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Smartphone subsidies ‘out of hand’

KCC expects to dish out more penalties to telecom operators

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Published : 2014-02-12 19:54
Updated : 2014-02-13 08:40

Mobile phones are sold at a store in Seoul.

Despite government efforts to prevent undercutting, local telecom operators have resumed their cutthroat battle to attract new smartphone subscribers with more subsides, even giving phones away practically for free.

The latest subsidy war kicked off on Saturday when the companies announced subsidies of up to 1.2 million won ($1,100) for a Samsung Galaxy S4 smartphone. Since the phones cost 954,000 won each, those who bought the S4 made off with a profit of 246,000 won.

The “bargain sale” went on for four days, and during that time, up to 112,000 subscribers switched telecom operators to get new smartphones, according to the Korea Telecommunications Operators Association.

The situation peaked on Tuesday ― dubbed by Korean media as a day of “smartphone chaos” ― when an online community announced that transferring to SK Telecom would yield discounts on purchases of the iPhone S5 and Galaxy Note 3.

The online community was bombarded with inquiries and people queued at smartphone outlets from 3 a.m. that morning to take advantage of the deal.

The government stepped in as the situation intensified, with the local regulator promising to look into the issue and dole out necessary penalties. The telecom operators have begun to blame each other for the chaotic day.

SK Telecom, the nation’s largest telecom operator, claimed its smallest rival LG Uplus was the first to provide the 1.2 million won subsidy.

LG Uplus, however, countered that SK Telecom was at fault, saying that the largest telecom operator had no right to blame it on LG.

“They act as if they have never given out subsidies, when the reality is that SK Telecom has spent too much on subsidies to keep its 50 percent market share. This reliance has forced the others to follow suit,” an LG Uplus official said.

The Korean Communications Committee said it would further investigate the issue.

“We are planning to impose sanctions on the telecom operators for this subsidy war next month. We are currently investigating handset shops to find out which operator sparked the incident,” said Jang Dae-ho, head of the KCC’s market investigation division.

In December, the KCC had fined the top three mobile carriers about 100 billion won ($93 million). The competition was more than heated, as in the nation of 50 million, the number of mobile subscribers exceeds 55 million.

In the meantime, the KCC is scheduled to hold a meeting on Friday to discuss illegal and excessive subsidies as part of a follow-up measure on last December’s sanctions. Penalties including business suspensions were expected to be given out to the telecom operators, according to KCC officials.
By Shin Ji-hye (shinjh@heraldcorp.com)

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