Reception problem?

By Kim Yoo-chul

KT and LG Uplus, the nation’s second- and third-largest mobile carriers, are likely to follow market leader SK Telecom in lowering mobile charges but their time schedule has yet to be decided.

Attention has turned to the pair after SK Telecom announced its plan on Thursday to cut mobile rates in response to pressure from the inflation-sensitive Seoul administration.

SK Telecom decided to shave 1,000 won ($0.92) from its monthly fees starting September while offering 50 free text messages a month, which is expected to help mobile clients save 28,000 won a year.

KT officials told The Korea Times that discounting its rates won’t chip away at its bottom lines too much since it has been diversifying its business portfolio. However, Uplus said further cuts will hit its business amid staggering business momentum.

``KT is in the final stage to introduce new billing plans that would include a measure to lessen our basic monthly charge,’’ a high-ranking KT executive said.

KT spokeswoman Kim Yoon-jeong said the announcement is likely next week at the earliest. But she declined to disclose details.

Uplus insiders said that its top executives have come up with a consensus for the need to trim down wireless rates.

``We will disclose our plan soon. The point is that we have decided to follow SK Telecom’s lead in cutting charges but concerns are that our profitability will be dented,’’ said a Uplus official who asked not to be named.

Choi See-joong, the chairman of the Korea Communications Commission (KCC), the country’s top regulator in the telecom business, expected that both KT and Uplus will cooperate with the rate cut and clarified the government’s plan to consistently push telecom companies to lower their mobile rates.

``We have no authority over KT and Uplus regarding mobile charges, however, the KCC expects the other two telecom firms to cooperate with the government, though it could hurt them,’’ the KCC chairman told local reporters at an event in Seoul.

``The KCC will push local telecom firms to cut their mobile rates in a consistent manner. That’s the policy,’’ said the chairman.

Bureaucratic nonsense?

But the government’s push regarding mobile rates has worried analysts and investors that they might end up prompting local telecom companies to curtail investment, in addition to hurting profitability.

The KCC said the decision by SK could help customers save some 750 billion won annually and that’s why SK executives called the cut ``huge.’’

``SK Telecom may swallow the measure without difficulty because the entity is the foremost player in the market. But it’s a big blow for Uplus. How can we invest in advanced telecom networks amid falling profitability in the saturated local telecom market,’’ the LG Uplus official said.

The nation’s smallest telecom carrier LG Uplus is striving to invest a record 1.7 trillion won for long-term evolution (LTE) networks.

The proportion of the monthly basic charge to Uplus out of total wireless-related revenue was accounting for 49 percent, which is significantly more than the 36.1 percent for both SK Telecom and KT, as of the end of 2010.

Uplus is also the only local telecom provider that doesn’t sell Apple’s iPhones. In addition, its sister company LG Electronics is still struggling to release competitive smartphone models, creating headaches for LG Group’s telecom unit.

SK Telecom held a 54.5 percent market share to chalk up 12.46 trillion won in revenue last year, while KT had a 30.3 percent share with 11.08 trillion in wireless business sales. Uplus reaped 8.5 trillion.

TongYang Securities, a leading local brokerage firm, forecast the operating profit for Uplus this year will be cut by 48 billion won and 144 billion won in 2011, and 2012 if Uplus adopts the same reductions as SK Telecom.

``Profit for SK Telecom and KT will also be cut, however, the impact on their entire annual profit would remain around 10 percent, while that could reach 30 percent for Uplus,’’ said the brokerage.

KT CEO Lee Suk-chae has blamed the government for making a ``political decision’’ as the measures could discourage investment by telecom companies.