By Kim Yoo-chul
The nation's three mobile carriers will be banned from signing new customers from January for offering illegal subsidies, according to Korea Communications Commission (KCC), Thursday.
The regulator said that it has decided to slap the business suspension order on SK Telecom, KT, and LG Uplus as they have continued offering illegal subsidies despite previous warnings.
The suspension period is expected to range from 20 to 90 days, effective from early January, KCC officials said.
This is the third time that the regulator has issued a business suspension order, the previous ones coming in 2002 and 2004.
''The difference stems from the market position of each firm. We will collect opinions from the carriers by December 17. We are ready to report the results of our months-long investigation over illegal subsidies,'' said a senior official from the Korea Communications Commission (KCC) by telephone.
The agency will prevent the carriers from acquiring new customers for a certain period of time as the government believes that the local telecom market is distorted due to excessive illegal subsidies offered by the carriers, the KCC officials said.
''On December 28, the KCC will make a final decision on the details of the punishment. On that day, we will fix the exact business suspension periods according to the carrier,'' said another senior KCC official directly involved with the matter.
Representatives from SK Telecom, KT and LG Uplus all declined to comment on the KCC action citing the sensitivity of the issue.
The move comes months after the KCC began investigating the firms over illegal subsidies for Samsung's Galaxy SIII smartphone. In September, customers could buy the phone for just 170,000 won with a set-period contract and a guarantee to change carrier.
In a related note, the government agency also recently warned the carriers to stop giving illegal subsidies for Apple's latest iPhone 5, while the KCC stressed it will punish the carriers if they keep failing to abide by the law.
Despite the warnings, the situation hasn't changed because more customers, even through excessive subsidies, is the top priority for carriers to expand their influence in the highly-competitive local telecom market.
Local outlets started providing large subsidies to customers ordering the iPhone 5 under the condition they would change mobile operator. A 16GB iPhone 5 costs 814,000 won but is available for 400,000 won with the subsidies.
''We will sell the 16GB iPhone 5 model at around 400,000 won, though the suggested retail price was 814,000 won. We will pay back some 400,000 won,'' said a salesclerk at Seoul's Yongsan Electronics Market by telephone.
The KCC limits the maximum subsidy for a customer who wants to buy a new mobile phone to 270,000 won. The permitted subsidy for the iPhone 5 is 130,000 won.
Executives from SK Telecom and KT said they are concerned about the upcoming legal measure as the two companies are aggressively trying to attract iPhone 5 customers.
''If the KCC punishment takes effect from early January, then we will have no option but to accept it. Our iPhone 5 clients are mostly new with changed phone number,'' said an official from SK Telecom, asking not to be identified.
The local telecommunications industry has experienced a significant decline in profit margins owing to a hike in marketing expenses in the race to gain long-term evolution subscribers.