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Fitch: Handset Bill to Check Korean Telcos' Marketing Spending
May 8, 2014 / 4:25 AM / in 4 years

Fitch: Handset Bill to Check Korean Telcos' Marketing Spending

(The following statement was released by the rating agency) SEOUL, May 08 (Fitch) Fitch Ratings says that the recent passing of the much delayed Handset Distribution Bill will be positive for Korean telecom operators as it will likely keep marketing spending in check. Intense competition in the Korean telecoms market has damaged operators' margins and cash flows. In 1Q14, telecom operators' earnings were squeezed by high marketing expenses, most of which was expenditure on handset subsidies. As a result, the Ministry of Science, ICT and Future Planning (MSIP) ordered all three telecom operators - SK Telecom (A-/Stable), KT Corporation (A-/Stable), LG Uplus (Unrated) - to suspend new customer acquisitions during 1Q14 and 2Q14 on a rotational basis. In passing the bill, the government is seeking to normalise handset distribution and ensure that handset subsidies are transparent. The bill bans price discrimination that results from different subsidies offered by telecom operators and requires operators to disclose their subsidy levels. The bill also covers restrictions on rebates provided by handset manufacturers. With the new bill scheduled to take effect in October and the suspension on new customer acquisitions, Fitch expects the competitive environment in Korea's telecom industry to further stabilise. The bill was passed by the Science, ICT, Future Planning, Broadcasting and Communications Committee on 1 May. The ruling party and the opposition finally agreed on the bill after the bill had been postponed for nearly a year due to a gridlock in the national assembly on other issues. Contact: Jeong Min Pak Senior Director +82 2 3278 8360 Fitch Ratings Limited, Korea Branch 9F Kyobo Securities Building 26-4 Youido-Dong, Youngdeungpo-Gu Seoul, Republic of Korea Shelley Jang Associate Director +82 2 3278 8370 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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