By Kim Yoo-chul, Cho Mu-hyun
Major mobile carriers _ SK Telecom, KT and LG Uplus _ will be banned from signing up new customers for offering excessive and illegal subsidies. They were also fined a combined 11.89 billion won.
The Korea Communications Commission (KCC) said in a statement Monday that the firms violated the local Telecommunications Law after an investigation into illegal subsidies.
''The carriers provided excessive subsidies to new customers and we believe this is against the law,'' the KCC said.
The nation's smallest LG Uplus will be banned for 24 days, while SK Telecom and KT face business suspension for 22 days and 20 days, respectively.
The KCC fined SK Telecom 6.89 billion won; KT, 2.85 billion won; and LG Uplus, 2.15 billion won.
This is the third time the country's top telecom regulator has issued a business suspension order. The previous ones were made in 2002 and 2004. The ban will go into effect from Jan. 7
In November 2002, SK Telecom received a 30-day ban with KT and LG Uplus being banned for 20 days each.
In June 2004, SK Telecom got a 40-day ban, with KT and LG Uplus again getting 20 days. The ban reduced marketing costs for the carriers by 26.5 percent in the third quarter of 2004 compared to the same period a year earlier, according to advisory and investment company Delta Partners.
''If the carriers continue offering illegal subsidies despite being punished, then we will fine them again. This isn't the end of the story,'' said Chun Young-maan, a senior KCC official, during a briefing to local media at its headquarters in Gwanghwamun, downtown Seoul.
Chun said the government agency will order carriers to suspend their business suspension for 90 days, which is the maximum suspension according to the Telecommunications Law.
''Despite two previous warnings, the carriers have been offering excessive subsidies to attract more clients, which we believe is unacceptable,'' said Chun in a briefing.
The subsidies are currently capped at $249, the KCC said.
The limit on subsidies is mainly intended to keep mobile operators from expanding their customer base at the cost of their profit margin because they are suffering worsening performances due to excessive marketing costs.
In 2010 and 2011, KCC found that the three violated the Telecommunications Law. However, it didn't punish them despite then heated criticism from consumers.
The latest punishment comes after the agency investigated the firms over illegal subsidies for Samsung Electronics' Galaxy S3 smartphones. The KCC also summoned marketing executives from the carriers and ordered them to stop offering large subsidies on iPhone 5s.
Despite the warning, the companies have been giving huge subsidies to customers.
Regarding the punishment, SK Telecom said the KCC was too harsh about the company.
''The KCC's decision to ban the signing up of new customers and imposing fines is too much for us. We are truly sorry about the decision,'' SK said in a statement.
In a separate statement, LG Uplus said it was hit hardest, though the company is the smallest carrier.
However, it's uncertain if the punishment is heavy enough to curb the practice as more customers mean more profits in the fully-saturated local market.
''We agreed that SK Telecom should go global. Despite previous attempts for expansion, SK Telecom failed without yielding visible returns. What we can do right now is to attract new customers to keep our market position. The impact of the KCC decision will be short-lived,'' said an official from SK Telecom, asking not to be named.
Major mobile carriers _ SK Telecom, KT and LG Uplus _ will be banned from signing up new customers for offering excessive and illegal subsidies. They were also fined a combined 11.89 billion won.
The Korea Communications Commission (KCC) said in a statement Monday that the firms violated the local Telecommunications Law after an investigation into illegal subsidies.
''The carriers provided excessive subsidies to new customers and we believe this is against the law,'' the KCC said.
The nation's smallest LG Uplus will be banned for 24 days, while SK Telecom and KT face business suspension for 22 days and 20 days, respectively.
The KCC fined SK Telecom 6.89 billion won; KT, 2.85 billion won; and LG Uplus, 2.15 billion won.
This is the third time the country's top telecom regulator has issued a business suspension order. The previous ones were made in 2002 and 2004. The ban will go into effect from Jan. 7
In November 2002, SK Telecom received a 30-day ban with KT and LG Uplus being banned for 20 days each.
In June 2004, SK Telecom got a 40-day ban, with KT and LG Uplus again getting 20 days. The ban reduced marketing costs for the carriers by 26.5 percent in the third quarter of 2004 compared to the same period a year earlier, according to advisory and investment company Delta Partners.
''If the carriers continue offering illegal subsidies despite being punished, then we will fine them again. This isn't the end of the story,'' said Chun Young-maan, a senior KCC official, during a briefing to local media at its headquarters in Gwanghwamun, downtown Seoul.
Chun said the government agency will order carriers to suspend their business suspension for 90 days, which is the maximum suspension according to the Telecommunications Law.
''Despite two previous warnings, the carriers have been offering excessive subsidies to attract more clients, which we believe is unacceptable,'' said Chun in a briefing.
The subsidies are currently capped at $249, the KCC said.
The limit on subsidies is mainly intended to keep mobile operators from expanding their customer base at the cost of their profit margin because they are suffering worsening performances due to excessive marketing costs.
In 2010 and 2011, KCC found that the three violated the Telecommunications Law. However, it didn't punish them despite then heated criticism from consumers.
The latest punishment comes after the agency investigated the firms over illegal subsidies for Samsung Electronics' Galaxy S3 smartphones. The KCC also summoned marketing executives from the carriers and ordered them to stop offering large subsidies on iPhone 5s.
Despite the warning, the companies have been giving huge subsidies to customers.
Regarding the punishment, SK Telecom said the KCC was too harsh about the company.
''The KCC's decision to ban the signing up of new customers and imposing fines is too much for us. We are truly sorry about the decision,'' SK said in a statement.
In a separate statement, LG Uplus said it was hit hardest, though the company is the smallest carrier.
However, it's uncertain if the punishment is heavy enough to curb the practice as more customers mean more profits in the fully-saturated local market.
''We agreed that SK Telecom should go global. Despite previous attempts for expansion, SK Telecom failed without yielding visible returns. What we can do right now is to attract new customers to keep our market position. The impact of the KCC decision will be short-lived,'' said an official from SK Telecom, asking not to be named.
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