SK, LG urged to join 'fair price' system

KT President Pyo Hyun-myung talks about the company’s new wireless-related business strategies in a press conference at its headquarters in downtown Seoul, Tuesday. Pyo urged rivals SK Telecom and LG Uplus to join KT’s “fair price campaign” in an attempt to cool down the heated race over subsidies by the three carriers. / Courtesy of KT

By Kim Yoo-chul, Cho Mu-hyun

A senior executive of KT, the nation’s second-biggest mobile carrier, has urged SK Telecom and LG Uplus to join the so-called ``fair price campaign’’ on mobile devices in a bid to cool down the heated practice of excessive subsidies.

``KT has tried very hard to make significant changes to customers’ decade-long purchase pattern of mobile devices. However, we have seen a limited reaction from the local mobile industry,” said Pyo Hyun-myung, head of KT’s Personal Customer Group, at a press conference held to unveil the firm’s new service and billing strategies.

“We can’t carry out the campaign alone. The solution to the subsidy war is the introduction of the fair price system. I expect the local telecom industry to be freed from excessive marketing subsidies.”

The fair price system is an open, fixed-price system introduced by KT in August 2011 to ensure transparency in pricing. But the system exists in name only as its rivals did not join the scheme.

KT has been sticking to its fair price system by unveiling the prices of popular mobile devices such as Samsung Electronics’ Galaxy Note II phablet as well as budget phones.

The Ministry of Knowledge Economy (MKE) earlier decided to push the ``Open Price Policy’’ at all of the carriers’ local outlets, as well as websites to assure a transparent distribution structure.

But the ambitious joint campaign by the government and KT has stalled due to the complex nature of selling phones here, a big differentiation by companies over policy and a lack of support from distributors.

``Consumers first check suggested retail prices when they want to buy electronics products. But we don’t see that price tag when buying handsets. This is why we started the new system. The government advised the carriers to put the suggested retail price on devices,’’ he told reporters.

After confirming that KT has been in talks with the local telecom regulator for the faster implementation of the system, Pyo continued, ``Because carriers are giving huge subsidies to distributors to attract more new customers, the telecom companies suffer from a decline in profits.’’

The Korea Communications Commission (KCC) has reached a broad consensus to ban the carriers from signing up new customers for violating its rules for one week early next month in relation to handset subsidies as soon as it wraps up an ongoing probe over illegal subsidies.

By the end of the third quarter, the combined expenses for marketing by the carriers rose to a quarterly record of 2.32 trillion won. Just with a pledge to change carrier and agreeing to a two-year contract, a customer who wants to buy the Note II by Samsung Electronics will receive 600,000 won off the price in subsidies. The original price of the Note2 is 1,150,000 won.

``As companies have their own issues to address, it remains uncertain whether the system will be rooted out in the foreseeable future,’’ said Nho Seok-jin, a salesclerk at an SK Telecom stores in Gangnam, southern Seoul.

``In the case of SK Telecom, customers will still have to compare prices at multiple shops if they want to find the most competitive price,’’ said Nho.