LG U+, SKT face second suspension

The Korea Communications Commission (KCC) said it will impose another business suspension on the nation’s No. 1 mobile carrier SK Telecom and the No. 3 operator LG U+ for overheating the market with illegal subsidies on smartphones.

The three mobile carriers this month finished serving their 45-day business suspensions imposed by the Ministry of Science, ICT and Future Planning, and the KCC said it will now penalize the two mobile carriers with its own suspension measure proposed in March.

In March, the KCC voted to ban SK Telecom from attracting new customers for seven days and LG U+ for 14 days because they offered illegal subsidies and overheated the market. The regulator said it would also fine the top three mobile carriers 30.4 billion won ($29.7 million) each.

However, the KCC postponed its sanction because of the Science Ministry’s 45-day business suspension on the three carriers. KT will be exempt from the additional business suspension.

The KCC will hold a meeting today to discuss when and how it will apply the sanctions on SKT and LG U+.

The sales suspension is expected to take effect around mid- or late June, after the June 4 local elections.

Market observers predicted that the suspension will be applied to SK Telecom and LG U+ sequentially, rather than simultaneously, because smartphone manufacturers and retailers were hit hard by the earlier suspensions between March 13 and May 19.

Smartphone retailers and manufacturers oppose the KCC’s decision, saying the measure helps large mobile carriers and hurts small vendors as the carriers can increase their net profit by reducing marketing costs.

“During the business-suspension period of the three mobile carriers, retailers and vendors of smartphones saw the biggest damage,” said one smartphone retailer.

But the KCC is determined to enforce its ban on the two carriers.

“We decided to take the measure in March. It could cause problems if we don’t enforce the administrative measures that we have already concluded,” said a spokesman for the KCC.

An LG U+ spokesman said the company is annoyed by the KCC’s decision since it has been a little more than a week since they finished serving their previous suspension.

“It is clearly a reverse discrimination that the government is imposing the longest business suspension on the No. 3 mobile carrier, which is the least influential in the market,” said a spokesman for LG U+.

BY kim jung-yoon [kjy@joongang.co.kr]