SK Telecom sleeps with enemy to reduce number of subscribers
"Sleeping with the enemy" could turn out be a win-win strategy, as far as domestic
telecom operators are concerned.
SK Telecom (SKT) and Shinsegi Telecomm (011 and 017), the leading mobile-phone
operators, announced yesterday that they will stop receiving new subscribers
beginning April 1 and look at ways to have its agencies sell the 019 services of LG
Telecom (LGT), one of its rivals.
SKT and LGT reached an agreement in principle Tuesday to let 011 agencies be used
as sales outlets for 019 mobile services from April 10 at the earliest, SKT officials
said.
They expected that the measure would help boost the market share of LGT, which
currently stands at around 15 percent, thereby bringing down SKT's market share.
This is the first time in the nation's history that a mobile-phone operator has opened a
sales network for its rival.
"We took the measure in a desperate move to lower our market share below 50
percent by the end of June. We will accept no new subscribers for 011 and 017
services until the condition is met," an SKT official said.
SKT and Shinsegi were ordered to bring down their combined market share to below
50 percent by the end of June by the Fair Trade Commission (FTC) on April 26, last
year, as a condition for their merger.
If the companies fail to lower their share, they will face fines ranging from 250 million
won to 614 million won ($190,000 to $475,000) a day. FTC says that if it judges that
SKT has not made sufficient efforts to lower its share, the fines could rise to 1.13
billion won a day.
So for the time being, consumers will be inconvenienced in not being able to sign up
for 011 and 017 mobile phone services while handset manufacturers will also sustain
significant losses in their business due to the market reduction.
The measure is also expected to deal a great blow to the sales agencies of the two
companies.
SKT officials said that they have so far made great efforts to meet the FTC condition,
including the abolition of installment sales and the implementation of a quota system
for new subscriptions at each agency.
However, the officials said, these measures had little effect since the mobile-phone
market itself shrank sharply following the removal of subsidies on handsets last year,
and so the sales suspension was inevitable.
The Ministry of Information and Communication banned the practice of mobile-phone
service operators paying subsidies for handset sales last June in an effort to improve
the profitability of service operators.
As of the end of February, the number of subscribers of SKT and Shinsegi mobile
phone services stood at 14.32 million, accounting for 53.68 percent of the market. To
reduce this to below 50 percent, the companies are required to shed 1.7 million
subscribers.
But industry experts say, SKT and Shinsegi will still find it difficult to meet the
condition by June.
Given that the two companies get an average of 200,000 new subscribers each month,
the measure is expected to cut their users by 600,000 in the coming three months
before the deadline.
In addition, as the number of subscribers who voluntarily cancelled their subscriptions
or whose services were forcibly suspended due to the failure to pay services is
expected to be 600,000 to 750,000 up till June, the reduction is estimated to be 1.2 or
1.35 million, well below the requirement, the experts say.
(hsshine@koreaherald.co.kr)
By Shin Hye-son Staff reporter
2001.03.29
koreaherald.co.kr |
