Carriers on huge marketing drive

By Yoon Ja-young

Mobile carriers are attempting to lure subscribers with expensive gifts, going against their claim that they have no room to cut mobile rates. The telecommunication market is showing signs of overheated competition again.

SK Telecom, the country’s telecommunication kingpin, announced Wednesday that it reported to the Korea Communications Commission an excessive subsidy offered to new subscribers by KT and LG Uplus.

“The excessive subsidy by KT and LG Uplus is likely to deter sound competition and development of the telecommunication market and damage most consumers. A measure should be taken immediately,” SK Telecom said in an announcement.

According to SK Telecom, KT and LG Uplus offer as much as 700,000 won in rebates for sales shops and gift coupons or laptops that cost hundreds of thousands of won to new subscribers.

Consequently, the number of subscribers who dropped SK Telecom to move to KT or LG Uplus recorded 23,809 from May to June 14, while KT saw over 6,000 new subscribers and LG Uplus, 17,732.

“Excessive subsidizing means transferring costs to other users and it eats into the area for rate cuts or investments. It deters fair competition in terms of rate, quality or service,” SK Telecom said in an announcement.

The government succeeded in making mobile carriers cut rates by continuously pressuring them, but they have been protesting that they wouldn’t be able to invest in networks to enhance mobile services. The huge subsidy, however, proves that they do have capacity for rate cuts as well as investment. At some home shopping channels, one can receive 200,000 won in gift coupons or net books by subscribing to a mobile service.

According to the guidelines on marketing expenses by the Korea Communications Commission, mobile carriers are advised to spend less than 20 percent of their sales from telecommunication services on marketing expenses.