* Samsung to recall a total of 1.9 mln Note 7s in U.S.
* Offers up to a $100 total bill credit to U.S. consumers
who exchange a Note 7 for any Samsung model
* Analysts say reputational damage is bigger than financial
* Samsung says Europe recall far smaller, involves 50,000
(Adds new recall plans for Europe)
By Hyunjoo Jin
SEOUL, Oct 13 Samsung Electronics on
Thursday offered refunds or financial incentives for U.S. and
South Korea customers who exchange Note 7s for other products,
as the tech giant scrambles to shore up its reputation after a
damaging phone safety crisis.
The world's largest phone maker is also expanding a U.S.
recall of the fire-prone model to a total 1.9 million Note 7
phones, which includes the 1 million Galaxy Note 7s it recalled
on Sept. 15.
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 high-end 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.
Samsung said on Thursday it is offering up to $100 in bill
credit to consumers who exchange their Note 7s for any Samsung
smartphone in the U.S.
U.S. customers who exchange their Note 7s for a refund or
other branded smartphone will receive $25 in bill credit.
"We appreciate the patience of our consumers, carriers and
retail partners for carrying the burden during these challenging
times," said Tim Baxter, president and chief operating officer,
Samsung Electronics America.
"We are committed to doing everything we can to make this
The U.S. Consumer Product Safety Commission said on Thursday
the Note 7's "battery can overheat and catch fire, posing
serious fire and burn hazard to consumers."
It added that Samsung has received 96 reports of batteries
in Note 7 phones overheating in the U.S., including 23 new
reports since the Sept. 15 recall announcement.
In the U.S., Samsung began sending fireproof boxes and
protective gloves to customers returning potentially explosive
Note 7s, drawing humorous barbs from social media commentators.
The company has commenced offering similar financial
incentives in its home market of South Korea, which it says
would compensate consumers for their "big inconvenience."
After days of heavy losses, Samsung's shares ended 1.4
percent higher on Thursday while the broader market fell
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.
"We are confident the 3Q 16 re-statement puts to bed the
direct financial impact of the Note 7 recall and termination,"
UBS said in a report.
"In the near-term, we believe investors will re-focus on
shareholders returns ahead of full 3Q results Oct 27th."
SAVING THE BRAND
In Europe, the company disclosed that only about 50,000
original Note 7 phones were ever delivered to customers. Ninety
percent of those, or 45,000 devices, had been replaced before it
halted returns once replacement phones were also found to be at
Samsung said it will begin to exchange or offer refunds for
all active Galaxy Note 7 devices in Europe on Monday, October
17. In the meantime, it is finalising the mechanics of a safe
return process for customers through retailers and distributors.
Decisions about whether possibly to offer some form of
compensation to customers for sticking with Samsung through the
recall are being left up to local sales partners, a spokesman
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
Many analysts say the real risk to Samsung lies in the
reputational damage it suffers in a cut-throat industry rather
than financial costs.
"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 on Thursday.
Moody's also said in a report that day that the Note woes
are "credit negative" and "threaten to have a more lasting
negative effect on the Samsung brand and would require
significant marketing expense to regain consumer confidence."
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)
(Additional reporting by Eric Auchard in Frankfurt; Editing by
Stephen Coates, Sam Holmes and Alexandra Hudson)