SEOUL, Korea-In a surprising move, the Korea Communications Commission (KCC), South Korea’s top telecom regulator, decided Monday to place business suspension orders on three mobile carriers and KT Corporation for violating the ban on handset subsidies.
The business suspension periods range between 10 days and 30 days, KCC officials said, adding that the difference stems from the market position of each telecom operator.
Analysts and industry insiders in Seoul warned business suspensions would seriously mar the corporate image of mobile carriers, disillusion foreign investors unfamiliar with handset subsidies in Korea and push down stock prices.
SK Telecom, the country’s largest mobile carrier, is set to face a 30-day business suspension. But the sanction does not stop all the business operations of telecom operators. Mindful of excessive penalties and side effects, KCC officials said they agreed to limit the suspension to any activities aimed at attracting and accepting new subscribers during the sanction period.
KTF, the second-largest wireless service provider, and LG Telecom, ranked third, will suffer a 20-day business suspension each.
KT, the country’s largest fixed-line carrier and broadband service provider, will be slapped with a 10-day suspension for offering illegal handset subsidies in connection with the marketing campaign of its mobile subsidiary KTF.
SK Telecom complained it is unfair for the government to set the degree of suspension according to the market share rather than the actual number of violations. SK Telecom’s market share is 53 percent, KTF has 32.3 percent and LG Telecom holds 14.7 percent.
In fact, LG Telecom’s handset subsidy violation cases were numbered at 3,865, topping the list. The numbers of violations by KTF and SK Telecom were 3,185 and 1,978, respectively.
Until recently, KCC placed a huge sum of fines on mobile carriers for offering illegal handset subsidies. SK Telecom has paid a total of 17.1 billion won (US$14 million) in fines, followed by KTF with 14.15 billion won (US$12 million), LG Telecom with 7.13 billion won (US$5.8 million) and KT with 2.21 billion won (US$1.8 billion).
The strict ban on handset subsidies formally went into effect in May 2000. Korea is one of few countries where handset subsidies, part of marketing activities by private firms, are formally banned. The peculiar measure came after three mobile carriers had engaged in excessive marketing by offering high handset subsidies to stay ahead in the race.
