LG Telecom lowers mobile phone rate by 6.3 percent
LG Telecom's decision to make a bigger phone rate cut than its competitors speaks volumes about the opportunities and challenges in the fast-evolving mobile battle in Korea.
Who will be the final winners remains murky; what's certain is that the race will be tougher than last year.
LG Telecom, the country's smallest mobile carrier, announced Monday it will cut its mobile service rate by 6.3 percent on average.
The basic subscription rate has been reduced to 14,800 won from 15,500 won, while voice calls during normal hours fetch 18 won per 10 seconds, down from 19 won.
Another 22 optional pricing packages will see 10.5 percent and 1.7 percent cuts in rates for basic subscription fees and voice call charges, respectively, LG Telecom said.
"The steep rate cut could put extra pressure on the company's earnings target this year, but we have made a final decision about the bigger-than-expected rate cut to help lessen financial burdens on customers," LG Telecom spokesman said.
In detail, LG Telecom's rate cut is largely targeted at teens and those in their 20s as the company slashed rates steeply for Khai and Caption option packages,
The company said individual subscribers will save about 18,400 won in fees for 2002.
The announcement came three days after its rival KTF unveiled its own rate cut of 4.3 percent. The delay reflected the potential trouble LG Telecom faces in coming months.
As the company is the weakling in the market, it has to offer better pricing to retain subscribers and attract new users. But a steep rate cut also means its profitability will be compromised in the process, something that LG Telecom fears could backfire.
Private research and simple on-site testing show SK Telecom, the country's largest mobile carrier, delivers voice calls better than KTF and LG Telecom in specific areas such as underground and remote areas.
But the trouble is that civic organizations and mobile subscribers increasingly are taking bold steps to express their displeasure about the mobile service rate in recent months. Bowing to such pressure, the Ministry of Information and Communication grudgingly asked mobile carriers to come up with rate cut proposals in the second half of last year.
The first and foremost decision came from SK Telecom, a mobile service provider with over 50 percent market share in Korea.
SK Telecom opted for a 8.3 percent cut for its service rates on average, an amount that it argued was reasonable, while civic groups griped about the smaller-than-expected scale according to their expectations.
SK Telecom's move affected KTF directly. The country's second largest mobile carrier said it would cut its mobile service rate by 4.3 percent on average, effective from Jan. 1, a move also aimed at softening the uproar from civic organizations dissatisfied with current pricing.
KTF's decision follows the move by the Ministry of Information and Communication Monday, giving the greenlight to SK Telecom's move to cut its mobile rate by 8.3 percent on average.
The government controls SK Telecom's pricing as the company is the dominant mobile carrier with more than a 50 percent market share. Other smaller carriers such as KTF and LG Telecom are relatively free to arrange the pricing to better compete with SK Telecom.
KTF's rate cut ranges between 11.1 percent and 3.4 percent, depending on the service type and options.
The bulk of the discount occurs in the basic monthly subscription rate. KTF said the standard option's basic rate will be lowered from 16,000 won to 15,000 won, plus 7 minutes of voice call per month free of charge.
Basic rates for other premium services will go down from 18,000-44,500 won to 16,000-43,000 won.
KTF said it will introduce the so-called "silver option" beginning in January. Silver option users will be charged 12,500 won for a basic monthly rate and are allowed to use 20 minutes of free call time for two designated numbers per month.
"The major rate cut is that standard option users can save 1,000 won for the monthly basic rate and get seven minutes of free call time per month, which will make KTF's pricing about 8-9 percent cheaper that SKT's," a KTF spokesman said.
Notable is that KTF said it would maintain discounts for calls among its own subscribers, set at 5.5-11 percent.
The portion of intra calls among KTF subscribers in total is now around 32 percent and rising steadily, the company said.
SK Telecom, in contrast, has abolished the discount system for calls among its own subscribers, except for economy option users, under pressure from the government regarding fair competition.
As SK Telecom virtually controls the market, the intra call discount is too strong an incentive that could hamper fair competition with latecomers, MIC officials said.
Which means SK Telecom subscribers will be discriminated against compared with KTF users in terms of government-arranged mobile pricing.
SK Telecom has also decided to slash long-term subscription discount rates as the government put a 15 percent cap on the optional discount.
The mobile rate cut, which is usually contentious due to the conflict of interest among carriers, government officials and consumers, does not include the controversial caller ID rate.
Currently, all three major carriers charge 2,000 won per month for the caller ID service, a rate deemed too expensive by mobile phone subscribers.
As the caller ID is increasingly favored by subscribers conscious of privacy, mobile carriers are known to be collecting substantial profits from the service.
(insight@koreaherald.co.kr By Yang Sung-jin Staff reporter
2002.01.03
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