SK Telecom under pressure over dominance

The government is cracking down on SK Telecom’s dominance of the mobile service market. SK Telecom has to report to the Information and Telecommunication Policy Review Committee for an additional two years over its fulfillment of conditions the government had set in exchange for approving SK’s acquisition of Shinsegi Telecom, the committee announced yesterday. The government approved the 2002 purchase of Shinsegi Telecom by the country’s largest mobile carrier on several terms. One was that the company had to lower its market share to under 50 percent for six months subsequent to the acquisition. SK Telecom previously had been required to report its status on the fulfillment of the acquisition terms until January 2005. But after reviewing the situation, the committee said that considering SK’s market share of 54.5 percent last year, it is too dominant. The committee will therefore extend its review of SK Telecom until January 2007. Additionally, SK Telecom had to suspend the system of subsidizing handset sales, which allowed new subscribers to buy handsets at lower prices. SK Telecom paid 11 billion won ($9 million) in fines last December and another 21.7 billion in February. “Penalties such as business suspension can be imposed on a dominant company that conducts illegal acts of unfair competition,” warned Kwak Soo-il, chairman of the Information and Telecommunication Policy Review Committee. To promote competition in the telecommunications market, the review board requested that the Ministry of Information and Telecommunication provide supportive measures to KTF and LG Telecom. SK Telecom, unsurprisingly, was not in favor of the committee’s decision. In response to reporters’ questions, SK officials said that they could not understand why the committee had reached its decision. Earlier, SK Telecom’s president, Kim Shin-bae, had told reporters that the telecommunications company would keep its market share below 52.3 percent until the end of 2005, adding that the company would reduce its expenditures on marketing and advertising while increasing funding for research and development. “[This move will give time for other carriers] to improve their power before the start of a new race in 2006, when products that service mobile Internet and digital multimedia broadcasting hit the market,” said Mr. Kim. by Chung Sun-gu, Yum Tae-jung