The release of the iPhone 5 as unlocked and contract-free form is being eyed as to whether it will stir up competition in the market of mobile virtual network operators, which offer more affordable wireless payment plans.

Apple’s iPhone 5 handsets, without any kind of contract with mobile carriers, went on sale in Korea on Friday.

“As Korea decided to implement a system that enables consumers to pick their own handset and mobile carrier as well as mobile payment scheme starting this year, Apple has for the first time reached a decision to make the iPhone available in an unlocked form to benefit consumers,” said an Apple Korea official.

The prices of the 16 gigabyte, 32 gigabyte and 64 gigabyte models of the latest iPhone were set at 890,000 won ($828), 1.03 million won and 1.17 million won, respectively.

The initial pricing is more expensive than purchasing the iPhone 5 through mobile carriers like SK Telecom and KT, but the monthly payment scheme is expected to be 20-40 percent lower using MVNO services.

MVNOs, or “Altteul” phone service operators, are firms that provide wireless services at a cheaper price to consumers by renting the necessary infrastructure from the country’s telecoms like SKT, KT and LG Uplus.

These operators do not have their own licensed frequency allocations or the infrastructure required to provide telecom services. The biggest MVNO companies are Annex Telecom, CJ Hello Vision, Korea Cable Telecom, Onse Telecom and freeC.

The number of people who subscribed to the MVNO services topped 1 million as of October.

Users of unlocked iPhone 5s cannot take advantage of subsidies offered by the major telecoms.

But Apple Korea is currently holding a promotion event with local card firms to have consumers divide their payments over four to 12 months interest free.

Those who buy an unlocked iPhone 5 will also have more flexibility when traveling overseas as they can simply swap out their USIM card.

Switching USIM cards allows use of overseas mobile carriers’ networks without having to connect to global roaming services.

The unlocked iPhone 5 owners will also have the choice to connect the gadget to the third-generation communications networks, which further pushes down the total cost. However, the fourth-generation LTE network services are also available through some MVNOs such as Annex and CJ Hello Vision.

Due to such benefits and improved opportunity for firms that do not have the required infrastructure for telecom business, retailers like E-Mart and Home-plus are preparing to dive into the MVNO market.

Online shopping malls, such as Gmarket and Auction, also launched MVNO service partnerships with SKT earlier this year, and 7-Eleven has already begun selling a low-end handset at 84,900 won since last month at its 7,000 stores nationwide.

By Cho Ji-hyun (sharon@heraldcorp.com)