SK, KT, LG penalized for colluding to cut rental fees

Logos of the nation's top three telecom operators — SK Telecom, KT and LG Uplus — are seen in this undated file photo in Seoul. Yonhap

Korea’s three dominant telecom firms — SK Telecom, KT and LG Uplus — have been fined 20 billion won ($15 million) for colluding to reduce costs for renting locations that house their equipment, which the Fair Trade Commission (FTC) said Thursday was an unfair act caused by their oligopolistic influence.

They were also ordered to rectify the inappropriate business practice of reducing rental costs, which went on for six years (2013 to 2019). The telecom firms established a joint response team amid the then-rising rental fees for sites where their equipment was installed after the fourth-generation (4G) telecom service was widely adopted nationwide, according to the FTC's investigation findings.

They focused on cutting the rent, particularly at apartment rooftops where they set up equipment such as telegraph repeaters. They paid relevant costs for the use of such spaces but colluded to fix the rental prices.

Given that representatives of apartment residents usually decide the rental price for their facilities, the unfair act by the telecom firms ended up causing financial losses to tenants across the nation, according to the watchdog.

This strategy helped the firms reduce the average annual rental fee per contract by 940,000 won in 2019 from five years earlier, at some locations that they internally designated as requiring joint actions due to relatively high rental prices. The designated sites come with an annual rental fee of more than 5 million won.

They also turned out to have set up internal guidelines for rental fees for each region, and took joint action when negotiating with landlords or apartment representatives. They also fixed an upper limit of 300,000 won for annual rent when installing additional equipment for 4G or fifth-generation (5G) networks.

Customers were made vulnerable by the collusive acts of the oligopolistic market players. The influence of the top three firms remains rather big, as they also run mobile virtual network operator (MVNO) affiliates that borrow the networks of their mother firms.

“Their latest collusion has caused direct losses to apartment tenants and landlords,” an official from the FTC said. “The collusive act is also seen as a hardcore cartel in that big firms made joint actions to abuse their massive influence for price proposals.”

The antitrust authority pledged to step up monitoring of major firms and boost fair competition, thereby alleviating the public's financial burden.