A Closer Look at the ‘Explosion of Cell Phone Subscribers’ in North Korea

The North Korean mobile telecommunications market has seen dramatic subscriber growth over the past five years contrary to initial speculations that mobile service would be limited to the elite. The 3G service, Koryolink, was launched in December 2008 by CHEO Technology JV Company, a joint venture between the Egyptian telecommunications firm Orascom (75 percent) and the North Korean Korea Post and Telecommunications Corporation (25 percent). In just over three years, Koryolink reached one million subscribers by February 2012, and then doubled that rate in 15 months, reaching two million subscribers in May 2013.[1] As of the end of the third quarter of 2011, Koryolink’s network consisted of 453 base stations covering the capital, Pyongyang, as well as 14 main cities and 86 smaller cities.[2]

Source: Orascom Telecom, 2008~2011 Earnings Release; OTMT Press Releases, February 2, 2012 & May 28, 2013.

While statistics are scarce and difficult to verify, anecdotal evidence clearly indicates that there has been a dramatic increase in the number of cell phone users in North Korea. Many foreign visitors have reported seeing ordinary people, including teenagers and construction workers, using cell phones on the streets not only in Pyongyang, but in other major cities as well. The gadgets seem to have become a common sight, at least in major cities.

Cell phones are becoming more of a common site in North Korean cities. (Photo: Ruediger Frank)

Who Are the Users?

An extremely restrictive regime was adopted when Koryolink launched 3G service in late 2008. In the beginning, according to a former Korean Workers’ Party official from Pyongyang, the service was available only to senior officials at security agencies and their families, and officially recognized traders involved in the business of earning hard currency, while Party cadres and workers at military factories were excluded from this service for security reasons. Even in the first one or two years after the launch, only powerful people or those who were rich enough to bribe distributors could acquire handsets due to limited supply.

As the government adopted a more permissive regime, ownership of cell phones is now determined by one’s financial capacity unless the applicant has serious security clearance problems. Of course, senior Party, government, and military officials and wealthy traders were the initial customer groups. These officials are able to accumulate wealth by accepting bribes or engaging in business through their public offices. It is no wonder that “Pyongyang’s ‘golden couples’ consist of a government-official husband and an entrepreneur wife.” [3]

However, the rise of informal markets has contributed to the development of a proto-middle class or the new rich who can now also afford cell phones.[4] For the new rich, cell phones are not only a symbol of wealth but also a means of survival. They provide traders with greater mobility and efficient ways to exchange market information, including information on prices and exchange rates. The wholesale and retail traders at the informal markets are now able to collect market information at an unprecedented speed and respond to changing market conditions promptly. Buyers and sellers often complete their bargaining over the phone even before the goods are taken to market. Cell phones have become popular not only in major cities but also in some towns and villages where residents are actively involved in trade with partners in the bigger cities. For example, residents of rural areas where gold mining or farm produce trade are booming can no longer imagine conducting businesses without cell phones.

Another popular financial source for obtaining cell phones is the remittances from defectors (mostly from those settled in South Korea) to their families left in North Korea. The annual amount of remittances is estimated at around US$ 10 million.[5] Incoming funds from South Korea have become so significant that they have been dubbed the “Mount Halla Stream,” named after the tallest mountain in South Korea.

Prestige is another important driver for the popularity of cell phones among North Koreans. A man from Chongjin who defected in December 2012 said that cell phones had become so popular that a young man without a cell phone was not treated well and could not even find a girlfriend. “Considering the high prices of handsets, it is obvious that only those who ‘regularly eat meat’ can afford to buy one,” he said. Even those without significant income are selling their assets or hard-earned crops to buy the handsets for themselves to show off their ‘wealth’ or for their demanding children who also want to bond with their cell-phone-using friends. As in other countries, cell phones have become status symbols, signs of prosperity, and one of the most noticeable examples of conspicuous consumption in North Korea.

North Korean children taking pictures with their cell phones. (Photo: Ruediger Frank)

Initially, potential buyers of cell phones must get approval from the State Security Department or the Ministry of State Security, and the Ministry of People’s Security by explaining the purpose and financial source of their purchase. After that, applicants must wait for up to one month until the application is processed. However, for those who want to own a cell phone without having to go through this lengthy, bothersome application process, they can register with fake names for extra fees. Intermediaries loitering around the Communications Technology Management Office or its branches can shorten the processing period down to one or two days. They register tens of phones in bogus names before selling them at higher prices than what the Ministry of Post and Telecommunications offers. Although illegal, the practice has become increasingly common as the demand for cell phones has risen quickly.

