The nation’s mobile virtual network operators are expected to see 2.5 million phone subscribers this year, according to a local economic research institute.

DIGIECO’s report on “MVNO market trends and prospects” showed that the total number of subscribers would almost double from last year’s 1.3 million to 2.5 million this year. This is a sharp increase from 2011, when the services were launched with 580,000 users.

The report predicted that MVNO users would make up 4.6 percent of all mobile subscribers this year, up from 2.3 percent last year. It said the market would also grow to 300 billion won ($280 million) this year from 130 billion won last year.

MVNO provides services to its customers at 30 to 40 percent lower prices by leasing network infrastructure from major mobile carriers.

The growth of budget phones is largely driven by strong performance of large companies’ subsidiaries like CJ Hellovision and SK telink, according to the report.

The number of CJ Hellovision users rose to 410,000 this year from 30,000 last year. SK telink, which started with 4,000 users last year, saw its customer base grow to 220,000.

“The two companies have better brand recognition than other (MVNO) providers,” the report said. “CJ Hellovision is able to draw more subscribers by taking advantage of CJ Group’s other businesses like media, movies and food.”

The surge also came from sales at discount retailers like Homeplus and Emart, and at post offices.

“Since the phones became available in post offices, the sales increased as they are easily accessible,” head of Korea Mobile Virtual Network Operator, Kim Hong-chul said.

Industry sources say broadening the distribution channels from online shops to offline retailers is a significant step forward for budget mobile firms, and that the sales at 200 post offices particularly help to raise their credibility.

By Shin Ji-hye (shinjh@heraldcorp.com)