By Yoon Ja-young
Elections are worrisome for mobile carriers here as politicians have called for mobile rate cuts in campaign pledges over the past few years. This year, with general and presidential elections, is no exception.
The governing Saenuri Party, the newly renamed Grand National, is considering pushing mobile rates be reduced by 20 percent as its campaign pledge for the general election on April 11.
Mobile carriers, however, are complaining that the politicians are victimizing the industry to win votes with the infeasible promise.
“Politicians seem to consider mobile rate cuts an easy way to win votes. As everybody uses cell phones and pays for them, slashing rates would be like cutting taxes,” a representative for a mobile carrier said.
A 20 percent cut in mobile tariffs was a campaign pledge by President Lee Myung-bak in 2008. The government pressured mobile carriers and ended up reducing the basic rate by 1,000 won on top of cutting subscription and text message costs and charging by the second instead of for every 10 seconds on voice calls.
The measure ended up eating into profitability. The country’s three mobile carriers of SK Telecom, KT and LG Uplus saw operating profit fall last year. For LG, it fell by more than half.
“I don’t think the politicians took into account the business conditions of the telecommunications companies. Another 20 percent cut would threaten our survival,” according to the representative.
The carriers are especially perplexed as they are investing massively in fourth-generation (4G) Long Term Evolution (LTE) networks. Their capital expenditure is expected to total 7.2 trillion won this year, as the country makes a shift from 3G to 4G that offers five times faster downloading.
Carriers say that demanding rate cuts at this time is like hampering investment in facilities. “It could end up ruin the competitiveness of the IT industry,” the representative said.
However, politicians are pursuing this as consumers find mobile costs burdensome. According to Communication Outlook 2011 by the Organization for Economic Cooperation and Development (OECD), spending on communications took 4.4 percent of total household spending as of 2009, the second highest among member countries. However, carriers say the rate isn’t high. “The communications expenses include not only mobile rates but also installments for handsets. Consumers think they are only paying for mobile services, but they may also be paying for a Galaxy phone.”
A spokesman for another carriers said that rates here are cheaper than in other countries in some ways. “The fixed line and Internet services, for instance, are among the cheapest in the world. It should also be taken into account that few countries offer unlimited data schemes for 3G users,” he said.
“All of the carriers are private businesses, not state enterprises. It isn’t fair to pressure us.”
The controversy over mobile rates is expected to continue, with consumer price hikes weighing on household economies.