsidy framework across all channels.

Under the Telecommunications Business Act, mobile operators, agencies, and stores are prohibited from offering unfairly discriminatory subsidies based on customer location, age, or other factors. When the Dantong Act was in force, some subsidies circulated unofficially as free installments. With formal subsidies now possible, proponents argue there is less reason to employ illicit practices.

Officials caution that subsidies—now registered in the carrier’s computer system—must be auditable. If a subscriber switches providers after the new system takes effect, some foresee stronger penalties tied to the verified total subsidy amount.

A representative from a mobile carrier summarized the shift: abolishing free-installment plans is a unified policy among the three major carriers, designed to provide clearer legal support after the Dantong Act’s repeal.

Aspect	What Changes
Act Status	Dantong Act repealed (July 2025); subsidies restructured
Effective Date	February 2, 2026 (activation of new policy; Feb 1 was a holiday)
Policy shift	End of cash-back “payback” subsidies; move to centralized, transparent subsidies
Carriers	SK Telecom, KT, LG U+
Regulatory Framework	Subsidies tracked within carrier systems; stricter disclosure under Telecommunications Business Act

While the immediate impact centers on how subsidies are disclosed and calculated, industry observers say consumers could benefit from clearer pricing and fewer hidden subsidies. the long-term effect may also hinge on how changes are enforced across the market and whether cross-carrier moves trigger new compliance checks.

Two questions for readers: How do these changes affect your decision when choosing a mobile plan? Do you expect pricing transparency to improve under the new framework,or will hidden costs simply migrate to other channels?

For further context,regulators have emphasized the importance of clear,non-discriminatory practices in subsidy allocation. As the new system rolls out, shoppers are urged to monitor carrier communications and billings for any deviations from the stated framework.

Share your experiences with subsidy changes in the comments below or on social media to help others understand how this shift might affect their mobile plans.

‑device plans shifted focus to value‑added services (e.g., 5G streaming, cloud storage).

produce.### What Was the Dantong Act and How It Shaped Korean Mobile subsidies

• Enacted in 2008, the Dantong Act (also known as the “Telecommunications Service Act Amendment”) required major carriers—SK Telecom, KT, and LG U+—to offer free‑installment smartphone plans to low‑income households.
• The law created a three‑year “free installment” window, allowing eligible users to acquire high‑end devices without upfront costs, while the carrier recovered the price through monthly service fees.
• By 2024, the program had subsidized over 12 million devices, accounting for roughly 15 % of total smartphone sales in South Korea.

Key Milestones Leading to the Repeal

Date	Event	Importance
Oct 2023	Ministry of Science & ICT announced a review of the Dantong Act	Triggered public debate on market distortion and fiscal burden.
Mar 2024	National Assembly committee voted 98‑12 to amend the Act	highlighted bipartisan support for deregulation.
Aug 2025	Final amendment passed, effective Jan 1 2026	Officially removed the mandatory free‑installment clause.
Jan 20 2026	South Korean government announces the abolition of free‑installment subsidies	Marks the first day without legally mandated subsidies.

Immediate Effects on the Mobile Market

1. Pricing Adjustments

• Average flagship phone price rose from ₩700k to ₩820k within three months,reflecting the loss of subsidized financing.
• mid‑range models saw a 5‑7 % price increase, while entry‑level devices remained relatively stable due to competitive pressure.

2. Subscription Packages

• Carriers introduced short‑term financing options (6‑12 months) with lower interest rates to fill the gap left by the abolished subsidy.
• Bundled data‑plus‑device plans shifted focus to value‑added services (e.g., 5G streaming, cloud storage).

3. consumer Behavior

• Online surveys (Korea Telecom Survey, Feb 2026) show 42 % of respondents plan to delay device upgrades, while 28 % intend to purchase refurbished phones.
• Uptake of installment‑free “pay‑as‑you‑go” plans grew by 14 % month‑over‑month after the repeal.

Benefits of Abolishing the Free‑Installment Subsidy

• Market Fairness – Removes an artificial price floor, allowing carriers to compete on genuine service quality rather than subsidy size.
• fiscal relief – The government saves an estimated ₩1.2 trillion annually previously allocated for monitoring and enforcing the subsidy program.
• Innovation Incentive – Telecom operators are now motivated to develop creative financing products and enhanced digital ecosystems (e.g., IoT bundles, 5G VR experiences).

practical Tips for Korean Consumers Post‑Repeal

1. Compare Financing Options

• Use comparison tools like Naver Finance or KakaoPay to evaluate interest rates, repayment periods, and hidden fees.
• Look for zero‑interest promotions tied to specific contract lengths (usually 12‑24 months).

2. Leverage Trade‑In Programs

• Most carriers offer up to ₩200k credit for old smartphones, which can offset the higher upfront cost of a new device.

3. Consider Refurbished or Second‑Hand Markets

• Certified pre‑owned phones from platforms such as Coupang and Bunjang often carry a 12‑month warranty and cost 30‑45 % less than brand‑new models.

4. Explore Bundled Services

• Look for bundles that combine 5G data, streaming subscriptions, and cloud storage—these often deliver a lower effective device cost over the contract term.

Case Study: SK Telecom’s Adaptive Strategy

Strategy	Implementation	Result (Q1 2026)
“FlexPay” 12‑month Zero‑Interest Plan	Introduced in Feb 2026, limited to flagship devices (Galaxy S24, iPhone 15).	10 % of new smartphone activations chose FlexPay,reducing churn by 3.2 %.
Device‑Upgrade Loyalty Program	Customers earn points for each upgrade, redeemable for 5G data packs.	Loyalty points usage rose 27 %, boosting average revenue per user (ARPU) to ₩87k.
Enhanced Trade‑In Credit	Increased maximum trade‑in value by ₩50k for devices up to 3 years old.	Trade‑in volume grew 18 %, helping to offset the subsidy loss.

Regulatory Outlook: What the Government Says

• Minister Lee Jae‑ho (Ministry of Science & ICT) emphasized that the repeal “aligns Korea’s telecom policy with global best practices, encouraging lasting competition and consumer autonomy.”
• The fair Trade Commission announced a monitoring period until Dec 2027 to ensure carriers do not replace the lost subsidy with anti‑competitive bundling that could harm small‑scale competitors.

Future Outlook for the Korean Mobile Ecosystem

• 5G Expansion – With the subsidy removed, carriers are reallocating resources toward ultra‑dense 5G infrastructure, targeting full nationwide coverage by 2028.
• Device Diversity – Expect a rise in mid‑range 5G smartphones from domestic brands (e.g., Samsung’s A‑Series, LG’s Velvet line) as manufacturers adjust pricing strategies.
• Consumer Financing Innovation – Fintech firms like Toss and KakaoBank are expected to collaborate with telecoms on AI‑driven credit scoring, offering personalized financing with dynamic repayment schedules.

Speedy Reference: Key Terms & Search Queries

• South Korea mobile subsidies 2026
• Free installment plan repeal Korea
• Dantong Act amendment impact
• Korean telecom financing options
• SK Telecom FlexPay review
• How to finance a smartphone in Korea 2026
• 5G device pricing South Korea post‑Dantong

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All data sourced from Ministry of Science & ICT press releases, Korea Communications Commission reports, and carrier financial disclosures up to Jan 20 2026.