First day of sales ban for carriers due to subsidies

LG U+ was suspended from attracting subscribers yesterday, making it the first of three local carriers to be punished by the communication watchdog for offering discriminatory subsidies for mobile devices.

Under the punitive measures levied by the Korea Communications Commission (KCC), LG U+ has been banned from receiving new subscribers for 24 days. Bigger players SK Telecom and KT will also be blocked from taking on new subscriptions for 22 days and 20 days, respectively.

The suspension is part of the KCC’s attempt to block excessive competition. Last month, it also issued fines worth a combined 11.89 billion won ($11.18 million) for the unfair subsidies.

SK Telecom was fined 6.89 billion won, KT ordered to pay 2.85 billion won and LG U+ 2.15 billion won.
The KCC said it found the three companies had discriminated against subscribers by paying subsidies worth more than 270,000 won between July and December last year. As a result, some subscribers were able to buy LTE Galaxy S3 handsets worth 1 million won for as little as 170,000 won.

This is not the first time the telecommunications companies have been penalized for offering unfair subsidies on mobile devices, but it was the first time that fines and business suspensions were handed out at the same time. Sales were also suspended in 2002.

As part of efforts to recoup its expected losses, LG U+ has been turning to its current customer base.

Yesterday, the nation’s No. 3 mobile carrier launched a series of promotional events, including discounts on its feature phones and complimentary gifts for subscribers who upgrade their feature phones to smartphones.

Meanwhile, the Korea Association for ICT Promotion, headed by SK Telecom CEO Ha Sung-min, said it has begun a “phone paparazzi” program to encourage the public to assist in its clampdown on online outlets that pay excessive subsidies.

“We’ve been getting a lot of inquiries, and we’ve found that subsidies have fallen following the policy announcement,” said an official from the organization.

Shares of the mobile carriers ended higher yesterday despite the business suspension. LG U+ added 1.82 percent to close at 7,830 won, while SK Telecom rose 1.63 percent to 156,000 won and KT gained 0.82 percent to 36,800 won.

By Lee Ho-jeong, Yonhap [ojlee82@joongang.co.kr]