Korean Regulators Slap Down Carriers
By Carlo Longino, Mon Jun 07 16:30:00 GMT 2004

South Korea's three largest carriers are facing bans on signing up new customers for breaking regulatory rules -- but they don't seem very worried.

SK Telecom, KT Freetel and LG Telecom face bans on registering new users for 30-40 days after offering illegal handset subsidies, should the government's information and communication minister go along with the recommendations of the country's Communication Commission.

Regulators have fined the country's carriers a total of 62 billion won ($54 million) since December as it tries to break SK's hold on the market and protect smaller entrants. SK's 51.6 percent market share and KT Freetel's 32.7 percent have fuelled concerns that they could simply cut prices to force smaller competitors out of the market, leading the government to ban handset subsidies in June 2000. South Korea also has number portability, but only for users wishing to move away from SK Telecom.

So given the government's commitment to maintaining competition in the market, it seems strange to effectively limit consumers' choices for a given period of time, but they're clearly looking to crack down on these rogue subsidies. Though the carriers have issued press releases showing some displeasure at the potential bans, they don't seem to mind too much -- nor do their investors, who sent shares in all three higher.

There's some financial upside to the ban, which will eliminate a month's worth of marketing expenses, and investors are hoping it will put an end to the handset subsidies, which make up a huge chunk of customer acquisition costs. And given South Korea's 70 percent penetration rate, it's hard to see too much growth coming from new subscribers, rather than people switching from one to another.