SK, LG slapped with further suspensions for illegal subsidies

By Korea Herald
  • Published : Mar 13, 2014 - 21:03
  • Updated : Mar 13, 2014 - 21:03
South Korea’s telecom watchdog on Thursday ordered business suspensions for two local mobile carriers already penalized by a government ministry for paying illegal subsidies to induce users to change service providers.

The Korea Communications Commission said it will suspend the businesses of SK Telecom Co. and LG Uplus Corp., the top two mobile carriers, for seven and 14 days, respectively.

It also imposed a combined 30.4 billion won in fines on South Korea’s three carriers, saying they defied repeated warnings to stop the subsidies and were not showing signs of any improvement.
A customer walks past business counters of telecom companies in Yongsan, Seoul, Thursday. (Park Hae-mook/The Korea Herald)

By company, SK was slapped with 16.6 billion won in fines, followed by LG Uplus with 8.2 billion won and KT with 5.5 billion won.

SK Telecom accounts for more than half of the market, trailed by KT with 30 percent and LG Uplus with the remaining 20 percent.

The KCC had previously imposed a seven-day business suspension on KT Corp. in July last year, along with fines of 66.9 billion won ($62.4 million) on the three mobile carriers.

While subsidies are the most widely used ploy to entice subscribers to change their mobile operator, they are also blamed for undermining fair competition and market transparency.

The KCC said local mobile carriers paid an average of 579,000 won in subsidies between January and February, far above the legal ceiling of 270,000 won.

“We deeply regret that (the KCC) has slapped the market’s smallest player with the most severe punishment. It is reverse discrimination,” LG Uplus said in a statement.

SK Telecom also expressed discontent with the decision, adding the government must implement effective policies to stabilize the market as soon as possible.

The KCC’s penalties add to earlier punitive steps by the Ministry of Science, ICT and Future Planning, which slapped the mobile carriers with 45-day business suspensions, also for providing illegal subsidies.

SK Telecom will be suspended from April 5 to May 19, while the suspensions for both KT and LG UPlus Corp. began on Thursday.

The execution date of KCC’s punishment will be decided later in May, when the ministry’s business suspension order ends.

Industry watchers were divided on the potential effect of the punishment. Some say the business ban will erode mobile carriers’ performances in the first half, but others say it may help them by reducing their marketing costs, which have ballooned due to the subsidy payments. (Yonhap)