The communications watchdog on Thursday imposed a business suspension on the country's No. 2 mobile carrier and fined it and two other rivals for providing excessive subsidies to lure customers.

KT Corp. will be banned from attracting new customers for seven days, as it is judged to have led an overheated competition in the local telecom market, and was fined 20.2 billion won (US$17.84 million), the Korea Communications Commission (KCC) said.

The watchdog also slapped fines of 36.4 billion won and 10.2 billion won, respectively, on industry leader SK Telecom Co. and the smallest player LG Uplus Corp.

The moves came as the three mobile operators had paid excessive subsidies to woo more customers, which has caused a stir in the country.

Early this year, the presidential office even addressed the need to revise subsidy policies, citing them as a "social problem."

In December of last year, the watchdog levied a combined 11.9 billion won in fines on the three companies in addition to business suspensions ranging from 20 to 24 days.

Under a set of measures introduced in 2010, the watchdog recommends mobile carriers limit subsidies to 270,000 won per person.

Critics, however, have raised claims that the amount should be revised in line with the rising price of new smartphones. Flagship models manufactured by Samsung Electronics Co. and LG Electronics Inc. are usually priced at around 900,000 won.

The mobile carriers said they are regretful about the results and pledge to strive for fair market competition and enhanced customer satisfaction.

South Korean mobile carriers have been embroiled in heated competition to lure subscribers amid stagnant growth in the local market.

Currently, SK Telecom controls roughly half of the market, followed by KT and LG Uplus. (Yonhap News)