Gov’t to raise discount on mobile plans to 25%

The government will begin raising mandatory discounts for cellular service plans on Sept. 15, the Ministry of Science and ICT said Friday, despite fierce opposition from local telecommunications providers.

The discount on monthly plans provided by the country’s leading telecom companies - SK Telecom, KT and LG U+ - will be raised from the current 20 percent to 25 percent, the ministry said.

In Korea, mobile customers can either choose to get lump-sum discounts when they buy a new phone or subscribe to one- or two-year plans and get discounts on their monthly bills.

The decision to increase the rate - which the firms had been notified of earlier in the day - will allow about 19 million subscribers to receive a combined 1 trillion won ($980 million) in discounts every year in the future, the ministry said.

The new discount scheme, however, will only be offered to new subscribers, as the notification does not have any mandatory clause on those who are already subscribing to plans.

That means current subscribers who want to benefit from the discount will have to cancel their existing plan and sign a new contract. This will inevitably require a certain penalty, the ministry said.

“It is up to each mobile carrier to figure out what to do with old subscribers,” Yang Hwan-jeong, head of ICT policy at the ministry, said during a press briefing.

But the ministry will try to persuade mobile operators to apply the 25 percent discount to existing users, too.

The measure faces strong opposition from the country’s three mobile carriers because, they claim, the decision will drastically worsen their profitability.

Some of the companies are hinting at possible legal action.

If the discount is applied to all existing subscribers, the combined annual revenue loss at the three telecom providers is expected to total 300 billion won, according to the companies.

The cost for cellular service in Korea has been cited as one of the biggest burdens for consumers. Civic groups and some lawmakers have called on telecom companies to reduce their service fees.

Earlier this year, President Moon Jae-in’s policy advisory committee announced a package of measures on telecom fees.

BY SEO JI-EUN, YONHAP [seo.jieun@joongang.co.kr]