The authorities have responded to these widespread illegal phones by removing the long-winded, restrictive regulations, at least in the border cities with China. According to defectors who continue to contact their relatives in Chongjin and Hyesan, since early 2012, applicants can now obtain both cell phones and phone numbers on the same day they register with the Communications Technology Management Office. Another defector who maintains contacts with his sources in North Korea also reported the same deregulations in Sinuiju, Hyesan, Chongjin, and even Pyongyang. Pre-approvals from the security agencies are no longer required. These days, the office passes on all the information after the sale to the security agencies for the security check.

Actual Number of Users

Although there are a growing number of testimonies by defectors and foreign visitors about the boom in cell phone use in North Korea, the two million subscribers that Koryolink has allegedly reached is still controversial among experts. Some argue that two million is not a realistic number considering North Korea’s demographics—a population of 24 million people. There are at least one million soldiers[6] who are not allowed to use cell phones for security reasons and three million children under 10 years old[7]who may not be old enough to legitimately use cell phones. If this two-million figure is correct, Orascom is essentially reporting that one out of ten North Koreans are using cell phones. Skeptical experts point out that this simply does not make sense for a country where per capita GDP is as low as US$ 1,800.[8]

Some North Korea economy experts agree with the skeptics, attributing the potentially overstated users to Koryolink’s complicated rate plans. Experts who have sources in North Korea argue that a growing number of heavy users, such as traders, have started to use more than one phone to save money. Subscribers get 200 ‘free’ minutes per month for a basic quarterly service charge of around 3,000 won (less than 40 cents at black market exchange rates[9]). After using up those minutes, they have to purchase ‘top-up cards’ in foreign currency that cost as high as 10 to 20 times more than the basic charge. Some people have determined that using more than one phone, thereby getting additional blocks of 200 minutes free, is more economical than using only one phone and paying for a multiple top-up cards. Of course, this requires extra handsets but the extra upfront expenditures can be recovered as this practice continues.

There may also be a significant number of cell phones distributed by the Party, government and military organs for official use. Heung Kwang Kim, Executive Director of North Korea Intellectuals Solidarity and a former professor at Hamheung Computer Technology University in North Korea, argued that up to one quarter of registered cell phones were for official use for the Central Party, state administrative agencies, state agencies with special missions, the police, the military, courts and so forth.[10] He said the call time was very limited for these phones. A defector who worked for a trading company in Musan until early 2011 said some trading companies, including Green Pine Association Corporation or Chongsong Yonhap which is on the UN blacklist, purchased cell phones with their own official funds and provided them to their employees on business trips to Pyongyang and Chongjin. A former Central Party official from Pyongyang said senior Party officials were provided with cell phones for official use. These testimonies suggest that a certain number of Koryolink customers would use multiple cell phones for private and official uses.

North Korea experts note that high-ranking officials rarely use their cell phones for fear of being eavesdropped on by foreign intelligence agencies. One North Korea IT specialist said that there were many inactive cell phone numbers presumably allocated to the power elite in North Korea. For example, only 800,000 numbers showed active traffic in February 2012 when the Koryolink subscribers rose to one million. This specialist suspected that part of the 200,000 inactive numbers was reserved for fast-track communication lines going directly to the leadership.[11]

Growth Potential

Some experts expect the number of subscribers could reach as many as 5 million, a penetration of 20 percent, assuming every household in North Korea buys at least one cell phone. This rosy outlook depends on how quickly the Koryolink service will be rolled out to the lower income segments, particularly the rural poor. The biggest challenge for Koryolink in expanding its subscriber base seems to be the exorbitant costs of handsets, ranging from US$ 150~700. Although some lower income people manage to find ways to obtain the handsets for conspicuous consumption, this may not be a sustainable trend unless the North Korean government, the exclusive seller of handsets, changes its pricing policy to accommodate more buyers. In addition, more affordable rate plans, especially for the top-up cards, would encourage potential users to subscribe to the service.

