SEOUL Oct 13 Samsung Electronics on
Thursday offered financial incentives for customers in South
Korea who exchange Galaxy Note 7 smartphones for other Samsung
models, as it scrambles to shore up its reputation in the wake
of a damaging safety crisis.
The South Korean giant is in damage-control mode as rivals
like Apple Inc and LG Electronics try to
steal market share from the global smartphone leader after it
was forced to scrap its latest flagship device.
Samsung is boosting its marketing and promotional efforts
around other Galaxy-series smartphones to cushion the blow from
the demise of the premium Note 7, which it finally abandoned
this week after failing to resolve overheating problems which
caused some of the phones to ignite.
"Industry experience, such as the decline of Nokia and
BlackBerry, shows how successful manufacturers can lose market
share particularly quickly in the handset business," Fitch
ratings agency said in a report.
In the United States, Samsung began sending fireproof boxes
and protective gloves to customers returning potentially
explosive Note 7s, drawing humorous barbs from social media
In its home market it started to offer refunds or exchanges
for other products. Customers who returned their Note 7s, priced
at about $880, were offered a coupon worth 30,000 won ($26.91),
while those who chose an exchange for another high-end Samsung
phone were promised an additional 70,000 won mobile credit.
The incentives would compensate consumers for their "big
inconvenience", Samsung said in a statement.
Samsung's shares had rebounded 2.4 percent by 0355 GMT in a
flat broader market, following days of heavy losses.
On Wednesday the firm slashed its quarterly profit estimate
by $2.3 billion to reflect the impact of the Note 7 withdrawal,
giving some investors hope that the financial cost of the
debacle had been largely accounted for.
"Samsung reflected most of the costs from the Note 7 in the
Q3 earnings, reducing uncertainty about Q4 profit," analyst Jay
Yoo at Korea Investment & Securities said.
But many analysts say the real risk to Samsung lies in the
reputational damage it suffers in a cut-throat industry, which
was harder to determine than financial costs.
"Potential long-term brand damage ... is a greater threat to
its credit profile than the direct financial impact, which will
be buffered by ample liquidity and a strong balance sheet,"
Customers will have plenty of choice in the weeks ahead,
with South Korean mobile carriers including SK Telecom
planning to take pre-orders for Apple's iPhone 7
starting Friday. LG Electronics also recently launched its V20
Meanwhile South Korea's central bank said the Note 7 failure
could undermine economic growth, although it needed more time to
assess the effects.
($1 = 1,114.7500 won)
(Reporting by Hyunjoo Jin; Editing by Stephen Coates)