Posted : 2014-03-06 16:39
Updated : 2014-03-06 16:39

Minister warns of illegal subsidies

Minister of Science, ICT and Future Planning Choi Moon-ki, third from left, holds hands with SK Telecom CEO Ha Sung-min, left, LG Uplus Vice Chairman Lee Sang-chul, second from left, and KT CEO and Chairman Hwang Chang-gyu prior to a meeting to discuss pending issues in the telecommunications industry at the Plaza Hotel, downtown Seoul, Thursday. / Courtesy of Ministry of Science, ICT and Future Planning

SKT, KT, LG Uplus face biz suspension

By Kim Yoo-chul

The nation's telecom minister warned the country's three mobile carriers ― SK Telecom, KT and LG Uplus ― Thursday that they will face stronger punishment if they continue to offer illegal subsidies to attract more customers.

The warning came after the Ministry of Science, ICT and Future Planning (MSIP) decided to impose a business suspension on the three firms for up to 45 days from next week, meaning that they won't be allowed to sign up new customers. The ministry plans to unveil details today.

"The MSIP has decided to implement a business suspension on the nation's three mobile carriers. We hope this punishment will be the last," MSIP Minister Choi Moon-ki said at a meeting with CEOs of the carriers at the Plaza Hotel, downtown Seoul, Thursday.

"If the carriers continue offering illegal subsidies while ignoring warnings from the ministry, they will receive stronger punishment," he said, adding the government will do "whatever it can" to stop such practices.

Choi's remarks can be seen as a sign that the ministry will hold CEOs of the carriers accountable if such malpractices continue.

At a press briefing with reporters, Kim Joo-han, a senior director at the ministry's telecommunication policy bureau, said the carriers will be banned from signing up new customers for 45 days.

"According to the Telecommunications Law, the MSIP can order a mobile carrier to stop signing up subscribers from between 45 and 135 days. The ministry plans to punish them 45 days from next week," Kim said during the briefing at the government complex in Gwacheon, on the outskirts of Seoul.

Kim stressed the measure aims to prevent the market from overheating and maintain parity in competition.

This is not the first time that the carriers have been banned from attracting new customers.

Last year, Seoul ordered them to stop new signups for similar reasons. They were fined millions of dollars.

Despite such hefty penalties, the carriers ignored the warnings by continuing to provide excessive subsidies to subscribers.

If a customer agrees to switch their service to another firm, then the customer need only pay the subsidized rate of less than 100,000 won for the latest mobile devices such as Samsung's Galaxy Note3 and LG Electronics G-Pro models.

CEOs of the carriers agreed they will end the so-called "subsidy war" and vowed to fully cooperate with the government to normalize the heating telecom market.

"This is a shame. KT is wasting our valuable resources to compete with its two rivals by providing more subsidies to secure our bottom line. We want to go global. But we can't because of the subsidy war," KT CEO and Chairman Hwang Chang-gyu told reporters after the meeting.

"Some say Korea is doing well in TVs and mobile phones. But that doesn't mean Korea is a powerhouse in the information and technology (IT) industry. There is no future if the carriers continue providing excessive subsidies," the CEO, who is a former Samsung Electronics president, said.

SK Telecom CEO Ha Sung-min said the nation's top carrier will respect the upcoming measures from the government, while LG Uplus CEO and Vice Chairman Lee Sang-chul expressed his intention to make efforts to cut monthly telecom bills.

The current law limits the amount of subsidies a carrier can offer to a new customer to 250,000 won.

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