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May 18, 2006 9:30 pm

S Korean carriers fined for collusion

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South Korea’s antitrust watchdog on Thursday fined the country’s three mobile carriers a combined Won1.78bn ($1.8m) for price collusion, the first punishment of its kind for wireless operators in the country.

The move follows a Won116bn fine imposed last year by the Fair Trade Commission on KT Corp and other fixed-line carriers for similar charges.

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

The FTC said the three operators, SK Telecom, LG Telecom and KTF, KT’s wireless unit, engaged in unfair business practices in 2004 by agreeing to discontinue flat-rate services, as competition intensified with the introduction of the number portability system.

This system has allowed mobile phone users to change service providers without changing their phone number. The companies began to allow customers to make limitless calls for a fixed fee at the beginning of 2004 in an effort to attract and retain more subscribers.

But they agreed to end such services in June 2004 because the flat-rate system increased their losses, according to the FTC. SKT and KTF were hit with Won660m of fines each, while LG Telecom received a Won462m fine.

South Korea’s telecoms market has been subjected to heavy government regulation. Analysts expect the penalties will intensify competition. More than 80 per cent of South Koreans carry mobile phones – 39m at the end of April – through which many watch TV programmes or surf the internet.

SKT reported 9 per cent growth in first-quarter operating profits but its long-term growth prospects remain bleak. It is eyeing overseas markets, especially emerging markets in Asia, to seek new revenue sources as domestic growth slows.

KTF said this month its first-quarter net profit dropped 20 per cent to Won125.3bn. But LG Telecom’s net profit more than quadrupled to Won105bn in the same period.

SKT shares fell 1.11 per cent to Won222,500 yesterday and LG Telecom shares closed down 2.65 per cent at Won12,850.

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