LG Uplus hit for causing cutthroat competition

By Cho Mu-hyun

Korea’s smallest carrier LG Uplus is facing criticism and scrutiny for a marketing strategy that has intensified cutthroat competition throughout the mobile industry, according to industry observers Monday.

A source familiar with the strategy said that the firm deployed 3,500 contract sales people across the country disguised as non-LG affiliates.

“These salesmen do not wear LG Uplus’ official uniform and work at registered retailers that are supposed to offer all three carriers’ (the chief competitors are SK Telecom and KT) services equally,” said the source. “They will pretend they are unbiased and offer LG’s service over others.”

The salesmen receive commission depending on how much they successfully pitch LG’s services. “The marketing feud between the three mobile carriers is intense because their subscription base is limited to the local market, forcing them to adhere to the same marketing strategy that rivals initiate,” said the source.

An LG Uplus spokesman admitted that it was indeed actively hiring contract salesmen to pitch its service over others, but stressed that this is done by all carriers.

The amount of unlawful activity by the carrier is reflected in the business suspension received by Korea Communications Commission (KCC), the nation’s telecom regulator. Disproportionate to its size, it will be banned from attracting new customers for 24 days, compared to SK Telecom and KT’s 22 and 20 days, respectively.

LG Uplus was also the highest violator of KCC’s subsidiary limit of 270,000 won, having offered more than that amount to 45.5 percent of its new subscribers from September to December. SK Telecom and KT’s violation rate was 43.9 and 42.9 percent during the same period.

Industry observers also question whether the firms’ strategic maneuvers this year _ that included forging new alliances with overseas firms _ will work next year due to imminent market saturation.

LG Uplus was the first to launch Google TV and a cloud-based game platform called C-Games among carriers. “It is inevitable that mobile carriers will diversify their content portfolio like those done by LG Uplus to gain an edge once the market becomes saturated,” said an industry official. “But these businesses will unlikely become the main revenue line.”

“In the long-term, the competition will be won by the one with the highest cash flow, and LG Uplus is behind in that regard compared to SK Telecom and KT, and will likely lose out,” he added.