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South Korean Networks Barred from Adding New Customers

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Korea's telecoms regulator, the KCC announced just before Christmas that it would impose penalties and restrict operations at the three mobile networks in response to excessive marketing subsidies.

Specifically, the KCC said that it had investigated excessive subsidies since the middle of September as competition between the networks intensified.

The KCC can restrict the mobile networks from signing up any new subscribers if the company violates the handset subsidy cap three times. As all three mobile networks violated the subsidy limit, the KCC decided to restrict operations at all of the carriers.

Specifically, the KCC imposed a W6.89bn penalty on SKTelecom (SKT), W2.85bn on KT and W2.15bn on LG Uplus (LGU+). And, LGU+'s suspension is the longest at 24 days, followed by SKT (22 days) and KT (20 days).

Local financial analysts, Korea Investment and Services said that the ruling will be positive for sector-wide profit as the fines are similar to the second round of penalties and as operations will be restricted. Profits at mobile telecoms improved in 4Q12 on easing competition to add subscribers due to the subsidy investigation.

Marketing competition should continue to ease in 1Q13, leading to lower marketing costs as the mobile networks are restricted from adding new subscribers.

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Tags: kcc  Korea