The economy of small cities is also an important factor for the Koryolink subscribership. Some experts estimate that the maximum number of subscribers in Pyongyang, which has a population around 2 million people, is around 1.5 million. This estimate assumes that there are two users per household and that Pyongyang is most likely to be approaching its full subscribership. Furthermore, there are only four major cities with populations greater than 500,000 in North Korea: Pyongyang, Hamheung, Chongjin, and Nampo.[12] Pointing to these market restraints, some experts predict that subscriptions will stagnate after hitting 3 million. Therefore, sustainable subscriber growth should be supported by small cities and rural areas. This, in turn, depends on the pace and scale of development of the local economies, including the informal markets.

Conclusion

One should be careful not to jump to a conclusion that North Korea is entering ‘mobile telecommunications revolution.’ North Koreans are still largely denied internet access, and international calls are blocked. Prohibitive top-up rates have made general users reserve their calls for important messages or emergencies. New digital social networking remains an unreachable luxury for the general population and traditional self-censorship prevents politically sensitive conversations on the phone. The government conducts tight surveillance of phone calls and text messages and frequently censors ‘politically inappropriate’ content on them such as South Korean songs and dramas.

However, there are still loopholes that the government cannot perfectly close. For example, a primitive but creative way to make ‘international’ calls supported by illegal Chinese cell phones is in the making, mainly employed now for remittances from defectors in South Korea to their families left in North Korea. However, if brokers can find more profit opportunities, they could surely figure out safer and more creative ways to circumvent technical barriers and the monitoring system. A defector in Seoul has already overcome that technical barrier by connecting to foreign phones with SIM cards bought in Pyongyang. The fact that millions of handheld cameras and digital voice recorders are being circulated should be source of anxiety for the regime. Despite tightly controlled and monitored, the Koryolink network could still potentially widen the loopholes of information flow to and from the outside world.

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This article is based on research done for a forthcoming comprehensive report on North Korea’s cell phone usage written by Yonho Kim and co-sponsored by the US-Korea Institute at Johns Hopkins School of Advanced International Studies and Voice of America. The full report will cover trends, the socio-economic impact, regime responses, and Orascom’s future in the North Korean telecommunications market. The full report will be released in January 2014.


[1] Earnings Releases 2008~2011 by Orascom Telecom; Orascom Telecom Media & Tech Holding (OTMT), “Koryolink Reaches Two Million Subscribers,” Press release, May 28, 2013. No more information on Koryolink’s operational performances, except for a brief press release and media interviews, is publically available after Koryolink ownership was transferred from Orascom Telecom to Orascom Telecom Media and Technology Holding (OTMT) in 2011.

[2] Orascom Telecom Holding, Earnings Release Third Quarter 2011, November 14, 2011. Even though the network covers only 14% of the territory, 94% of the population of North Korea can be served by the established Koryolink network because the rest of the country is mostly mountainous and sparsely populated.

[3] “Also available to earthlings,” The Economist, February 11, 2012.

[4] For the informal economic activities and the new rich in North Korea, see Andrei Lankov, The Real North Korea: Life and Politics in the Failed Stalinist Utopia (Oxford University Press 2013) pp. 82-93 and pp. 91-2.

[5] “Concern as remittances to N. Korea grow,” Chosun Ilbo, February 7, 2011.

[6] South Korean Defense Ministry, Defense White Paper 2012, December 2012.

[7] Central Bureau of Statistics of North Korea, DPR Korea 2008 Population Census National Report, 2009.

[8] 2011 estimate. CIA, World Fact Book. Last updated August 22, 2013, https://www.cia.gov/library/publications/the-world-factbook/geos/kn.html.

[9] According to Daily NK, black market exchange rates in Pyongyang, Sinuiju, and Hyesan steadily rose until reaching $1=8,000 won in late 2012 and have stayed at the level since then. See North Korean Market Trends, http://www.dailynk.com/english/market.php.

[10] Interviewed by author in Seoul, South Korea, in July 2013.

[11] For the reporting system dedicated to Kim Jong Il, see Ken E. Gause, Coercion, Control, Surveillance, and Punishment: An Examination of the North Korean Police State, Committee for Human Rights in North Korea, July 19, 2012.

[12] “Nampo is the most densely populated city in North Korea” in Korean, VOA, May 21, 2012, http://www.voakorea.com/content/dprk-cities-demography-152323315/1367245.html.

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