Mobile Carriers Spend W1 Trillion in Subsidies

Three mobile service operators shelled out more than 1 trillion won in handset subsidies over the past year to lure more customers amid intensifying market competition, a government report showed Tuesday.

According to the report by the Ministry of Information and Communication, SK Telecom, KTF and LG Telecom used a combined 1.03 trillion won for handset subsidies during the 12 months since the government eased related regulations early last year.

Handset subsidies were banned for three years in 2003 on concerns they could prompt heated and distorted market competition.

On March 27 last year, however, the government allowed the three mobile service companies to provide long-term customers with financial help in purchasing handsets at cheaper prices.

The report showed that market leader SK Telecom spent 591.5 billion won in handset subsidies through a legal framework for the one-year period as of the end of March 2006. This means the company gave an average 103,000 won in subsidies to each customer.

No.2 operator KTF came second as it provided 236.7 billion won worth of subsidies during the same period, followed by LG Telecom with 130.4 billion won, the report showed.

South Korea has more than 40 million mobile phone users among its 49 million population. SK Telecom holds more than 50 percent of the customers, while KTF and LG Telecom have the rest.

Despite the eased regulation on handset subsidies, the three mobile operators have been fined frequently for their excessive and illicit financial support amid intensifying marketing efforts to attract more customers.