Posted : 2013-01-21 16:30
Updated : 2013-01-21 16:30

SKT may face further penalties over subsidies

By Kim Yoo-chul

The country's telecommunications regulator is considering imposing additional penalties on SK Telecom, the country's top mobile carrier, for continuing with illegal marketing activity despite prior warnings.

All three of the nation's wireless carriers were hit with suspensions late last year for providing customers with excessive handset subsidies to help them purchase pricey smartphones and tablets.

SK Telecom, with a market share of over 50 percent, will be banned from signing new customers for 22 days between Jan. 31 and Feb. 21. KT, the country's second-largest wireless carrier, will face the same restrictions from Feb. 22 to March 31.

LG Uplus, the smallest of the three, is already serving a 24-day ban that will end on Jan. 30. The carriers were also fined a combined 11.89 billion won.

The Korea Communications Commission (KCC) has imposed strict limits on the level of handset subsidies to prevent the market from overheating and maintain parity in competition.

Now, the watchdog is fuming after finding that SK Telecom has continued to offer illegal amounts of subsidies even as LG Uplus entered its suspension.

Cynics have been saying that the suspensions are a blessing in disguise for the wireless carriers, who have seen their financial health erode rapidly in recent months due to their intense marketing wars and immense spending on long-term evolution (LTE) technology and networks.

''We have been monitoring the market since announcing the suspension and confirmed that SK Telecom is continuing to violate the rules,'' said Jeong Jong-ki, an official from the KCC's customer policy bureau, adding that it would be hard for the leading carrier to avoid additional punishment.

''The investigation on carriers was conducted between Dec. 25 and Jan. 8. SK Telecom was the highest in terms of what we call a violation rate, a measurement of the proportion of excessive subsidies for new customers at 33.8 percent, followed by KT with 27.9 percent and LG Uplus on 25.9 percent.''

According to the Telecommunications Law, mobile carriers can't offer more than 270,000 won (about $252) to a single customer in handset subsidies.

''The multi-billion dollar fine and business suspension are harsh penalties. But in the eyes of the KCC, it's apparently still not enough. Our internal report shows the carriers are ignoring us and that means we need to penalize them, further,'' said Yang Moon-seok, a member of KCC's standing committee.

Jeong declined to comment on whether the agency is considering the possibility to impose an additional ban on just SK or all three carriers.

Despite the KCC punishment, SK Telecom and KT are consistently offering huge subsidies to steal LG's customers. Apple's iPhone 5 can temporarily be bought for 114,000 won just with a simple condition ― choose KT as the carrier.

SK Telecom is selling the iPhone 5 at 199,000 won if the customer agrees to change carrier. A 16GB Samsung Galaxy S3 smartphone costs 904,000 won but a switch to SK Telecom means the phone is available for a subsidized 150,000 won.

''The KCC warnings don't work. As SK Telecom and KT will be banned from signing up new iPhone customers, the two are being aggressive to lower their iPhone stock by giving more subsidies,'' said Song Jae-min, a salesclerk at a mobile phone store in Gangnam, Seoul.

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