By Kim Yoo-chul
Staff Reporter

From November, mobile phone rates will be lowered in stages, helping households save 7 to 8 percent annually.

The Korea Communications Commission (KCC) said Sunday that subscribers will be able to save an aggregate 1.5 trillion won (about $1.3 billion) next year, equal to 7 to 8 percent of the combined sales of the operators ― SK Telecom, KT and LG Telecom,

"The savings will reach 2.1 trillion won in 2011, or about 10 percent of their combined sales. The government is positive about achieving a 20-percent reduction in mobile rates for households as it plans to order telecom providers to introduce more cost-cutting steps," KCC Director General Shin Yong-sup said.

The operators will have to lower charges for new subscribers and give discounts for long-term users, while slashing charges for mobile data services, according to the regulator.

Market leader SK Telecom said it will introduce a new rate system next March under which calls will be charged second-by-second, rather than every 10 seconds.

SK Telecom, which controls 51 percent of South Korea's total wireless market, will cut its subscription fees from November by 27 percent to 40,000 won, and slash its monthly wireless data rate by 19 percent.

KT will reduce its subscription fees by 20 percent to 24,000 won from November. It will also cut monthly wireless data service fees by as much as 62 percent.

SKT and KT will also have to provide discounts for their long-term subscribers and trim rates.

LG Telecom, the smallest of the nation's three mobile operators, will cut its monthly voice call rate by as much as 25 percent. The three companies must lower the call rates of their combined service products by 50 percent, the KCC said.

The latest move is expected to erode the profitability of mobile carriers, as SK Telecom, KT and LG Telecom are lowering their rates reluctantly under pressure from the regulator.

"We are studying the possible effects of SK Telecom's second-by-second rate system. If the system works, then we will have no option but to follow it to secure our bottom line. But that would financially burden us," a KT official said.

A recent OECD report showed that South Korea's mobile service costs are among the highest in the world.

"Telecom companies are only focusing on marketing for more of a share of the saturated local market. Therefore, we reached a consensus that tougher intervention was needed," Shin said.

"Again, it will be tolerable for telecom companies to cut mobile rates by slashing their 10-percent-level marketing expenses. Investment and profit are not bigger than foreign companies. But Korean telecommunication companies are spending much more on marketing."

yckim@koreatimes.co.kr