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South Korean Networks Warned They Could Be Barred from Signing Up New Customers
Published on:
South Korea's telecoms regulator, the Korea Communications Commission (KCC) has warned the mobile network operators that it could restrict mobile operations for three months (maximum) if a recent escalation in competition continues.
The mobile handset subsidy on the Galaxy S3 ranged from W140,000-300,000 from Sep 1 to Sep 6, but jumped to W600,000 on the 7th September.
According to the Telecommunications Business Act revised in 2010, a carrier that violates the subsidy limit (W270,000 per handset) three times could be restricted from signing new subscribers. So far, all three telcos have violated the subsidy limit twice. One more violation would trigger the penalty.
Competition has been more intense than the market expected. As such, there is concern the telcos may not meet the profit improvement expectations. The Korea Investment and Securities wrote in an analyst note that it believes competition will cool as the KCC will look into the subsidy matter.
If the KCC restricts the carriers' operations, profit would improve as marketing costs will shrink. The KCC placed short-term restrictions on the telcos' operations in Nov 2002 (30 days for SKT, 20 days for KT and LGU+) and Jun 2004 (40 days for SKT, 30 days for KT and LGU+). Marketing costs grew 25% QoQ in 2Q04 but shrank 26.5% QoQ in 3Q04 after the KCC acted.
The KCC's determination to put a lid on competition should be a catalyst for the telcos' share prices.
Tags: [korea communications commission] [Korea]
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