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Telecom subsidy war builds ahead of sanctions

More than 1 million subscribers switched telecom operators to get new smartphones during each of the last two months, according to an industry source. This came as local telecom operators have continued their cutthroat battle to attract new subscribers with more subsidies.

During the period, the daily shift reached 41,000, nearly double the 24,000 mark designated by the industry regulator to indicate an overheating market.

As the subsidy war continues, the Ministry of Science, ICT and Future Planning is soon expected to impose a suspension of business operations of up to 100 days on the telecom operators SK Telecom, KT and LG Uplus.

“We sent notification of the sanctions to the mobile carriers on Feb. 21, and it will be confirmed as early as this week,” said Bae Young-sik, an official of the ministry’s Telecommunications Policy Planning Division. It is a follow-up measure to last December’s sanctions, he added.

“Apart from the business suspension, the regulator is expected to additionally impose sanctions on the telecom operator that led the subsidy war,” said Kim Hong-sik, an analyst at Hana Daetoo Securities.

It is not yet clear if the revision to the Communications Law will be passed within the year. The bill was not approved during the provisional session of the National Assembly in February.

“All the bills the ministry proposed amounted to nothing even though we strived so hard throughout February,” said Yoon Jong-lok, vice science minister, following the provisional session.

Though the National Assembly is scheduled to meet again in April, the bill is not expected to pass soon because the issue could become politicized ahead of local elections in June.

“Without the revision to the Communications Law, the illegal subsidy war is expected to continue despite the hefty fine by the government,” an industry source said.

By Shin Ji-hye (shinjh@heraldcorp.com)
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