Posted : 2014-03-20 16:07
Updated : 2014-03-20 16:07

Mobile carriers vow to end 'illegal subsidies'

Marketing chiefs of SK Telecom, KT and LG Uplus bow at the Ministry of Science, ICT and Future Planning in Gwacheon, Gyeonggi Province, Thursday, after promising to stop providing illegal subsidies to stabilize the telecommunications market. From left are KT's consumer division head Lim Hun-moon, SK Telecom marketing chief Yoon Won-young and LG Uplus executive Hwang Hyung-shik. / Korea Times photo by Shim Hyun-chul

By Kim Yoo-chul

Korea's three mobile carriers ― SK Telecom, KT and LG Uplus ― agreed Thursday to stop offering illegal subsidies to stabilize the telecommunication market and better serve customers.

This marks the first time that the carriers have issued a joint statement declaring an end to the cash-burning war for subscribers.

Subsidies were a result of heated competition among Korean carriers vying for more customers in a market where 70 percent of people already own smartphones, according to data from the Ministry of Science, ICT and Future Planning (MSIP).

"We are totally responsible for illegal subsidies for mobile devices, hurting the soundness of the telecom industry. We will strictly abide by the law, which limits subsidies to 270,000 won per person," said the joint statement.

The statement continued; "Sales outlets will be strictly monitored. If an outlet violates the subsidy law, then its online network will be blocked."

Present at a press conference at the government complex in Gwacheon, on the outskirts of Seoul, were marketing chiefs from the carriers.

"SK Telecom will talk with the Korea Communications Commission (KCC) to announce more details about the latest agreement," Yoon Won-young, head of SK Telecom's marketing division, told reporters.

The ministry recently issued a 45-day ban on the carriers. The staggered ban, from March 13 to May 19, comes on the heels on their attempts to illegally give subsidies to buyers of smartphones and phablets.

Lim Hun-moon, head of KT's customer division, said KT will allocate resources to improve service quality and upgrade networks.

The carriers said they will discuss the issue with handset manufacturers as the end of illegal subsidies means a cut in handset prices, hurting the latter's profitability.

An official at Samsung Electronics said the world's top producer of smartphones will discuss with the carriers whether or not to cut suggested retail prices on high-end handsets.

Officials from the carriers said the effectiveness of the agreement is totally dependent upon plans by Samsung to cut the price of mobile devices.

That situation is not looking good, though.

"Samsung Electronics will discuss it. But we can't cut the price of our mobile devices by much. Our pricing policy reflects consumer needs. Samsung is better positioned to release high-end and mid-tier mobile devices according to demand," said the official.

A Samsung spokesman declined to comment. Samsung plans to release its brand-new Galaxy S5 on April 11, ahead of the sales ban that could hurt initial sales.

"Samsung will roll out the Galaxy S5 from April 11 as planned and we are in the final stages of setting the device's price," Shin Jong-kyun, co-CEO at Samsung Electronics, recently said.

LG Electronics, the nation's second-biggest handset producer, however, welcomed the agreement by the carriers, because LG has limits on spending for marketing unlike Samsung.

"LG has been consistent in providing high-quality devices with reasonable retail prices," an LG official said.

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