New subsidy scrutiny for three mobile companies

The Korea Communications Commission’s seemingly relentless efforts to crack down on excessive subsidies used by the three mobile carriers to compete for subscribers may be a temporary expedient.

The top telecom watchdog said yesterday it has again launched a preliminary investigation of SK Telecom, KT and LG U+ after discovering that an abnormally high number of subscribers switched carriers since May 17, which was Buddha’s birthday and the first day of a three-day holiday.

The investigation follows one that spanned two periods - Jan. 3 to March 31 and April 22 to May 7 - and is now in its final stage, according to the commission. The first period was when the three mobile carriers were banned from signing up new customers as a penalty for illegal subsidy competition and fined billions of won.

The subsidy ceiling per subscriber is 270,000 won ($238), but the mobile providers - mostly sporadically over the long holiday weekend - gave out much more to cut the cost of phones for new customers.

The commission found that during the first three days of June, 97,321 subscribers switched mobile service providers, an average of 32,440 per day. That is about 1.4 times the 24,000 that is considered an indication of overheated competition.

Separately, Minister of Science, ICT and Future Planning Choi Mun-kee, after meeting with the CEOs of the three carriers, said Monday they agreed to slash initial mobile subscription fees by 40 percent in August at the earliest and 30 percent more by 2014. By 2015, the fees will be eliminated, he announced.

SK Telecom charges 39,600 won, KT 24,000 won and LG U+ 30,000 won for initial subscriptions. With a 40 percent reduction this year, the minimum subscription cost will be 14,400 won.

The minister also warned the CEOs against excessive spending on marketing. The three companies’ expenditures on marketing activities surged 20 to 50 percent in the first quarter of the same period last year.

He urged them to “invest” on upgrading networks and developing technologies. “Mobile carriers’ investments are directly linked to sales revenue and employment at smaller equipment producers and content providers,” he added.

BY SEo JI-EUN [spring@joongang.co.kr]