KT bears the brunt of penalties for unfair subsidies

The Korea Communications Commission yesterday slapped a combined 66.96 billion won ($49.5 million) fine - the largest ever by the 5-year-old top regulator - on three mobile service providers on charges of offering unfair subsidies to new subscribers.

KT, in particular, was ordered to stop accepting new subscribers for seven days beginning July 30 on top of the fine - the first time the regulator has singled out a carrier - for spearheading the practice.

SK Telecom was fined 36.4 billion won, KT 20.24 billion won and LG U+ 10.26 billion won.

The measure comes only four months after the top watchdog slapped a 5.31 billion won fine on the three carriers for providing subsidies exceeding the legal ceiling of 270,000 won in a competition to lure more customers.

In December, the three were fined 11.89 billion won plus up to 24 days of operation suspension on the same charges.

The commission embarked on a probe into whether the three carriers perpetuated the same practice for two periods: Jan. 8-March 13 and April 22-May 7. They again turned out to have repeated the illegality. Based on the six categories of penalty points totaling 100 to measure the degree of violation that the commission has designed with the carriers, KT received the highest mark at 97, followed by LG U+ at 52 and SK Telecom at 32. For that, KT became the single carrier ordered to suspend new subscriptions.

Lee Kyeong-jae, chairman of the commission, warned before the measure that he intends to “step up the level of punishment on one of the service providers considered to have led the overheated competition in the mobile market,” on the grounds that penalties in the past were not effective.

The government measure is seen as a blow to KT, which is already behind the other two carriers when it comes to the latest mobile network called long-term evolution (LTE)-Advanced.

SK Telecom launched the advanced form of connectivity that offers twice the data transmission speed of existing fourth-generation LTE on June 24 and LG U+ yesterday followed suit.

KT has yet to come up with the technology. “The [KCC] decision is regrettable in that we have exerted efforts at [mobile] market stabilization,” KT said in a statement after the government announcement.

Industry insiders estimate the loss from the seven-day suspension at up to 30 billion won. The company posted 6.1 trillion won in sales in the first quarter, up 7 percent year-on-year, but its operating profit tumbled 36.7 percent from a year earlier.

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