SKT pushes voluntary retirement

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SKT pushes voluntary retirement

Facing the prospect of a saturated telecommunications market, Korea’s largest mobile carrier, SK Telecom, has turned to a voluntary retirement plan to reduce expenses.

The company recently boosted retirement benefits for those who leave their jobs before the standard retirement date.

Early retirees receive standard severance pay plus 50 months’ salary. Those who accept the new offer will receive an additional 30 months’ salary.

SK Telecom also eased eligibility requirements for early retirement to anyone with 15 years or more of service, regardless of age. Previously, employees had to be 45 or older with at least 10 years on the job.

Under the new standard, half of the company’s estimated 5,000 employees will be eligible for early retirement.

“The average payout of the retirement package will be about 300 million won ($265,800),” said an SK Telecom source, who declined to be identified.

The company did not predict how many employees will leave, but industry sources say it could be at least 10 percent of the work force.

The move is at least partly due to the Mobile Device Distribution Improvement Act introduced last fall.

The law caps the amount of subsidies carriers can provide at 300,000 won ($265), raising the price of smartphones. That has led people to seek out cheaper payment plans.

Operating profits of SK Telecom declined by 9.2 percent year-on-year to 1.8 trillion won in 2014. Income in the fourth quarter was particularly affected, declining by 8.7 percent year-on-year. The mobile device act took effect in October.

Observers say SK Telecom could find it difficult to find alternative revenue streams to compensate for losses since the regulation was enacted.

This is the carrier’s first large-scale restructuring since 1998, when the Asian Financial Crisis struck the country. SK Telecom is not alone in feeling pinched.

In April, Korea’s second-largest mobile carrier, KT, saw more than 8,000 workers leave the company on a voluntary retirement basis. The number was the highest ever for a local company and accounted for about 25 percent of KT’s work force.

A similar trend can be seen in the banking, securities and insurance sectors.

The latest example was Hyundai Heavy Industries, the nation’s largest shipbuilder. It cut 15 percent of its 10,000 management level or higher administrative workers, starting with voluntary resignations.

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