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Last updated: September 15, 2005 9:09 pm

S Korean watchdog fines telecoms groups

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South Korea's antitrust watchdog on Thursday fined the country's fixed-line operators, including KT Corp, a combined Won25.74bn ($25m) for price collusion on long-distance and international calls.

The punishment came after the Fair Trade Commission in May slapped a record Won119.9bn fine on KT, Hanarotelecom and Dacom over price-fixing for local calls and network connection services.

The penalties are expected to put further pressure on telecommunications providers, which are grappling with stalled growth in a competitive market.

The FTC said the three operators, together with Onse Telecom, engaged in unfair business practices in 2002-04. KT was hit hardest with a Won23.9bn fine, while Dacom, Onse and Hanaro received Won1.6bn, Won212m and Won60m, respectively.

The regulator also found evidence of collusion among broadband operators but only ordered them to improve their business practices without levying fines. The FTC said the punishment would help create fair competition but KT protested against the decision and plans to take legal action to reduce the fine.

“The decision was made without considering a peculiarity of the telecoms industry. So we plan to seek an objective opinion by filing a lawsuit,” said Cho Chul-jae, a KT spokesman. He said KT and other telecoms operators were following a recommendation by the communications ministry to support second-tier telecoms operators, which the FTC denied.

South Korea's telecoms market has been subjected to heavy regulation by the government, which in June designated KT as the dominant operator. That requires KT to obtain government approval in setting tariffs and other business terms.

“The regulators' asymmetric approach has so far had a negative financial impact on KT but not to the extent that it has suffered considerably,” Fitch Ratings, the credit rating agency, said in a recent report.

KT, which controls more than 90 per cent of the fixed-line market and has half of broadband connections, has coped well with the negative effects of regulation by growing revenues in new services. It reported Won608bn in first-half net profit, up 9.5 per cent from a year ago.

But analysts expect the penalties to intensify competition in a saturated market. Fixed-line traffic continues to fall as customers switch to mobiles.

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