SK Telecom’s retail partner compensation plan stirs controversy

A SK Telecom retail store in Seoul / Yonhap

SK Telecom is facing growing controversy over its proposed compensation plan to offset retail store losses following a recent data breach, as the amount it set falls short of retail partners’ expectations.

According to retail stores on Sunday, the telecom operator sent notification of its plan to compensate sales partners for the almost two month period when they were not allowed to enroll new users.

Following the massive data breach of its users’ universal subscriber identity modules (USIM) in April, the company followed government instructions to suspend accepting new subscriptions until completing USIM card replacements for its existing users.

During the suspension, the retail stores have been unable to carry out operations other than USIM replacements and related inquiries.

Under the plan, SK Telecom will provide compensation of 150,000 won ($110) per new subscriber case. The company will calculate the number of affected cases for each store based on the store’s average number of new sign-ups between April last year and March this year.

In addition to new subscriptions, SK Telecom will offer an additional 20,000 won per case for device upgrades, taking into account the lost sales opportunities caused by the suspension of new sign-ups.

Based on this plan, industry officials assume that the telecom company plans to spend a total of 18 billion won for compensation, including damages covering from May 5, when it decided to suspend new sign-ups, to June 24, when the suspension was lifted.

However, retail store owners are crying foul, saying that customer departures have continued even after the company resumed new sign-ups, while few new customers have appeared.

On the first day of resuming subscriptions, the number of SK Telecom users increased by only 257.

"I understand there’s been a lot of talk about the compensation plan," said a Seoul-based retail store owner. "SK Telecom is only covering the period when new sign-ups were officially suspended, but I believe it should also take into account the time between the data breach and the suspension, as well as the continued damage to the brand even after services resumed."

Since the suspension, more than 380,000 users have switched to other mobile carriers. The figure rises to 620,000 when counting from the date the data breach was first disclosed on April 22.

Meanwhile, SK Telecom is expected to introduce a compensation plan for their users this week, which will likely include a 10 percent discount on the subscription plan for six months for all users and a 20,000 won discount on international roaming subscriptions.

SK Telecom’s data breach surfaced in April when the company detected a cyberattack, leading the Ministry of Science and ICT to launch a government-private sector investigation team. The team is expected to complete the investigation by Monday and share its final report soon after.