Koryolink Keeps Growing

October 16, 2015 7:00 AM

Martyn Williams over at North Korea Tech has noted that Koryolink has passed a new milestone with 3 million subscribers; this is an increase of 600K from June 2014. This would seem to be following the common trajectory of adoption in other countries that we explored in an earlier post. Also, there is anecdotal reporting from DailyNK on the increasing popularity and cultural status associated with cellphones. This now includes elite use of 3G to download music and movies. Welcome to the distractions of the digital age.

There are however several caveats on this growth number. First, North Korea has a strong fiscal interest in selling handsets, and pricing policy apparently makes it cheaper to get a second handset than to top off extra minutes; an unknown number of these subscribers could therefore be duplicates. Foreign journalists and other tourists who absolutely must have a phone are particular targets of price discrimination. Alistair Bunkall at SkyNews tells a recent anecdote of a journalist colleague who had to top off a newly purchased $200 SIM card with another $100 after a call lasting only six minutes.

Second, we are still unclear on whether phones are being distributed to party members or even higher level military officials for official purposes. This would make sense since official salaries are very much lower than what traders—obvious sources of cellphone demand—can make in the market.

Finally, there is the ongoing saga that we have reported about Koryolink’s inability to repatriate profits. It is not clear that an increase in subscribers benefits Orascom’s bottom line, at least not if measured in foreign exchange. The North Korean government has also been reportedly rolling out its own cellular service provider “Byol.” It is unclear why the North Koreans are rolling out a new carrier to compete with Koryolink, of which the DPRK government owns a 25 percent stake. One possible reason is that the North Koreans are looking to force Orascom into a merger on favorable terms that would somehow reduce the overhang of foreign exchange claims. Our interpretation: it remains hard for the North Korean government to allow foreign firms to make money, which puts a damper on the strategy to encourage foreign investment that we have covered in earlier posts (here and here).

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Stephan Haggard Senior Research Staff

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