June 21, 2011 / 7:54 AM / 9 years ago

Seoul probes mobile carriers over subsidies

SEOUL, June 21 (Reuters) - South Korea’s telecom regulator said on Tuesday that it had launched an investigation over whether mobile carriers had provided excessive subsidies for handset purchases, warning of possible tough disciplinary measures.

The move came after South Korea’s top mobile operator SK Telecom Co requested last week that regulators sanction smaller rivals KT Corp and LG Uplus for allegedly expanding subsidies and hurting competition after the market leader announced tariff cuts early this month. KT and LG Uplus have rejected SK Telecom’s claims.

The smaller rivals are under mounting government pressure to join SK Telecom in cutting mobile tariffs to help rein in inflation, which could weigh on their earnings.

SK Telecom, which controls more than half of the country’s mobile phone market, announced a mobile tariff savings plan worth $696 million annually earlier this month.

“Our constant position is that it is desirable for operators to convert costs spent on excessive marketing competition... into tariff reductions, new service development and infrastructure expansion,” the Korea Communications Commission (KCC) said in a statement.

The commission said it would impose the “biggest fines allowed under the law” on carriers found engaging in illegal marketing activities.

News outlet Edaily cited a KCC official as saying the commission could ban carriers from attracting new subscribers depending on the results of the probe and planned to complete the investigation next month.

In September last year, the KCC slapped a combined fine of 20.3 billion won ($18.7 million) on the country’s three mobile carriers over handset subsidies. ($1 = 1083.400 Korean Won) (Reporting by Hyunjoo Jin; Editing by Jonathan Hopfner)

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